Internet content IPOs: Conservatives need not apply

By Joe Schembrie
web posted June 26, 2000

The John Birch Society used to claim that Wall Street financiers bankrolled the Bolshevik Revolution. While that assertion is implausible, there's no doubt that the modern-day capitalist community -- against all sanity -- has been funding a leftist attempt at taking over the Internet.

The primary example of this is Salon.com, the ultra-liberal webzine that was touted by Democrats during the Impeachment Wars as virtually a propaganda rag for the White House. Shortly after its Initial Public Offering last year, Salon.com was assigned a market value of a cool $162 million -- an absurdly-inflated equity of about a million dollars for each employee.

Since then, Salon.com's stock has plummeted 88 percent from its offering price. In just one year, financial backers lost seven out of every eight dollars invested.

These grim facts are chronicled in a recent article written by Christopher Byron at the financial news site, Bloomberg.com ("Salon.com Typifies Demise of 'Content' IPOs," June 20). In the article, Byron blames Wall Street underwriters for misleading investors. "The bad guys in this tale?" he writes. "Fee-obsessed underwriters who couldn't say no to seven- and eight-digit commissions, and thereupon set the merry-go-round whirring to create a market for deals that had crash and burn tattooed all over them."

But should we be so quick to blame the free market system for this content-driven disaster? What about the content providers themselves -- the editors and writers at Salon.com?

For them (who are his liberal buddies, he admits) Christopher Byron has nothing but weepy praise: ". . . Salon.com is one of the best, most imaginatively written 'magazines' on the Web," he writes. So instead, he blames the failure on capitalism itself: "The senseless business plan that lured in the gullible: That advertising alone could support 'content' marketing on the Web."

In truth, there are a number of content-driven sites that are profitable on advertising alone. It's just that they escape Byron's world view because they happen to be politically conservative.

Matt Drudge built his content-driven web site into the Internet force it is today on the salary of a gift shop clerk. If the little ad banner at the top of his page generates only a penny per exposure (low for today's market), then the million hits his site receives every twenty-four hours translate into revenues of ten thousand dollars a day . . . and $3.65 million a year. At higher ad rates, projected cash flow gives DrudgeReport.com a real market value of hundreds of millions of dollars -- far above Salon.com's wildest fantasies.

Nor is Drudge alone. World Net Daily receives a quarter million unique visitors a day, and Conservative News Service and other sites appear to be thriving as well.

Which of these conservative sites were approached by Wall Street underwriters sponsoring multi-million-dollar IPOs? Instead, the big money capitalists have been pouring their funds into liberal web sites -- with financially disastrous results. Not only is Salon.com foundering, but then there's also Slate magazine, with Michael Kinsley (former 'liberal voice' on CNN's Crossfire) as editor, bankrolled by the awesome monetary clout of none other than Microsoft itself, yet also losing millions of dollars per quarter.

According to Byron's Bloomberg article, Salon.com spends nearly $800,000 a month just on rent, utilities, and payroll -- but how is that even possible? Reality check, please!

After all, we're only talking about a simple web site. You get your daily news content off the standard AP/Reuters wire, you pay for in-depth articles by big-name writers out of a budget of a couple thousand dollars per day -- and that's pretty much it. The staff shouldn't cost millions; here at EnterStageRight.com, the editorial staff works for free (so do I, by the way), as a labor of love, and still comes up with a presentation every bit as professional as what you find at Salon and Slate!

Maybe I'm missing something here, but if I were an investor in one of those liberal content sites, I'd ask if they could maybe please stop shredding hundred dollar bills for kitty litter.

Instead, the capitalist community continues to betray its philosophical defenders, by shunning conservative content sites and embracing liberal content sites. And it doesn't seem to mind that it's losing huge money by doing so. As Microsoft's anti-trust suit illustrates, the capitalists aren't even getting political favors in return.

The situation makes so little sense, it doesn't even meet the minimal criteria for an instinct of self-preservation.

There's an old adage attributed to Lenin, "When it comes time to hang the West, the capitalists will sell us the rope." Today, on the content-driven Internet, capitalists are eagerly paying for that rope -- and proceeding to hang themselves, both ideologically and businesswise.

Joe Schembrie is a senior writer for Enter Stage Right.

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