Expensive Social Net Will Cost BusinessWeek $4.7 Million In 2009; $21 Million Expenses Till Date

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Expensive Social Net Will Cost BusinessWeek $4.7 Million In 2009; $21 Million Expenses Till Date

BusinessWeek’s efforts to reinvent itself in the internet age hasn’t come cheap. On the eve of McGraw-Hill’s Sept. 15 bid deadline for the business magazine, The New York Times reports that BW’s social net Business Exchange is on track for nearly $21 million in expenses from its 2007 launch through 2009 . Last year’s revenue, according to a memo the NYT says was sent to investors: about $600,000 on expenses of $7.6 million. The memo shows the gap narrowing this year but still with expenses of $4.7 million.

That’s just part of BW’s losses. The mag lost $17 million last year, according to the memo—plus another $26 million in overhead and rent from McGraw-Hill (NYSE: MHP). Part of the mag’s pitch to prospective buyers is those charges have been to high and can be reduced. Projected losses over all for this year: $41 million, slightly better than $43 million in 2008 but still not very attractive for a prospective buyer.

One of the magazine’s problems online is a page-view mix that tilts heavily to slide shows—45 percent—with only 16 percent of pageviews for the 1H09 going to original stories. The memo also says BW’s online ad sales are down by half from 79 percent in 2006. CPMs are down too.

Rafat adds: On Business Exchange’s $21 million expense: really? With tons of white label social net services out there, and the value of being a media org, BW couldn’t get a cheaper and better deal? Give me that amount of money and I’ll conquer the world with it. No wonder the pub is in trouble…

Staci D. Kramer

@sdkstl Sep 13, 2009 10:43 PM ET

Posted In: Advertising, Media & Publishing, Magazines, Social Media, businessweek

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Scott Brown

Completely agreed—media companies should focus on their core business, and not on developing home-grown tech platforms that they can get on the open market.

I don't see that I actually mentioned any specific solutions in this space, but would be happy to if you're interested. 8)

Rafat Ali

Scott, thanks for a blatant pitch for your company's products. Of course you'll say that. Point is, there is no reason a news media company should be spending that much on a social net solution these days.

Scott Brown

The absolute number of dollars spent may be unique to McGraw-Hill, but the situation is not. While plenty of white-label social media point solutions exist, there aren't that many platforms for media companies to combine the power of "social" and produced content in a sustainable way.

Reality is definitely setting in, and media companies are increasingly looking beyond the "development" dollars are realizing the customer platforms they developed are costing them far more than they realized to operate and maintain.

Scott Brown
Cisco Media Solutions Group

jenkins

Has anyone bothered to look at what Business Exchange is/does? It's goddamn terrible if you ask me. Someone should get fired for incubating this product because it is basically useless.

ed dunn

I simply did not understand what BusinessExchange was about and glossed over it.

I'm curious to know if the $21 million was spent on paying certain self-important "new media/web 2.0" people to participate on their social network…

patricia

Wow. They're really getting hosed with who or whatever is running their digital efforts. That's too bad.

Sean Ryan

It's simply not possible to run that amount of expenses through a social media network, business or otherwise.

There are numerous ways to increase revenue, through social virtual goods, subscriptions and other specific social media advertising, but cost control is key, so maybe selling the firm is the right idea

Sean Ryan
Loki Partners
"Monetizing Soical and Digital Media"