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The Internet Paradox

by Randy Cassingham, Author, This is True
Presented to The Online News Summit II*
Washington, D.C., May 19, 1998

Copyright 1998 by Randy Cassingham, All Rights Reserved.

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Megatrends author John Naisbitt coined the phrase "Global Paradox", which he says is, "The bigger the world economy, the more powerful its smallest players". In Online Media, the Global Paradox becomes what I call the "Internet Paradox": "The bigger the competitor, the easier it is for small players to compete." I'm here today to give you a real world example.

The Wall Street Journal is one of the top 10 news destinations online. It has attracted a huge clientele to its paid online offering. A six-figure audience paying a minimum of $29 per year to read perhaps one of the best offerings in online news at the moment. But the bottom line of the news business is business: how much money are they making? Not a penny.

To be fair, the net is a young medium. It's not unreasonable to expect some growing pains and a slow ramp-up to profitability. But let's contrast virtually all of the large, well funded news sites with a tiny company funded with petty cash. Let's picture ...say... me. I came up with a niche publication, designed from the beginning to not only take advantage of the new medium of the Internet, but also, as the New York Times noted in 1995, one designed to use the "Spring Chicken" medium of the Net as a springboard into the so-called "dinosaur" medium (their word): newspapers. I started This is True mid-year 1994 and I too lost money that half-year. That loss bothered me so little I had to look it up: I lost $3000 on sales of $3000. Sales in 1995 were five times that, and in 1996 were enough that I quit my $50,000 a year aerospace job and went full time online. As of right now there are three This is True book compilations selling several thousand copies per year -- direct online so that there is no middlemen to absorb profits. My online popularity caught the eye of newspaper editors and publishers, and now This is True runs in print publications in four countries as a syndicated feature column.

So what is This is True? Go figure: it's news commentary! Well, better than that, actually: humorous news commentary. And despite the fact I've never sent out a press release, the concept has been so outrageous that it's received worldwide coverage in publications from the Los Angeles Times to Newsweek to the Nikkei to the New Straights Times. Here's just a sample of some of the press This is True and I have received in the last few years, again without my ever sending out press releases.

Maybe I should give you a sample of what it is I'm writing. This is True is a weekly column which summarizes seven to nine bizarre-but-true news stories from the legitimate printed news media, mostly newspapers. By "legitimate", I mean no "Weekly World Star Enquirer" tabloids, only real newspaper stories, or most often, an interesting portion of a larger story, and I retell them stories in my own style and condense them to about 50 words, and then I make commentary on them. For example, here's a story I slugged "Space Docking Maneuver":

A panel discussing extended space flight at Virginia Tech suggested that a private place be maintained for astronauts to socialize. Panelist Dwight Holland said, "No doubt about it, if we do go to Mars, it's going to be a mixed crew." A trip to Mars and back would take several years. Former astronaut Jon McBride agreed: "It's going to be the most complicated thing we'll ever do in space flight," presumably he was talking about the length of the mission, rather than how the crew would spend their off hours. Another panelist, who spent two years sealed in the "Biosphere II" experiment, agrees that privacy is essential. "Especially," he said, "acoustical privacy."

The story was from AP, and my comment on it was: "In space, everyone can hear you scream."

Online readers are eating it up. Four months after I launched I had 10,000 subscribers, and this was 1994, the dark ages of the Internet. Today, This is True is sent to subscribers in 143 countries every week. I give it away for free, and not on the web. And that brings me to the first of my three big points for today.

Point one: I said people subscribe. That is exactly right: they sign up to get it by e-mail. This is True is not published on the World Wide Web. You cannot read it on the web. I subscribe to Newsweek. I do not have to call Newsweek every week and say "Would you please send me my issue?" Instead, it shows up in my mailbox whether I think of it or not, whether I'm in town or not. In the same way, This is True shows up in subscriber e-mailboxes every week whether my readers think about it or not. The subscriber model is essentially the same. On the other hand, Web sites are asking people to think of coming back week after week, or perhaps day after day. Some people will, if the information is important enough to them. But Newsweek wouldn't make money asking people to call every week, even if it were fully automated. And guess what: web sites generally don't make money either.

1994: the Dark Ages of the Internet.

That's not to say that all the money being spent on web sites is wasted -- far from it. Web sites are an incredibly cheap place to publish reference material for people to browse when they have questions. I have a web site that answers 99 percent of the questions people have about This is True. And it's certainly the place for consumer information, large amounts of text, and a place to sell things 24 hours a day. But that ease also enables small players with limited resources to compete with you. Another page in the Internet Paradox.

Of course, newspapers publish way too much material to send out by e-mail. But major news sites can send out an e-mail summary of the important stories, or -- even better -- summaries of stories that your subscribers have told you are important to them, based on key words entered on profile surveys, with a URL next to each summary so that if they see a story of interest, they can click on the link and go to the web site and read the details. There is now terrific e-mail distribution software available commercially that can handle this kind of high-volume distribution, and automatically take care of any "bounces", or undeliverable e-mail. And it's cheap enough that even a small operator like me can afford it -- I started using it last year after outstripping the capabilities of free list software; if this sounds useful to you, it is not in your workbook, so write this down: www.lyris.com.

Point two: I said people subscribe for free. When I started This is True, my friends didn't understand it. How could I make money if I gave it away for free? I finally came up with a good answer that they could understand: I make money the same way that NBC makes money giving away TV shows for free. Advertising. Giving it away results in a larger audience, with correspondingly higher ad rates. I've had new subscribers every single day, including Christmases and other holidays, starting from my launch in 1994. Also, the more readers I have, the more book compilations I sell.

However, about two years ago I found I was selling less than half my ad inventory. So I cut down the online send rate by half. That is, Internet readers only got half the text that I wrote every week for the newspaper clients that were buying it. Because True is published by e-mail, online readers can easily give feedback, and I quickly learned that I was building up an unsatisfied demand. So I essentially told them fine: if you want it all, every week, just pay $15 per year and you can have a separate e-mail feed. And even better, I'll send that paid edition out sooner -- the non-paying people can wait for their half dose. And since these are the paying, loyal fans, I decided they, as my best customers, deserved something else: in exchange for their loyalty and for putting their money where my mouth is, I give them a discount on the book compilations. I thought that if I gave them something extra, not only would more people pay the $15, the people that did pay the $15 might buy even more books. And guess what? They do. If you give them good content for a price that's well worth it, online people are quite willing to pay.

The Internet Paradox here is, once I figured out how this mechanism might work, I didn't write a memo to the boss. I didn't discuss it with the board. I didn't do concept studies. I knew, after consultation with my own intuition, that it would work, so I merely implemented it. In six days. The resulting cash flow, six days later, was in the thousands. It made me sure I had a viable concept that would let me work for myself on my own terms. And it enabled me to buy a house.

Point three: I said I had a good intuition of what works online, and I think that's been proven. But intuition has to be based on something. Mine is based on a good understanding of the online culture, and make no mistake about it: there most definitely is an online culture. I've been online continuously since 1982 and I understand very well what people want out of their online experiences. Big media companies that throw money into a big online presence with no clue as to what the culture is are probably wasting most of that money. Your big names mean little to the so-called "Netizens" of the world. They want content, they want quality, and they want it on their own terms. They don't want to wade through cluttered pages to find it. If they can't find it on your sites, they'll go somewhere else. And that, bottom line, is the Internet Paradox. The little guys can do it just as easily as you can. There's always somewhere else to go. Your brand will not convince people to come back if they don't see what they want, but a little guy like me can create a brand by giving people the content they want. If you don't have someone on staff that knows what the Net is really about, don't buy market studies, hire someone who's been there awhile. We are around, even if we're hard to find because we're off doing something else more interesting than working for big companies. If the people you hire can't show they've been online much longer than you have, hire someone else. Anyone who tells you that the net hit 50 million users in four years doesn't know when it started.

This is True is not making me rich. Yet. While I build up a large supply of intellectual property that sells more and more subscriptions and books each year, it meanwhile has enabled me to ditch the safety of a Day Job and move out of Los Angeles, where I didn't like to live, and head for Boulder, Colorado, where I do like to live. I work the hours I want, take long lunches with friends, and travel around giving talks -- and I can still do my day-to-day business from a laptop. The Internet has enabled me to be an ad-supported periodical publisher, a newspaper feature syndicator, a book publisher and retailer, and be one of the first people to live the New American Dream: to make a living on the Internet while the big guys scramble to get their footings, otherwise known as taking full advantage of the Internet Paradox.

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*The "Online News Summit" is a conference of "New Media" organizations who are struggling to make a profit on the Net. 1998 marked the second annual forum. Participants included: CNN, ABC, El Universal Digital, MSNBC, The Jerusalem Post, MIT Media Lab, NANDO.net, Associated Press, UPI, Reuters New Media, AFP, The Irish Times, and many others. The "Niche Masters Who Can Kill You" panel included Randy, NetNoir, Salon magazine, and Online Today/Online Tonight Netcast.