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Evan Rudowski is co-founder of SubHub, a paid content platform. He was previously an online manager at Newsday and business development dire…

Evan Rudowski

Evan Rudowski is co-founder of SubHub, a paid content platform. He was previously an online manager at Newsday and business development director at News Corp.’s iGuide.

As I watch the coverage of Rupert Murdoch’s upcoming iPad publication, The Daily, my mind races back to 1995, when I worked on Murdoch’s last effort to create a new digital publication for a new medium.

Known as “iGuide,” the effort I worked on was one of the first attempts by a major media company to build a unique and original offering for the then-nascent world wide web. For about 15 wild months, News Corporation (NSDQ: NWS) brought together some of the brightest editorial, marketing and technical talent to make it happen — only to pull the plug in the end.

My enduring image from that time is of Murdoch himself, his hand bandaged and in a sling following a sailing accident on Larry Ellison’s boat. The iGuide team was gathered in a standing circle at our trendy downtown Manhattan offices as Murdoch rallied the troops in his gruff Australian accent. Everything was going great, he assured us, and Ellison was coming on board to help foot the bill for our extravagant operation. But, in the end Ellison, wasn’t in — and maybe six weeks later we were all out.

I can’t help but wonder about the similarities The Daily may share with our long-ago failed iGuide effort. I hope — mainly for the sake of the people working hard right now to make The Daily happen — that they’ll enjoy a different outcome. Yet here are the things I’d look out for…

Big Media Talent

iGuide featured some of the top talent in the New York media world — a constellation of stars from the worlds of print, television and online. Each had their own turf to mark and defend. There were some good people there, and some who could have been prototypes for The Devil Wears Prada. But, with so many big egos, there was little team cohesiveness.

Revolving Door

Regime change happened more frequently at iGuide than in a third-world banana republic. Any one of the senior management teams at iGuide could have — and in some cases already had or later would — built a great digital media operation.

In its short, 15-month lifespan, however, iGuide endured at least three major changes of senior management — along with their assistants, henchmen and other favorites. For the rest of us, much time and energy had to be spent navigating our own place in that ever-changing organization. A big warning sign for The Daily would be similar churn at the management level.

Big Media Budgets

Big media talent expect to spend big media budgets. Compared with a lean startup, the cost structure for a venture like iGuide was through the roof. At one point, iGuide was rumored to be burning an average of $2 million per week.

Spending sometimes seemed to substitute for strategy. Although News Corporation already had its own perfectly good skyscraper, a fortune was nevertheless spent to
fit out a new office
for iGuide in a massive, historic old building downtown. This gave the project a “new media” feel, but without the necessary scrappiness. Most of that cavernous space was never even filled.

The news desk at the center of the operation was remodelled at least twice. In the end it resembled the bridge on Star Trek, with big-screen monitors suspended from the ceiling around an open circular space where the journalists could work. The monitors were at least handy for watching the O.J. Simpson trial verdict. Still, when interior design is one of the first priorities of management, there may be trouble ahead.

Brand Confusion

The branding at iGuide seemed to change more times than a runway model changes outfits. “Genuine Internet” was the first choice. Under revolving-door management, this got scrapped. Eventually “iGuide” became the preference — and much was spent to license the brand from its existing owners. Not that it mattered, since no consumer ultimately ever heard of it.

By contrast, the branding for The Daily seems consistent, if undifferentiated.

Dependence on Partners

All those costs had to be funded somehow. Murdoch clearly likes to experiment, but his appetite for footing the bill is maybe not as great. So he finds partners.

In the case of iGuide, Murdoch found a partner in MCI, one of the major telcos of the era. MCI parachuted in its internet team (including Scott Kurnit, who later founded About.com) and Murdoch in turn put in his best people (including Anthea Disney (NYSE: DIS), one of his long-time top lieutenants, later CEO of News America).

Unfortunately, MCI took a look at the bills, and after a few months pulled out. Cue Murdoch’s ill-fated sailing trip with Larry Ellison. And goodbye MCI executives; it was nice having a cup of coffee with you.

Now with The Daily, Murdoch finds himself dependent on another partner, Apple. There seems to be a cooperative relationship, but will it endure? Each partner has its own interests; they will cooperate as long as those interests coincide. Just as MCI once pulled the plug and Larry Ellison left him bloodied, bandaged and rejected, will Murdoch be able to count on the continued support of Steve Jobs and company?

Timing

With no partner to help pay the freight at iGuide, Murdoch soon lost his resolve and shut things down – ironically right at the beginning of the dot-com bubble.

The missed opportunity was staggering. Shortly after the layoffs were announced, I was pulled aside and asked to stay a bit longer to help unwind News Corporation’s deal with Netscape. Netscape was then the dominant web browser and Murdoch had bought exclusively the browser’s Search and Directory buttons — probably the most valuable real estate on the web.

But iGuide never launched on the Netscape browser. Instead, those buttons were grabbed by a scrappy Silicon Valley startup called Architext Software — soon to be renamed Excite — and the deal put them on the map (they hired me soon after).

As Excite’s co-founder, Joe Kraus, once said, “Being early is the same as being wrong.” iGuide was a pioneering and admirable effort, in spite of all its chaos. But it came a bit too soon, just before the web was ready to reach critical mass.

Is The Daily in a similar position? The iPad and other tablets are selling like hotcakes, but they are hardly a mass-market device. Given the likely levels of spending at The Daily — if they are anything at all like iGuide on that score — will they be able to make the economics work?

Waiting in the wings after the collapse of iGuide were a new generation of internet startups like Excite, Yahoo! (NSDQ: YHOO) and others who were ready to grab the opportunity that iGuide left on the table. Which brings me to my final point…

Bottoms-Up Almost Always Beats Top-Down

At News Corporation, there had been three-course lunches at expensive New York restaurants; at Excite we went down to the local burrito shop. At Excite, we had team meetings in the small kitchen in our cramped office; at iGuide, in its vast office — well, I can’t really recall too many team meetings, except the one where we all got laid off en masse.

Yet it was scrappy little Excite that snatched those Netscape buttons when News Corporation left them on the table. It was Excite that landed deals with some of the big media companies it had been my job to court at iGuide. The little startup won — not because they beat the big guys at their own game, but because the big guys were busy playing the wrong games.

Will The Daily suffer from a similar fate? How much has it cost to build and what will it cost to sustain? Compare this with, say, Flipboard or Pulse. Whose economics will be better?

It will be fascinating and exciting to watch The Daily take off. We need experiments like this. But as for me, I won’t be able to help having that odd feeling of déjà vu.

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This article originally appeared in SubHub.

  1. Great story – great to get an insiders view… I guess where big companies fail… is that their staff as you say are ego driven.. and demand lovely offices… and overseas trips to conferences. Whereas a fledgling start-up company – is just deparate to launch ….. and make it work.

  2. Great story and fascinating parallels!

  3. Craig McGregor Monday, January 31, 2011

    Brilliant piece Evan, and should be required reading at any ambitious i-nterprise. I too am an ex-Murdoch manager, and always surprised at how this shared experience always looms so large, and teaches so many useful lessons, even if they (usually) weren’t apploed at the time! Keep it up.

  4. Richard Truesdell Monday, January 31, 2011

    Evan,

    I agree with the others Evan, this is a very informative story, from the inside. I found this to be especially on target where you said, “Is The Daily in a similar position? The iPad and other tablets are selling like hotcakes, but they are hardly a mass-market device. Given the likely levels of spending at The Daily—if they are anything at all like iGuide on that score—will they be able to make the economics work?”

    First, I wonder when I hear that $30M is being spent to launch The Daily. Can this be true? How can someone spend this much? Does anyone remember Portfolio? And right now the iPad is in about 3% of US households, it’s not a mass market item and will never be when the cost of entry is $500 and up. Tablets will be mass market when they are available for $200 or less and it won’t be Apple who gets there first. It will be tablets that are Android-powered. What sense does it make to produce content for a device that reaches such a small part of the potential readership?

    The iPad won’t save newspapers and magazines. The iPad and other tablets will force newspapers and magazines to reinvent themselves. Is it any surprise that just three magazine apps are among the Top 100 apps on iPad and their numbers are declining (Wired had 100,000 app downloads in 4/10 and 23,000 in 11/10)?

    Richard Truesdell
    Editorial Director, Automotive Traveler Magazine, automotivetraveler.com

  5. Evan Rudowski Monday, January 31, 2011

    @David, Chris and Craig – thank you for the positive comments.

    @Richard, I am not surprised at all about the $30 million cost; if anything I thought that was low compared with iGuide (especially accounting for 15 years of inflation since then). Probably this is because the production tools are more standardized for the iPad whereas, in 1995 for the web, there were no production tools and they had to be built — something News Corp. invested in then and, to their credit, continued to use for the TVGuide/Gemstar venture that inherited some of iGuide’s old assets.

    I still do think it is a lot easier to make the economics work if you’re organic and grow based on market response, rather than investing a lot first and hoping the market response justifies the investment.

  6. Not much mention here of selling advertising on The Daily. I led digital sales for WSJ when we launched our iPad app last year… on the same date as the product’s debut. Without knowing what the scale would be for the app, we successfully packaged iPad sponsorships with print/online advertising. Very curious to see how The National will generate ad revenue with no adjacent media properties as they wait for the circulation to build.

  7. Evan Rudowski Monday, January 31, 2011

    @Brian, very good point – it certainly helps to leverage the same brand across multiple platforms — and a very well established brand too. The Daily will not have any of those advantages. They will need to establish a new brand in the minds of consumers, grow it to a sufficient level and maintain that growth in order to make it an attractive advertising proposition. Big job, especially with a high cost base to support.

  8. Evan

    I couldn’t agree with you more.

    The Daily and Murdoch’s “new” vision of how the news will be read, viewed and monetized is based on old media’s stubborn hold on how to generate revenue by controlling content. It’s no wonder that Apple is so keen on making a big splash (sort of) about this new venture. Because both of these media empires are dancing together on an unsettled path to new media dollars.

    While APPLE is the leader on monetizing through the web, NewsCorp is notorious for failed ventures (I GUIDE) and 2 minute two late acquisitions ( My Space). The arrogance in spending a reported $30Million dollars to launch a product that is based on a $4.99 subscritpion fee while paying a staff of NY Based folks ( word is about 111 people) makes no sense.

    I get the NYT’s free ( for a while at least) and Google News is growing on my list of bookmarks that is becoming a better aggregator of news, sports and entertainment. Google will dominate the space for monetizing links back to news creators while Apple, in my opinion, is testing out the waters until it can figure out its own model.

    Until then, it will be interesting to see what The Daily looks like in all of its IPAD glory. But one has to wonder how much revenue can really be generated on a subscription based news source with no history, a right leaning foundation and why is that better than me not paying for the WSJ instead? You pay for the print version of that AND get online access. And you’re telling me that’s not a richer, deeper more respected source for news?

    Good luck Rupert! I hope your staff orders from Subway rather than Wolfgangs’!

    James L.

    1. @Evan Thanks for sharing your thoughts on The Daily and for being so
      responsive here.

      I think the $30 million estimate sounds especially high if people think of
      it as iPad-only but I don’t see that as the end game. A staff of 126 (and
      until we see it, can’t say if that’s over or understaffed) even if salaries
      weren’t at NY rates, is a significant investment plus development,
      marketing, etc. It’s also a relatively small one in a company the size of
      News Corp.

  9. Evan.

    Just wondering how this budget and these activities tie in with what the bright folk at Next Issue are up to. News Corp is one of its five founding partners, with a mission to ‘ to explore and shape the boundless opportunities for publishers, advertisers and consumers in the exciting, emerging environment of digital publishing and e-reading devices’.
    So, are they doing this twice?

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