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Jay Penske betting he can beat the odds in Internet media

The 30-year-old son of Roger Penske has been quietly building an online business since 2004, now including veteran journalist Bonnie Fuller's new celebrity website.

November 26, 2009|By Ben Fritz
  • Veteran magazine editor Bonnie Fuller launched HollywoodLife.com last week with backing from Jay Penske, who's bullish on online media.
Veteran magazine editor Bonnie Fuller launched HollywoodLife.com last… (Mail.com Media Corp. )

It's tough to talk to Bonnie Fuller without getting an earful of Hollywood gossip.

"This is similar to what went on between Jen[nifer Aniston] and John [Mayer]," she says casually in conversation. Later on: "Look what's going on with Cindy Crawford and her nanny experience. . . . When Miley [Cyrus] was slamming the 'New Mooners,' we disagreed."

Fuller isn't name-dropping, though. She's talking business. The former editor of celebrity, fashion and lifestyle magazines such as Star, Us Weekly, Marie Claire and Glamour is shifting from print into the hyper-competitive realm of online celebrity news in one more effort to create a media brand for women -- this time as a digital venture.

Fuller's HollywoodLife.com, which launched last week, targets women 18 to 35, the core market for celebrity rubbernecking. It bills itself chipperly as "your celebrity news, gossip and styleBFF [best friend forever]by Bonnie Fuller."

"I'm looking to emotionally engage women by using celebrities as a way to talk about all the issues in their lives," Fuller said. "One of the reasons celebrities resonate so well with women is they look at them as mirrors."

It's an old formula now trying to establish itself in a new medium. When Fuller left Star publisher American Media last year she planned to launch her own online venture. Instead she ended up teaming with an unlikely backer: Jay Penske, the 30-year-old son of automobile magnate Roger Penske.

To many Penske seemingly came out of nowhere this summer when he acquired Nikki Finke's showbiz blog Deadline.com for several million dollars, aligning himself with the enfant terrible of Hollywood journalists.

But Penske had been quietly building an online business since 2004, when -- at age 25 and only three years out of the University of Pennsylvania's Wharton School -- he raised debt to buy Mail.com, an e-mail provider that barely survived the dot-com bust.

He has since turned the Santa Monica-based company, of which he is chief executive, into a budding media empire. Now called Mail.com Media Corp., it acquired Movieline and Hollywood Life magazines, which Penske relaunched on the Web. Movieline.com focuses on film and TV news and is run by former editors of the gossip blog Defamer.

The venture is backed by a large cash reserve for a start-up company. Just before the financial markets cratered last year, Mail.com raised $35 million in funding led by private equity firm Quadrangle Group.

At a time when many in the online media business are cutting staff and focusing on aggregated news that costs little to produce, Penske is investing in original content and spending big on well-known talent.

"There's such an abundance of reheated content on the Web, and we think original content is what people want and advertisers are looking for," Penske said. "I look at this as building an all-star team of editorial talent in each of our categories."

HollywoodLife.com represents a risky bet for a small company. The site has an editorial staff of 11 with experience at publications like CNN, the New York Post and the New York Daily News. Although Fuller is earning less than the $1.5 million a year she made at American Media, she has a hefty equity stake in the new venture.

The bigger bet, however, may be on the business plan.

Turning a profit based on advertising, which Penske says provides the majority of his company's revenue, is the eternal quest for nearly every online publisher, even ones with high traffic. Internet ad rates lag well behind those charged in print and other media. And overall online ad revenue fell 5.3% in the first half of the year, according to the Internet Advertising Bureau.

"If a website isn't a massive success, then typically the ad revenue just won't support a large staff," said Alan Citron, former general manager of TMZ.com who is now president of pop culture Web publisher Buzz Media. "It's very difficult to reach profitability."

Penske is betting he can beat the odds with several different sites. Mail.com currently offers four separate Web publications. A fifth, Fan.com, is expected to focus on sports and launch soon. Each operates largely independently, sharing only business and ad sales operations. Fuller and Finke, for instance, have never spoken beyond a few friendly e-mails.

Penske said he expects each of his ventures to take 18 to 24 months to reach profitability. Though the goal may seem optimistic in this economy, HollywoodLife.com did attract advertisers such as Old Navy and Sony Pictures for its launch.

"We want our sites to go from growing audience to building relationships to generating enough cash to support themselves," said Penske, who recruited seasoned executives from Procter & Gamble Co., Microsoft Corp. and Walt Disney Co. to senior positions.

So far, most of his sites are very much in the "growing audience" phase.

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