Will TV Savvy Help Time Warner Online?
Time Warner is laying ambitious plans to become an Internet retailer, which is a radical shift from flagship site Pathfinder's ad-revenue business model, The Wall Street Journal reported last week.
"Time Warner senses that this is the time to come in," said Roy Schwedelson, CEO of list management firm Worldata, Boca Raton, FL, parent company of banner-placement firm WebConnect. "It means [the Internet] is a mass market that makes economic sense. It also means that a lot of their traditional buyers are there."
Within the next 12 months, Time Warner plans to begin selling CDs, videos, Time-Life history books and other merchandise, the Journal reported. The as-yet unnamed business initially will sell only Time Warner products but eventually will sell entertainment merchandise from rivals.
Time Warner launched Pathfinder (www.pathfinder.com) in 1994 to showcase online versions of Money, Fortune and Time magazines and other properties hoping to find profits in ad revenue. But while highly popular with online consumers, there's little doubt that Pathfinder has been nothing but a money pit to Time Warner.
In 1995, Don Logan, chairman/CEO of the company's Time Inc. division, said at the American Magazine Conference that Pathfinder had given new meaning to the term "black hole," the Journal reported.
An online retailing site will let Time Warner focus on a single mission and probably will result in a far more focused site than Pathfinder, said Regina Brady, head of interactive services at list firm Acxiom/Direct Media, Greenwich, CT.
As director of interactive marketing for Internet service provider CompuServe, "I used Pathfinder as an example of how not to design a home page," Brady said, noting that Pathfinder designers had reduced magazine covers to the size of postage stamps.
Logan, who is heading the new online retailing initiative, already is touting his firm's success at selling products to people that "they didn't know they wanted or needed," the Journal reported. The company's aggressive marketing tactics give it an edge over more passive Internet retailers like bookseller Amazon.com, Logan was reported as saying.
However, while history gives Time Warner a wealth of information to draw from, what works on television may not necessarily translate into instantly profitable Internet selling, said Richard Baumer, president of media-buying and list-management firm Venture Direct Worldwide, New York.
"Every medium has nuances," Baumer said. "It will take testing to learn what works on this one."
And money -- it will take deep pockets to find the right formula.
"You can't just throw a few bucks at [Internet marketing] and when things don't pan out immediately say, 'The medium doesn't work,' " Baumer said.
A key difference between Internet marketing and traditional direct response is that people must choose to visit a site, Schwedelson said.
"In traditional direct marketing, the merchant makes the first assault," Schwedelson said. "On the Web, the consumer makes the first move, and that in itself changes the equation. But that doesn't mean that a direct marketing giant like Time Warner isn't going to be able to leverage their understanding of measurable media."
Also, other online marketers can benefit by observing how Time Warner's selling approach evolves.
"They come with a discipline that says, 'We're going to watch what the reaction is and respond accordingly,' which is what makes it direct response," Schwedelson said. "Watch what they do and go to school on them."