Why can't magazines get the Web?

The news coming from Condé Nast gets bleaker. Most of the headlines, of course, have been about the humbling of pet-project print magazines like Men's Vogue and Portfolio, but the real story is the company's increasingly tortured relationship with the Internet.

This week, the company laid off more than three dozen online staffers from its CondéNet division, which oversees its popular "destination" Web sites like Epicurious.com and Style.com (as opposed to the online versions of the company's print magazines). This follows the decision two weeks ago to cut back the print version of Portfolio to 10 times a year, fire most of the staff of Portfolio.com, and curtail most of the site's original content.

According to one report, a Portfolio.com staffer who asked a company executive why the Web site was being penalized for the magazine's woes was told that Condé Nast is first and foremost a magazine company.

"Any rational person would say that's crazy," says a former Condé Nast editor who, like every former or current Condé Nast employee consulted for this article, insisted on anonymity. "To say that we're just a magazine company in this day and age is like saying that we're a buggy company."

What is behind Condé Nast's bellicose approach to the Web? Other traditional media outlets properly regard the Internet as both destroyer and savior and have gone into overdrive to translate themselves into online brands. By axing its online properties, Condé Nast is revealing its apparent online strategy: looking the other way while Jaws devours the back of your boat.

Condé Nast is certainly not the only publisher with a wary relationship with the net. There are very few examples of successful category-leading Web sites built around magazines. One notable exception is People.com, which says that it receives 8.6 million unique visitors and some 733 million page views a month. Those are large and impressive numbers, but compare the site to CNN.com (35 million page views daily, 276 million on Election Day alone) or ESPN.com (67 million page views each Monday night for its NFL content alone) and you begin to get a feel for magazines' relatively meager presence in the world of old media transformed online. Similarly, in a bid for survival and relevance, the nation's largest newspapers—the New York Times, Washington Post (parent company of The Big Money), Los Angeles Times, and USA Today—have all built extensive sites laden with video features and reporter blogs, which makes Condé Nast's latest string of decisions seem peculiar, even shocking.

Some magazine publishers are tiptoeing into the brave new world by converting print titles into exclusively online venues. Hearst recently announced that its last print issue of CosmoGirl will appear in December, and that afterward the magazine will appear exclusively online; ditto for Hachette Filipacchi Media U.S.'s ELLE Girl. Time Inc. did the same when it shut down Teen People.

But those moves smack of desperation, not strategy. Many magazine editors seem to believe that digital is the future but are grappling with how to make it viable in the present. The burning question: How can crown-jewel publications like Vogue and Vanity Fair be made as profitable online as they were as peak-performing print publications?

The predominant—and unhappy—answer is that it's probably not possible, at least not right away. While advertisers are increasingly interested in online platforms, an Internet-ad dollar is still not the same as a print-ad dollar. The price of advertising is measured in CPM, or cost per thousand readers; one media expert estimates that online CPM is worth between one-seventh and one-tenth of a print CPM.

This means that swapping out online-for-print publication right now literally amounts to trading in dollars for pennies—which is hardly an alluring prospect for publishing companies used to commanding lavish ad revenues.

"No one has figured out how to make real money from online content," says Glynnis MacNichol, editor of Mediabistro.com's FishbowlNY. "The print ad structure can't keep up with the technology. Right now we're still in the Wild West. That said, it's inevitable that someone will figure out how to make a ton of money out of this."

Indeed, a new generation of online publishers is hell-bent on finding new ways to advertise effectively online, going beyond the irritating banners and buttons that blink along the edges of Web sites now.

"Branded entertainment is the new advertising," says Jimmy Jellinek, an executive hired to oversee Playboy.com's extensive, soon-to-be revealed digital overhaul. "You sit down, figure out the brand values, create a program; it can be a viral video, a written piece, anything in your imagination. You have to be as flexible as possible."

But magazine mega-publishers are clearly reluctant to make this leap. Condé Nast made some promising moves by purchasing the social media site Reddit and the Web publication Ars Technica in recent years. Yet the company has long neglected to build the necessary infrastructure—from software to writers—to be a competitive presence on the Web. When Condé Nast bought Wired magazine in 1998, it didn't even bother to buy the Web site. Former Condé Nast staffers from the magazine Web sites say that it was a bureaucratic nightmare to get desperately needed technical staff or even the most remedial features added to the magazines' bare-bones Web sites. In most cases, the company insists that new site technologies be developed by nail-bitingly slow internal IT teams rather than using high-quality, inexpensive technologies widely available on the market. It took one editor a whole year just to obtain a flash audio player. The company has famously refused to make magazine content available online and has not been willing to hire a generation of writers to create original content.

"You live and die by the quality of the content you create," says Jellinek. "If you're just a magazine clone, you're never going to attract an audience. The failure of [Condé Nast's] Web sites is a failure of vision and ability to translate the DNA of their titles into an online environment."

"They've been willing to lose $100 million to make a magazine profitable," adds a former Condé Nast online employee. "But for some reason, they've never been able to apply that thinking to the Web."

Ultimately, it comes down to trickle-down attitude and changing a deeply entrenched magazine culture. When magazines first began to go online in the mid- to late-90s, their corporate imperative was often to promote subscriptions to the print publication, not to create a new medium. And countless reports from inside Condé Nast confirm that this is still the thinking at the top—the Web is there to drive print subscriptions, nothing more.

And if magazine publishers were disinclined to build this infrastructure when they were relatively flush, now all of their dwindling resources are going to shore up their core products, making a meaningful transition online even less likely.

But what happens when the core product is no longer profitable, and you haven't built a bridge to a new medium?

"Then you get to where the music industry is," says another former Condé Nast editor. "They just don't know what to do. All of the rules have been thrown out. You have billion-dollar companies trying to figure out a model in a free fall."

It's heartbreaking, in a way. Condé Nast's Portfolio.com says that it was attracting 3 million unique visitors a month. If so, there are plenty of companies that could make a handsome business out of that, but Condé Nast evidently believes that it cannot—or is simply disinclined to do so, at the expense of many jobs and missed opportunities.

It must be tempting to look the other way and hope for the best. After all, nearly every person consulted for this article said that it's too early to sound the death knell for the industry, that magazines will always be around.

Then again, that's what people thought about Lehman Bros.