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NOTE: This article is an archived copy for portfolio purposes only, and may refer to obsolete products or technologies. Old articles are not maintained for continued relevance and accuracy.
December 8, 1997

Information wants to be free? Not at TheStreet.com

One of the popular refrains heard on the Internet is that the low-cost, liberating nature of HTML and the Web will allow anyone to become their own publisher. The perceived problem—and one that has been proven correct by many failed ventures—is that Net surfers do not want to pay for content.

Not so, says Brendan Amyot, Chief Operating Officer at TheStreet.com, which has 15,000 paying subscribers to its Web site (http://www.thestreet.com).

"People want information that will help them stay ahead," Amyot says, "and if you can provide valuable information on a timely basis, you can certainly charge for it."

TheStreet.com is one of the few Cinderella stories about successfully charging for content for just this reason, Amyot maintains. The key is to provide valuable, unique content very quickly. If any of these components are lacking, visitors may come but won't buy.

Opportunity knocks

In the financial industry, there are literally thousands of newsletters, papers, and magazines available for consumers to pick from. The opportunity that TheStreet.com saw was the Web's ability to provide low-cost and immediate distribution of a new newsletter.

"Jim Cramer [TheStreet.com's founder] goes through reams of data every day as a hedge fund manager, and he wanted to be able to get to that data on a timely basis for himself," Amyot says.

Realizing that others had this same need and desire, Cramer started looking for ways to provide immediate distribution, using low-cost tools.

Although other vendors such as Bloomberg have been offering hardware-based terminals that provide the same type of service, these terminals cost much more than $1,000 per month to lease.

"Jim saw a way to bring this same value proposition to individual investors for $13 a month, by using the Internet as a distribution vehicle," Amyot says.

Apparently, they have tapped into a gold mine. Forty million households in the United States own stocks or mutual funds, according to Forrester Research, out of which 1.5 million had online, electronic trading accounts by the end of 1996. That figure is expected to grow to 3 million by the end of 1997, and to reach 10 million by the turn of the century.

By getting investment information immediately, these individuals don't miss trading opportunities. This is the key to TheStreet.com's paying subscriber base.

"If we're providing good information on a timely basis, and it results in a successful trade, then [the transaction] will pay for the subscription costs, and they'll keep buying the service," Amyot says.

A smorgasbord of services

At the heart of TheStreet.com's service is its newsletter, which goes out to over 10,000 users daily. The newsletter is similar to other offerings in the industry in that it is geared primarily towards the financial community, offering news and opinions about the day's activity.

TheStreet.com's Web site also offers this information on a more immediate basis. Four editions are generated each day, covering different elements of the financial community and their impact on investors.

In addition to the news, The Street.com also publishes a wide variety of commentary, as well as profiling and ranking investment companies, giving more than just market data to the subscribers.

"We're not out to beat the wire feeds with market data, but to provide perspective and commentary on the events that are causing the movement," Amyot says.

Another part of TheStreet.com's success is due to the fact that all of their content—with the exception of the market data—is generated locally by TheStreet.com's writers.

Gregg Bishop, TheStreet.com's chief technology officer, says, "That's why we're successful, and able to charge for the content. Other sites offer some information from one site, and other content from another site, while we have everything under one roof."

By not recycling other news from other sources, TheStreet.com avoids the syndrome whereby the value of their content is diminished.

"You can only get it here," according to Amyot.

Outsourcing is key

When TheStreet.com first came online, they were running a handful of Web servers out of their office and a nearby ISP. However, as the site grew, problems started cropping up.

"With our old setup, we couldn't accommodate more than 5,000 simultaneous users, as that was the most the authentication database could handle," Bishop says.

To allow for more users, The Street.com inked a deal with Seattle-based StarWave, whereby StarWave would handle all of the backend work, while allowing TheStreet.com to focus on the content.

Under this arrangement, TheStreet.com's public servers are located on a T3 circuit in Seattle, Wash., while the editorial offices are in Manhattan. All publishing and staging of content is handled at StarWave's offices in Bellevue, Wash.

StarWave has several Windows NT-based servers for TheStreet .com's use. Among these are a handful of Web server systems running Microsoft Internet Information Server 3.0. There's also a system running Microsoft's SQL Server for use with authentication and for controlling the newsletter's distribution list. The mailing of the newsletter is handled with L-Soft Inc.'s Listserv, also running on an NT host.

StarWave gets market data onto the Web site through connections to Standard & Poor and Lipper Analytical Services' various tracking systems. For S&P data, StarWave has a "blue box" that receives market updates every 20 minutes by satellite; this data is then converted to Web format by a customized program. Lipper sends mutual fund data directly to StarWave's site using FTP uploads, after the markets close.

The newsletter itself is sent in plain ASCII text, although it used to be sent in Microsoft Word format as a MIME attachment. However, many mail systems don't accept large attachments, and America Online users had to download the file separately from the e-mail message.

"Also," Bishop continues, "There was a production overhead issue with formatting the newsletter as well, so that was eventually abandoned in favor of raw text."

Looking ahead

Considering that the Web site has been online for only a year, 15,000 subscribers is a pretty good indication of success. However, TheStreet.com is also looking to expand into even more forms of distribution and access to information.

They have already benefited from the extra bandwidth and capacity by implementing a new portfolio tracking system (using client-side cookies and at back-end SQL Server database), which allows users to monitor their stock and mutual fund portfolios in real time. They're also looking to add chat rooms and direct links to some of the online trading houses, allowing users to talk to analysts and immediately change their portfolios. But TheStreet.com does not plan to get into the online trading business.

"We don't want to worry about the potential conflict-of-interest or credibility issues that would be incurred from owning an interest in the transactions," Amyot says.

The company is also looking into ways to license the service to trading houses and institutional investors. By providing direct, bulk access to the traders themselves, TheStreet.com hopes to broaden its customer base. Currently, professional traders account for approximately 20 percent of their business.

The investor will remain its primary focus, Amyot says, "We've lowered our price to $9.95 a month for those buyers, and are also starting to advertise aggressively on CNBC and in other financial media."

What lessons does TheStreet.com have for other sites wishing to sell intelligence?

"Find out what's really important to your customer base, and what they want to know immediately. They'll probably be willing to pay for it," Amyot says.

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Copyright © 2010-2011 Eric A. Hall.
Portions copyright © 1997 InfoWorld Media Group, Inc. Used with permission.
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