_____Financial Disclosures_____ • At a Glance: What They're Worth E-Mail This Article Printer-Friendly Version Subscribe to The Post

By Howard Kurtz
Washington Post Staff Writer
Wednesday, February 21, 2001; 8:48 AM

When Michael Kinsley headed to Redmond, Wash., five years ago to launch Slate.com, there were dire warnings that the Microsoft dragon was about to devour the journalistic world. Now Slate barely registers in the buzz department.

When David Talbot created Salon.com, he won rave reviews for its irreverent, politically incorrect style. Now its stock, which had hit $ 14.25 a share, is worth 75 cents.

When Jim Cramer founded TheStreet.com, he attracted such blue-chip partners as the New York Times. Now the Times has bailed out and the financial news service is struggling.

And they're the lucky ones, the pioneers who still have a pulse. The same can't be said for APBNews.com, Voter.com, Pseudo.com, Disney's Go.com and other once-ballyhooed ventures that have landed on the cyberworld's trash heap.

"I always said I'm a Web junkie and everyone would come around to my view," Cramer says. "Here it is 2001, and they didn't."

No wonder critics are pronouncing last rites for content sites. "There is no prognosis; the patient has died," says New York magazine columnist Michael Wolff, whose own Internet company went belly up. "Virtually everyone who took public money is either going to go out of business or be merged out of business. . . . Everyone who's saying, 'We're going to make these businesses work, blah blah blah,' I don't think it's real. Everyone in their heart of hearts feels what I feel."

Well, maybe. But millions of people still click on these news-related sites, major media companies are still pouring big bucks into them, and their sheer speed has changed the journalistic culture.

"In the beginning," says Talbot, "journalism as we know it was going to be completely changed, and journalists like myself would become overnight billionaires. That was wildly inflated, and equally so is the gloom-and-doom media coverage we've been getting."

Much of the reporting on the dot-com decline focuses on the business side: stock slides, cutbacks, layoffs. And indeed, there is no shortage of financial woe. Rupert Murdoch's News Corp. is folding its digital media unit, axing 200 jobs. The New York Times has cut 17 percent of its new-media jobs and Knight Ridder 16 percent; CNN has sliced 130 jobs. TheStreet.com has fired 20 percent of its staff, NBC Internet 20 percent, CNBC.com 25 percent and Motley Fool 33 percent. Disney took a $ 790 million write-off in shutting down Go.com.

But a more intriguing question is whether the very concept of online journalism has lost its grip on the national imagination. Has the Next Big Thing become the last big hype?

"There's a feeling of disappointment, inevitably, about all the miracles this medium was supposed to wreak," says Kurt Andersen, co-founder of Inside.com, the media and entertainment site that has fallen short of the 30,000 online subscriptions it had hoped to sell. "What the mania and hysteria and over-optimism did was make people forget how hard it is to build a brand. It takes years. Coming back to earth is the realization that for all the power, magic and novelty of this medium, certain facts of life haven't changed."

Detroit Free Press columnist Mike Wendland puts it bluntly: "I'm getting bored with the Internet. . . . It looks like the Net itself is losing appeal and the surfing public is becoming dot-bored." The average time spent online dropped from October to December, from 17.5 hours a month to 14.9 hours, says Nielsen/Net Ratings.

"My God," writes J.D. Lasica of Online Journalism Review, "was it all . . . just . . . a meaningless fling?"

To be sure, big media companies are drawing heavy traffic to such sites as MSNBC.com (9.8 million visitors last month), CNN.com (7.7 million), NYTimes.com (3.4 million), USAToday.com (2.7 million) and washingtonpost.com (2.6 million), according to Media Metrix. But with modest exceptions, the online material is mostly the same as in print or on the air. And most of these sites lose millions of dollars.

"I can't deny it," Kinsley says. "There hasn't been a site launched in the past couple of years by a major media player that has taken off."

Slate, backed by Bill Gates's deep pockets, drew 2 million visitors last month; TheStreet.com, 1.6 million; and Salon, 1.5 million. All of which has Kinsley scoffing at the notion that the business is heading downhill.

"Our traffic keeps going up and so does other people's, so I don't see any objective evidence," he says.

"Certainly the novelty has worn off. The news cycle makes it inevitable that 'X is a big deal' is going to be followed by 'X is a snooze.' Five years is a pretty long run before you get to that. The mere fact that you're on the Internet is no longer anything for which you get cool points. We're part of the media landscape."

Salon's Talbot turns the question on its head. "Where has all the creative energy been in the last five years?" he asks. "In the new launch of magazines like Talk, or places online like Slate and Salon? Web sites, I would contend, are the only new-media operations that have had any impact. I can't think of anything that's changed the Zeitgeist that's been launched in print in many years."

Each Webzine has its own identity. Salon features plenty of edgy political reporting ("We bombed Iraq! What else is new?," "New York's bully-in-chief meets his match"), along with lots of sex under such headings as "Turn On" and "Naked World." Slate strikes a more highbrow, ironic tone ("Deflating the Dot-Com Smarty Pants," "How Come We're Reading Jack Quinn's E-Mails?"), along with e-mail debates and such columns as "Chatterbox," "Culturebox" and "Moneybox." Inside has a Hollywood trade-magazine feel ("Another XFL Loss Puts NBC in a Danger Zone," "Henry Yuen's Master Plan to Rule the Publishing World"), along with lots of ratings and "Inside Dope" gossip. TheStreet is a daily, stock-filled how-to-make-money seminar, with lots of Wall Street columnists ("Winning the Market's Mind Game," "Whole Foods Gets Funkier").

Ideology, not surprisingly, is also popular on the Web. Conservative outlets, from National Review to the Wall Street Journal's editorial page, have extended their franchise by offering new material online.

But the niche market generating the most excitement: opinionated, idiosyncratic, one-person Web sites. In the wake of Matt Drudge's phenomenal success with his gossip site, Jim Romenesko's MediaNews.org, Mickey Kaus's kausfiles.com, AndrewSullivan.com (by the New Republic columnist) and Joshua Micah Marshall's Talking Points have been attracting small but loyal followings.

"When you put a regular magazine on the Web, you don't have the liberating experience of getting rid of proprietors, editors, advertisers -- all the things that can constrain you," says Sullivan, who's drawing about 5,000 visitors a day. "You're just putting yourself up there and venting on a daily or hourly basis. You have this wonderfully direct connection with your readers. People take the time to dash off e-mail to me telling me I'm completely wrong about something."

What Sullivan lacks, of course, is revenue. He says he plans to follow the example of Reason magazine's Virginia Postrel (Dynamist.com) and ask readers to click on a button that enables them to donate a dollar or less. Postrel's donations are routed through Amazon.com, which takes a 15 percent cut.

But public companies like TheStreet.com, whose stock has dropped from $ 71 to $ 2.72, need a whole lot more revenue than that. One major problem, says Cramer, is that telephone and cable companies have done such a poor job of wiring people's homes for broadband connections -- making it impossible for most users to view video well.

"That, I think, is what really killed the development of the Web," Cramer says. "It's almost like we know how to do a talkie but the movie theaters won't put speakers in. The Web is like a UHF station in the '60s."

Of course the Net has a far broader appeal than as a mere purveyor of news and opinion. Lots of people go online to swap instant messages or download music (Napster had 9.1 million users last month) and click on headlines in their spare time.

"There's not a teenager around that doesn't like using the Internet, and therefore it's a habit that will continue for the rest of their lives," says Kara Swisher, the Wall Street Journal's Silicon Valley columnist. "It's as ridiculous to say it's over as to say the world's going to end."

Swisher, who loves such Web sites as Salon, says that "it's incredibly impressive, no matter what you say about the financials of these companies, that they're attracting so many people in an era when traditional media is not growing. It's a great way to get instant news."

Still, any discussion of content invariably drifts back to the dire financial picture. When the Internet stock bubble burst last year, the Wall Street funding spigot was quickly turned off.

"Prior to March 2000, the investment community had the attitude that a dot-com could do no wrong," says Craig Smith, co-founder of Voter.com, which ran out of cash this month despite having drawn 17 million visitors on Election Day. "After March 2000, the investment community had the attitude that a dot-com could do no right. The market went south on us."

As a practical matter, that means these cyber-operations have to live on whatever cash they can generate. Salon, for example, has slashed its budget from $ 35 million to $ 12 million, and its staff from 150 to just under 100.

The larger problem is that the dominant model -- content supported by advertising revenue -- isn't working, in part because so few surfers click on the ever-present ads. In this free-lunch culture, Slate and TheStreet.com had to give up on charging for subscriptions.

Dot-com executives are now turning to the much-derided Old Media for partnerships and promotion. Inside.com has joined with the Industry Standard to produce Inside, the print magazine.

Salon has launched a radio show and co-sponsors personal ads with Nerve magazine. CBS MarketWatch.com has a television show. TheStreet.com lost its Fox News Channel show but Cramer is developing a business show on radio.

In the end, though, these Web sites will soar or sink on their ability to attract eyeballs and generate cash.

"Some of these things are bad ideas and will die," Andersen says. "Some of them are good ideas and will survive. And some won't have time to prove they are good ideas."