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Will Seattle Post-Intelligencer Be Profitable Online?

NEW YORK (AdAge.com) -- Most newspapers wouldn't dream of stopping the presses, from which they still derive the overwhelming bulk of their ad revenue, which in turn often contributes to a healthy, profitable bottom line. In 2007, the most recent year figures are available from the Newspaper Association of America, print ad revenue represented 93% of total ad revenue for newspapers.

The Seattle Post-Intelligencer's final print edition.

But Hearst's Seattle Post-Intelligencer, which is going online-only after today, had big losses to contend with. If the print revenue wasn't enough to erase a $14 million loss, according to Hearst, you can see the logic in shutting down. The weekday print edition booked $141 million in ad revenue in 2007, but that dropped to $118 million in 2008, according to TNS Media Intelligence.
Now the question is what it takes to make the new, online-only P-I profitable.

The site will probably cost $4.5 million to $5.5 million a year to run, according to back-of-the-envelope estimates by Ken Doctor, the newspaper vet-turned-analyst for Outsell. If the site maintains or expands its current traffic, and if it could achieve $10 pricing per thousand impressions by making the most of relationships with Yahoo and others, it could collect some $4.8 million in revenue.

There are several big "ifs" in that analysis, however. The site won't be a traditional newspaper site. It will aggregate content, link to sources including The Seattle Times and pull in community participation. The site also has to build a sales staff from scratch and make the most of partnerships with Yahoo's Newspaper Consortium and Quadrant One. And a lot of the page views the site has to offer right now represent low-value inventory like photo galleries and blogs.

"The challenge is to have a sales force that can be quickly and well trained on the Yahoo system and then make the connections," said Mr. Doctor, who has written about the Seattle situation on his blog, Content Bridges. "But Hearst has time. This is the thing. Let's say they lost a couple million. That's not a lot to Hearst. For Hearst it's a great lab. They can really learn what happens when you flip the switch."

While Hearst Newspapers is backing this venture, others who have lost their jobs and newspapers are attempting to create their own web news site. Following the demise of Denver's Rocky Mountain News, a group of journalists banded together to start InDenver Times. The group is asking readers to pledge to pay a $4.99 fee per month, and if they reach 50,000 pledges by April 23, they will go live with a news site.

A Hearst spokesman did not respond to requests to speak with Seattle P-I executives or George Kliavkoff, hired Monday to lead the digital expansion of Hearst Entertainment and Syndication.

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