About.com is in free fall. The New York Times (NYSE: NYT) revealed yesterday that its network of information sites suffered a 67% drop in profits and that revenues had fallen by a quarter.
The new figures come at a time when the New York Times Company is trying to forge a digital strategy based on high quality content and the prestige of its flagship brand. About’s problems could present a distraction as NYT Co seeks to implement that strategy.
Looking at the company today, it’s hard to recall that About.com was once one of the hottest properties on the web. When the NYT Co paid $410 million to acquire the site in 2005, it reportedly beat out other media giants like Google (NSDQ: GOOG) and Time (NYSE: TWX) Warner.
Despite the stiff price tag, the purchase for a time looked shrewd as About.com generated steady profits while growing its revenues from $80.2 million in 2006 to $136 million in 2010.
This growth, however, was fueled in part by the acquisition of niche sites like ConsumerSeach.com which the NYT Co bought for $33 million in 2007. Perhaps tellingly, the company had to write down the value of that site last quarter. It also divested another site that was part of the About group, UcompareHealth, early in 2011.
The biggest worry, though, is that the decline of About.com itself may be irreversible. Fewer people are clicking on About ads placed by Google and the site’s own display ads have dropped in value.
The company has attributed this decline in value to Google’s decision last year to downgrade About pages in its search results. With more than 80% of traffic coming from search, the Google denigration was indeed a blow but About’s problems may be rooted in something deeper.
Namely, it’s unclear if About is still viable as a brand. While the company launched a marketing campaign in 2010 to differentiate it from other “how-to” sites, there’s little evidence the message resonated with users. While readers may seek out individual About “guides,” the 80% search traffic figure reflects how About remains a detour not a destination for the vast majority of visitors.
These fortuitous attributes appear to conflict with the NYT Co.’s strategy of building a digital brand around famous, high-quality content.
On yesterday’s earnings call, New York Times executives responded to analysts’ skepticism by noting that About is in the process of reinvigorating its sales force under a new management team. The company appointed long-time CFO Darline Jean to take over the CEO job last July after her predecessor was forced out after a three-year stint.
If there’s a bright side, it’s that About reportedly has 60 million unique monthly visitors and that, for now, it is still profitable. But going forward, it’s hard to see About reacquiring its former cachet anytime soon.