Syndicate Or Die

 
 
By Matthew Hicks  |  Posted 2001-02-05
 
 
 

It may be the winter of dot-com discontent, but you wouldnt know it from Salary.com Inc. Since last May, the year-old site has more than quadrupled its unique visitor count to 586,000 per month, vaulting Salary.com to No. 6 on Jupiter Media Metrix Inc.s list of top career sites. The Wellesley, Mass., company even managed to raise $2.6 million in new venture backing last month, no mean feat in the current dot-com downturn.

So how did Salary.com do it? Not by taking the usual dot-com marketing tack, spending millions on offbeat Super Bowl ads or promotional mass mailings of back-flipping toy dogs. Instead, Salary.com dramatically drove traffic by syndicating its specific brand of job information—proprietary compensation data on 1,000 positions plus a search tool called Salary Wizard—to other top career sites and major portals such as Yahoo Inc. So far, Salary. com has signed up 150 syndication partners, which are generating "significant" revenue for the site in addition to big-time visitor increases, said Andy Linn, vice president of product management.

"Syndication works when you have content that adds value to [a] site," said Linn, who declined to discuss Salary. coms revenue or profit picture. "It improves the user experience, and as a syndicator of content it provides us a distribution network for our unique content."

Under pressure to find new revenues beyond online advertising, dot-com content sites are increasingly syndicating their content to other sites for a price. Syndication, experts say, offers not only a new source of revenue but also a way to quickly build traffic at a relatively low cost, particularly if e-businesses make use of a growing group of new online syndication networks. The trend even offers opportunities to non-content-driven dot-coms, which now have a chance to enrich their sites by adding syndicated content. Experts, however, offer a word of caution to dot-coms considering the syndication route: Always protect your brand by being selective about where and how your content appears.

Theres gold in syndication

Spurred on by dot-coms such as Salary.com, the market for syndicated online content is expected to grow rapidly over the next few years. Forrester Research Inc., of Cambridge, Mass., predicts the total value of content syndicated online will grow from $718 million in 2000 to more than $3.5 billion in 2005. While that wont make syndication anywhere near the dominant source of revenue for Web sites— advertising will continue to fill that role, according to Forrester—much more money will be made on syndication over the next few years.

Who makes most of that money, say experts, depends a lot on the type of content a site has to sell and how much leverage it can exert in the market. The more valuable the content, for instance, the bigger the premiums are that sites receive through syndication, said Daniel OBrien, an analyst at Forrester.

One e-business thats used syndication to boost revenues is online financial news source MarketWatch.com Inc. The site, which includes the well-known CBS MarketWatch.com and BigCharts.com, has seen proceeds from content licensing grow to account for about one-third of its revenues, with the rest coming from advertising, said Scott Kinney, executive vice president of licensing for MarketWatch. com, in Minneapolis. In the third quarter of 2000, about $4.2 million in revenue came from licensing fees, compared with only $1.8 million from syndication in the same quarter a year earlier, the company reported. Among MarketWatch.coms syndication customers are Datek Online Brokerage Services LLC, a subsidiary of Datek Online Holdings Corp., and ETrade Securities Inc.

Much of the jump in syndication revenue resulted from MarketWatch.coms purchase of BigCharts. com in June 1999. BigCharts.coms income was split almost fifty-fifty between sales of its content—stock quotes and financial news—and advertising, Kinney said.

In most of MarketWatch.coms 250 content licensing deals, it works directly with syndication customers, creating for them custom Web sites that incorporate a combination of content from stock quotes and financial charts from BigCharts.com as well as financial news from CBS MarketWatch.com, Kinney said. A team of 35 people works from MarketWatch.coms Minneapolis offices exclusively on licensing and syndication deals. In some cases, they host the content pages for syndication customers. In others, they download content.

For e-businesses such as MarketWatch.com, a big advantage to syndication is that revenue tends to be more stable and predictable than that from online advertising. Licensing agreements tend to be at least one-year contracts, if not for multiple years. MarketWatch.com charges sites a monthly fee that varies depending on a sites business model. A brokerage site may be charged based on the number of account holders, for example, while a subscription-based site will be charged based on the number of subscribers, Kinney said.

Finding deals

Marketwatch.com has been more successful at syndication than most content sites, experts say. Few, so far, have been able to grab such a large percentage of revenue from syndication, Forresters OBrien said. Working in its favor is MarketWatch.coms concentration on financial data and news, which is highly marketable.

For other content dot-coms, such as general-interest news and features site Salon.com, syndication remains a challenge. So far for Salon.com, syndication accounts for between 5 percent and 10 percent of revenues, said CEO and President Michael ODonnell, in San Francisco. Meanwhile, Salon.com continues to struggle to turn a profit. Salon.com reported losses of $3.5 million for the quarter ended Sept. 30, compared with a loss of $4.7 million for the same period in 1999. In December, the company cut 20 percent of its staff as part of an effort to cut expenses.

Its not surprising, then, that Salon. com continues to pursue syndication deals. ODonnells goal is to make syndication a more substantive part of the companys revenues—about 25 percent—to help Salon rely less on advertising. The company has two of its salespeople concentrating on syndication.

The biggest problem for Salon.com has been finding lucrative, long-term syndication deals for its content. Although the company has found particular interest from foreign publishers, such as Italian publisher Gruppo Mondadori, in the United States most of its content syndication deals have been one-time purchases of articles by print publications, ODonnell said. The company, for example, has worked with book publishers on three compilations of Salon.com writing.

Besides chasing syndication deals themselves, Salon.com, MarketWatch. com and other e-businesses have begun to syndicate content through online syndication distribution networks such as iSyndicate Inc., ScreamingMedia Inc. and NewsEdge Corp.

Such services essentially license content and resell it to content-consuming sites, taking responsibility for online transfer of the material.

Salon.com, for instance, first started selling its content in 1997 through traditional newspaper syndicator United Media, a division of The E.W. Scripps Co. It also has worked with Web syndicators such as iSyndicate.

Working through such syndication networks can be a quick path to gaining exposure for your site and your content, Forresters OBrien said. Syndicators provide a ready-made base of hundreds of Web sites that will have access to the content and, in some sense, act as an outsourced sales team cultivating new business. They also handle the complexities of delivering content in various forms, from Extensible Markup Language and HTML to the many wireless protocols.

Syndication networks are not necessarily a guaranteed source of significant new revenue, however. ODonnell said none of the syndication network relationships that Salon has entered into, for example, has generated significant revenues.

"We have deals with them, but its not a priority," ODonnell said.

The problem with syndicating through online networks, experts say, is that the site providing content receives only a percentage of the revenues generated from syndication deals and must compete with hundreds of other content sources vying for placement on Web sites. In ScreamingMedias case, for instance, 70 percent of revenues go to ScreamingMedia, and 30 percent to content providers.

There can be many permutations. NewsEdge pays some content providers a flat annual fee so that it can provide customers the option of an unlimited news feed from specific sources. Sites providing content might even pay, as is the case with one of iSyndicates services through which Web sites can post headlines from iSyndicates content partners for free. Those headlines then include links to the content site, which pays for the extra traffic on a per-click basis.

"You can get to hundreds or thousands of sites by working through a syndicator," OBrien said. "[But] at the end of the day, 10 solid licensing deals with volume may be worth more than a thousand smaller sites. You can do both, using a licensing staff for the largest arrangements and doing the rest through a syndicator."

In most cases, content dot-coms say it makes more sense for them to do it themselves, particularly if theyre selling many types of content and can add services on top. "When were doing a complicated project for a large brokerage or a large bank, were designing and developing dynamic pages that change every second with new market data," Kinney said. "If we were only syndicating CBS MarketWatch.com news, then the opportunity would be much less."

Protecting the brand

Whatever the arrangement, content sites must consider how syndicating their content across the Web will affect their brands and destination sites. Overexposing its content to the point that it no longer offers any unique value on its own site, or allowing its content to be represented or changed inaccurately, could damage a content providers reputation rather than help it.

Some syndication networks give providers some control over their content. At ScreamingMedia, for instance, content providers can choose which sites have access to their content. That way, they can block competitors or avoid sites they believe may damage their brand.

All the syndicators also allow various amounts of control over how content is branded, making sure articles, for instance, are sourced. iSyndicate even has content providers that require that their logos appear on all their content shared in the network.

"Our content providers inherently trust us because they preapprove where their content will go," said Kevin Clark, CEO of ScreamingMedia, in New York. "Our content providers dont want to go to a competitor. They want to know explicitly that their content goes where its best represented."

That doesnt mean all content sites shy away from selling information to competitors. MarketWatch.com has syndication deals with competitors to its CBS MarketWatch.com site, such as business and financial news sites TheStreet.com Inc. and Dow Jones & Co.s WSJ.com, Kinney said. He said he doesnt believe such deals harm MarketWatch.coms destination site, partly because the competitors tend to buy stock data and charting capabilities rather than financial news. In addition, the destination site is competing on the way it presents and prioritizes news, and not all its content is shared through syndication.

"We focus hard on delivering products to those guys that are of high value and enhance the capability of their sites, and if that makes them more competitive to other parts of our business, then we accept the trade-off," Kinney said.

While syndication, if done right, can provide content dot-coms with a needed new source of revenue, increased exposure is the principal motivation for some. Consider PlanetOut.com, a gay and lesbian portal that was first launched on MSN.com in 1995 and today provides its news and features for free to top portals such as Yahoo and America Online Inc.s AOL.com, Netscape Netcenter.com, ICQ.com and CompuServe. Those deals, said Beth Callaghan, senior director of content and programming at PlanetOut Corp., in San Francisco, help establish PlanetOut as "the gay voice of record."

So far, however, syndication is only a blip on the sites revenue radar screen, Callaghan said. PlanetOut also is using syndication networks ScreamingMedia and iSyndicate.

Syndications value, though, isnt always best measured in direct revenues, as Salary.com learned so well. The instant exposure Salary.com gained was syndications biggest payoff. With traffic numbers soaring, Salary.com also established itself as a destination, and that means even more opportunities for revenues and future profitability.

"If you can get more and more sites and get them to market the information in the right way," Linn said, then "its basically limitless."

In fact, with syndication as part of their strategy, content-oriented sites like Salary.com may yet survive the dot-com winter.

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