For magazines,
a smarter sort of pay wall
Maggwire is gearing up to offer readers select content
By Diego Vasquez
Nov 10, 2009
Call it iTunes for magazines. A trio of former Deutsche Bank analysts have launched a new site called Maggwire, where readers eventually will be able to access individual magazine articles instead of having to buy the actual title. Like iTunes, where buyers can cherry pick songs from a variety of albums, Maggwire will allow subscribers to pay a fee ranging from 15 to 50 cents for an article or purchase a monthly subscription for a particular category, such as politics, theater or sports. Ryan Klenovich, Jian Chai and Steve DeWald, who are all under 30, quit their Wall Street jobs to launch the site, now in beta. For now, Maggwire is linking to other sites' content and analyzing readers' habits, with the premium site's launch coming next year. Maggwire is hoping to establish revenue-sharing partnerships with some major publishers by promising to draw in young readers looking for personalized content and older ones looking for an easier way to navigate the web. Klenovich, chief executive officer at Maggwire, talks to Media Life about Maggwire's business model, when it hopes to achieve profitability, and the future of magazines online.
How did you come up with this idea? What is your background and how will that help you with the site?
We created Maggwire out of our love for magazines. While working at Deutsche Bank, my partner Jian Chai told me his idea. He painted a picture of an online magazine haven offering a personalized experience built around a community of like-minded readers.
We began brainstorming the challenges and what it would take to accomplish.
After researching the industry and the Maggwire concept for almost a year and after having endless evening and weekend meetings, we decided to quit our jobs at Deutsche Bank to pursue this opportunity with our 100 percent commitment. At the end of the day, we want to create a product that brings the magazine industry into the 21st century.
In our view, the biggest threat to magazines is not competition from within the industry, but rather competition from other forms of media. And to date we have seen limited magazine innovation, in terms of creating a robust digital model.
We are the right guys to do this. We grew up during a unique time of innovation inspired by the internet, and we understand what works for middle-age readers on the web (simplicity) as well as what younger generations expect (personalization and value).
Maggwire will be the ultimate magazine experience.
Why hasn't anyone tried something like this before, or have they? If so, what did you learn from their experience?
Nobody has tried to fully utilize cutting-edge technology to create an immersive digital experience for magazines online. Others like Zinio and Maghound have tried to establish mainstream adoption, but both have left a lot to be desired.
Some people will always enjoy flipping through a magazine book and discovering great magazine content that way, but most people expect more out of technology.
We are creating a personalized experience that delivers readers the magazine content they're most interested in. I can't tell you how many times I've seen someone rapidly flip through 20-plus pages of a magazine before finding a page that interests them. A lot of people are bored with the old magazine experience, that's why we're reinventing it.
What is your business model? Do you share these profits with the publishers? If so, how much?
We are creating a way to “channel surf” by interests instead of being tied down to titles.
When we launch Maggwire Premium next year, we will be selling subscriptions to “Channels” in the $1-$2 per month range. To reach mass adoption, it's critical to keep the introductory pricing simple. We will also allow content to be purchased on a single-article basis, ranging from 15 to 50 cents per article.
Additionally, publishers can expect to generate 50 percent of their revenue from the user-targeted advertising platform we will eventually integrate. Our revenue sharing agreement is 75 percent publishers, 25 percent Maggwire.
How long until the site is profitable, best estimate?
As long as it takes for our revenues to exceed expenses. [Laughs] I'm obviously kidding. We expect to reach profitability within two to three years, so a strong investor backing is important as we are rapidly developing technology.
Are you accepting or aggressively pursuing ads for the site?
You won't see ads for at least one year. Our primary focus is on creating an optimal product that our users are happy to pay for.
What is the publishers' incentive to do business with you? How many have you contacted and how many have committed to the idea?
We are having discussions with literally hundreds of magazine publishers (including some of the biggest players) about how our platform can help them monetize their content. We are receiving a lot of enthusiasm in working together to create this magazine marketplace.
A large number of magazine publishers don’t really know how to move forward on the web to create a sustainable business—we can help. Other publishers have formed their own digital strategy, but Maggwire seamlessly fits in.
Why do you think this could help the magazine industry?
First, the days of spending $50 to find and secure a subscribing customer are gone. We have to think, as an industry, about operating more cash efficiently.
Maggwire is the first online newsstand that uses technology to enhance the magazine experience, and uses an intelligent algorithm which allows users to discover great magazine content, perhaps from magazines that they would never think of.
Second, 99 percent of magazines cannot successfully charge for subscriptions to their web sites.
Why? Because the idea of having more than one virtual subscription with recurring credit card charges is terribly intimidating for most people. At a minimum, consumers need to have a central source to manage their digital subscriptions. And as a publisher, how can you effectively market a single magazine site subscription? It's close to impossible.
By making magazine consumption easier, people will consume more. Just as Apple did for music, we will offer a frictionless media consumption experience that makes it painless for consumers to spend their money and get the magazine media they want when they want it.
In creating this marketplace for publishers to sell consumers their content, the quality of online magazine content will soar. You'll see higher resolution photos and feature articles designed with the same elegance as print. There is an untapped market out there, separate from individuals who are in love with their print editions. We're going to capture that.
Why do you think people will pay for something like this after so many years of getting content on the web for free?
I don't see that to be as much of a problem for magazines as it is for newspapers.
Our content is not as commoditized, and people tend to view magazine reading as a more leisure experience.
Maggwire enhances this leisure experience in so many ways. We save people time by learning what they like to read and bringing them only what they're interested in. And as I said before, by establishing an efficient marketplace for publishers to sell their content, the quality of digital articles will rise above that of free alternatives.
Do you think the future of the magazine industry is online or in print?
It clearly depends on the publication, but online will obviously continue to take a bigger chunk of the pie for every magazine.
At some point, consumers will abandon print media in masses. It is inevitable, and the quicker we establish a successful digital model, the sooner our industry can focus on real growth instead of desperately holding onto the print model which has too many limitations for younger generations.
People want personalized and targeted media; they don’t want to flip pages. Publishers need to prepare today.
Within 10 years, I predict commemorative or tribute print editions will be more common than monthly print editions. It might even be sooner.
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