Sunday, April 01, 2007

Why did the Industry Standard die

A failure is a better lesson learnt?

            Why did the Industry Standard die?

McGovern: In 1997, the magazine was launched as many big Internet companies were launched, and investors needed a weekly publication covering the industry. In its first year, ‘97, the magazine made $9 million in revenues, and in its second year it made $25 million. And then at that point, there was $800 billion invested in Internet companies.

But then the bubble burst. The magazine went from making $200 million in revenues in 1999 to making only $50 million in 2000. Unfortunately the management had put the magazine on an IPO track. They bought very expensive CRM software, and had $120 million in fixed costs per year. It was a hopeless situation. The gap between costs and revenues was too large.

The magazine had made a volcanic rise and fall. We’d never seen anything like that before or since. In 1999 the magazine set a record for the number of ad pages, and the next year it set a record for the largest drop in ad pages.

The paradox was that in 1999, we were approached by Time Warner and Hearst, who wanted to buy the Standard for $400 million or $500 million. But [then-CEO] John Battelle had a plan to be making $1 billion a year by 2006, wanted to take the company public, and planned to make a tender offer to buy Dow Jones. It was a plan for world domination, and we should have taken the money from the magazine publishers and run. Business 2.0 sold for $350 million right before the bust.