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Boston.comChapter 3, Case 1

internet business models

text and cases

Steven Young COS498

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Overview of Boston.com Introduction

Introduction• No-charge online affiliate of the Boston Globe

newspaper

• Is an “Online Content Provider”, which distributes copyrighted content over the internet

• Corporate parent is the New York Times Company

• Local newspapers score either 1st or 2nd in online news penetration

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Overview of Boston.com Mission and Vision

• The Boston.com enterprise was knee-jerk reflex reaction. They knew that they wanted to get online, but what would their offering be?

• According to CEO Lincoln Millstein Boston.com was started “without a clear vision of why we were putting the news online”. “Are we destroying our own business model?” “What’s the endgame.”

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Overview of Boston.com History

History• Boston Globe a private company founded by 6 Boston

Business people, lee by Eben Jordon in 1872. Remained private until 1973. 15 Pulitzer Prizes. First newspaper with bylines to identify writers.

• 1973 became a subsidiary of Affiliated Publications (formed and controlled by the Taylor family which were long-time publishers of the paper.

• 1993 Affiliated Publications merged with the New York Times Company ($1.1 Billion deal), including the separate electronic news subsidiary Boston Globe Electronic Publishing.

• By 1999, a readership of 1.4 million daily (3 readers / copy, 472,000 copies).

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Overview of Boston.com History (continued)

History (continued)• Boston.com had a 16.3% penetration in the Boston market by

1999 (the top national news, cnn.com has 7.7% penetration).

• From its inception in late 1995 to 1999, circulation of the Globe had declined 8% (weekday) to 10% (Sunday paper).

• Classified advertising in the Boston Globe (which represents >35% of advertising revenues) declined 6% in a year (1999)

• The poor performance resulted in the dismissal of its publisher, Ben Taylor, who was the 5th generation Taylor to hold this position over the previous 127 years (the Globe was founded in 1872)

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Goals

Goals• Mission to support, defend, and extend the frachise of The Boston Globe.• Yokum (Director of Classifieds) said that the mission was to “grab share”, to

“build relationships”.• Aim high, do not avoid competing against themselves.• Provide free Boston Globe content, and unique viral online content related to

news and services • Integrate with Boston Globe as much as possible without handcuffing

Boston.com’s ability to “go for it” in competition with the Globe.• David Margulius, a Stamford MBA, was hired to write a business plan for an

online version of the Globe. – His analysis predicted growth online would cannibalize print and subscription

revenues of the paper. – Senior editor Stephen Taylor and Margulius argued that it could cannibalize itself

or be cannibalized by others. – Globe management still approved the plan!

• To develop the “largest listing of things” (Yocum)

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Strategy

Strategy• Have full access to the Globe’s new content.• Avoid scooping by only releasing major stories after is had been

printed in the Globe..• Organize into 2 divisions, features and news,

– Have 2 areas in news, Boston Globe Online (full edition downloaded after midnight after press so not “scooped”), rest of site constantly updated and included non-Globe information.

– In features area, aggressively pursue classified advertising.• Maintain the allure of the Globe by featuring articles of Globe writers

instead of AP releases (no Boston.com writers).• Develop and maintain a brand identity that was distinct from the

Globe, while taking advantage of the Globe’s name (co-branding).• Establish partnerships with media and cultural organizations (TV

stations, radio stations, Boston Magazine, Museum of Fine Art).

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Strategy (continued)

Strategy (continued)• Carefully integrate sales departments with the Boston Globe to exploit the

print/online package while allowing aggressive competition with the Globe for advertising $’s. (Includes coordination of classified advertisements.) Balance of Doves who want to leverage brand and legacy, and Hawks who feel the need to create new entities to move quickly and compete.

• Be a Hawk regarding establishment of viral content.• Freed by Globe management of requirement of profitability within a

specific timetable.• Maintain integrity by refusing to allow payment for preferential

placement of stories, and refusing favoritism in stories for advertisers.• Accept that the 8-10 hour window that reporters had daily to prepare

for press run time is over.

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Necessary Paradigm Shifts

• Top 100 Globe accounts were initially hands-off to Boston.com.

• Reporters had to deal with the loss of the 8-10 hour time window to prepare their articles before release.

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Boston.com’s home page

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Boston.com’s news page

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Boston.com’s Globe page

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The FactsValue Proposition

Value Proposition• Provide free news and information services to

online customers

• Provide local auction site (merger with FairMarket)

• Provide complete and updated directory service (online Yellow Pages) which include interactive maps.

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The FactsCompetitors

Competitors

• Ebay and other disintermediary options, which remove the need for newspaper classified ads.

• AOL (greater market capital than all publicly traded newspapers combined)

• International, national, and local news organizations

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The FactsEconomics / Revenues

Industry economics • Number 1 in the industry in print classifieds, #3 for online classifieds behind

Monster and Jobfind.• Boston Globe revenue from advertising (78%) and circulation (22%) (typical

for the industry). Advertising revenues for newspapers have been declining for years (dropped 3% from 1993 – 1998) (also typical of the industry).

• 70% of Globe circulation revenue from home delivery.• Major accounts included Bank Boston, Filene’s, and Dunkin Donuts with a

budgeted revenue of 4.2 million in 1999• Local accounts represented 1.8 million dollars of revenue in 1999

Advertising revenues• Advertising revenue from:

– Retail display,– Free-standing inserts (preprints), and– Classified.

• Advertising revenues for newspapers have been declining for years (dropped 3% from 1993 – 1998).

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Primary Stakeholders

Boston.com Management• Lincoln Millstein, CEO (former news editor)• Stephen Taylor (Aerosmith), President• Teresa Hanafin, Editorial Director• Keith Yocum, Director of Classifieds • 80 full-time employees

The Boston Globe

The New York Times

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GBF Analysis - Winner takes all?

Network Effects• Moderate as a whole, high for certain segments,

such as the auction site, and low for news./Economies of Scale• High, as setup $ is there regardless of viewership,

so incremental costs are low.Customer Retention Rates• Fairly high as there is some personalization, plus

some readers develop an affinity to certain writers, and with the familiarity that they attain.

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GBF Analysis

• Feeding Peter by robbing Paul? Is the success of Boston.com hurting the Boston Globe?

– No, the decline of the paper was inevitable from Web offerings generally, and better to get a piece of the pie than not.

– The Globe has sold considerable subscriptions online

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GBF Analysis

Customer life time value analysis

• I did not attain any data on this.

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GBF Analysis

Funding analysisProfit margins for newspapers declined from 40% in late 70’s to low

teens in mid 90’s.

Revenue mix…• Boston Globe revenue from advertising (78%) and circulation (22%).

Advertising revenues for newspapers have been declining for years.• 70% of Globe circulation revenue from home delivery.• Advertising revenue from:

– Retail display,– Free-standing inserts (preprints), and– Classified.

• Major accounts included Bank Boston, Filene’s, and Dunkin Donuts with a budgeted revenue of 4.2 million in 1999

• Local accounts represented 1.8 million dollars of revenue in 1999

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Success or Failure?

The goals and strategy were …– Successful in establishing themselves in this

new environment, and building stability through diversity.

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Update

Update for Boston.com (from Tony’s resources)

– Pageviews on Boston.com had grown from 100,000 per month in October 1995 to approximately 70 Million views in 2001.

– Boston.com partnered with agencycompile.com in 2001 to allow connection with agencies to build interactive marketing programs.

– Expanded offerings in 2001 to include cell phone access and a Red Sox information email service @batinsider”).