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Exclusive Interview with Jim Daly, founding editor of Business 2.0
Many of us rode the wave of Internet mania up—and then right back down. But few have occupied the enviable catbird seat of Jim Daly, the founding editor of Business 2.0, which is credited with fundamentally changing the way the media covers businesses as they were thrust (some unwillingly) into the uncertain abyss of cyberspace. Earlier this year, mass media goliath AOL Time Warner purchased Business 2.0 and kept only three Business 2.0 staffers, choosing instead to fold the staff of its eCompany Now magazine to the new Business 2.0.
by Michael Grebb, Special Correspondent
Daly spent his newfound free time with his family on an extended vacation in the Wyoming wilderness. He’s back now—re-energized and actively weighing options that include book offers and overtures from new “startups.” Daly took a few minutes out of his admittedly less hectic schedule to give BizReport his take on the magazine business, the Internet economy, and why the Internet still changes everything.
MG: You’ve just gotten back from your first real vacation in a while. How did it feel?
JD: It was a little strange, actually. After the sale went down, I had a lot of extra energy built up inside me.
MG: I imagine you haven’t taken any time off since becoming founding editor of Business 2.0.
JD: A few days here and there, but when you have a startup, it’s kind of like a restaurant in a way. You have to be there to check on the service, the sauce, everything… You have to be there to make sure that all the parts of the magazine are working, especially with one that was growing as fast as we were.
MG: Did the stunning growth of the magazine—especially around late 1998 and into 1999—surprise you at all? The issues were starting to look like Sears catalogues for a while.
JD: Well, it did surprise us. But we knew the story was a good story, and we knew the magazine was good. I don’t think we expected the growth to be as rapid as that. It’s a bit unusual for a magazine to grow that quickly—to go from a startup to a magazine with the eighth highest revenue of any magazine in the United States within two years. That was certainly surprising, but we caught the story just as it was starting to develop and people were starting to get excited about it. The one thing that really worked for us was that the story really generated both a lot of excitement and a lot of confusion. When you have a lot of excitement and a lot of confusion, people look for information. That put Business 2.0 right at that nexus. We knew we didn’t have all the answers, but we wanted to ask all of the questions and get down to the business models—the ones that were working and the ones that weren’t working. I think we did a really good job doing that. I think a lot of people realized it. Certainly, AOL Time Warner did. You have the largest magazine publisher in the world buying a magazine that hadn’t hit it third birthday. So that was pretty flattering.
MG: During the boom of the late nineties, how challenging was it to just keep up with so much growth so fast, considering it was probably the toughest labor market in decades?
JD: It was very difficult. You have to remember that when we started out—the first two years or so—we only had about a dozen people in editorial, and that included the art staff and the production staff. And that is not a lot of people. It’s an adequate number of people to put out a 112- or 128-page issue, but when the issues start to get up to 300 and in our most extreme cases 480 pages…
MG: Well, you used a lot of freelancers.
JD: But you know, everyone was growing, and it was difficult to get good freelancers. In many ways, you had what I call a “citizen army” developing. Everyone who could write and knew a little bit about business began to write for all these different publications. It was just difficult to get good people. It was even more difficult to get excellent people. You needed to hire 30 people right away, but you couldn’t do that because maybe there weren’t 30 great people out there that you wanted to contribute to the magazine.
MG: But then everything changed. In the Spring of 2000, the bottom started to drop out for technology business magazines across the board. Considering that you had beefed up the staff in 1999, how did you deal with the new reality?
JD: Well, we had beefed up the staff, but we never beefed it up as much as other people had. Even at the highest level, we only had about 45 people in editorial. Some of those magazines had over 100 or 200 people.
MG: That sounds like The Industry Standard, which just went out of business. As the former editor of a rival publication, what do you think happened there? Did they just get ahead of themselves?
JD: That was one reason. I mean, they had a tremendous burn rate. They were going through a lot of money very, very quickly. They were very ambitious, and you can’t fault people for being ambitious. But when the softening began in the spring of last year and the whole market fell off a cliff in November, I don’t think anyone expected it to crater as quickly or dramatically as that. Suddenly, if you’re bringing in one third the income that you used to but are spending the same amount you used to, you have some serious challenges.
MG: Someone from outside the publishing world might wonder why a magazine that had such a lucrative two or three years didn’t have a stockpile of saved cash to weather an eventual downturn.
JD: It doesn’t really work that way. Most magazines aren’t even profitable until year five because you have to spend a lot in marketing, a lot in branding, a lot in getting your name out there. So a lot of that money you’re bringing in is going right back into the magazine. We were unusual in that way. We were profitable by the end of our first year because we had such a small outlay. We had a lot fewer people on the staff; we didn’t spend as much on marketing; etc.
MG: Obviously, AOL Time Warner noticed that. What’s the history of that acquisition? As I understand it, Time Warner was interested in Business 2.0 almost from its inception and before Time Warner merged with AOL.
JD: They had approached us after issue three in early 1998. That didn’t happen. They wanted to get into this space, and they did eventually. So they launched their own publication, which was eCompany Now. It didn’t do all that well. It was losing a lot of money. But what happened with Business 2.0 is that our parent company got into a serious hole. They had launched a lot of publications and they were getting pretty badly hit. They needed money, and the crowned jewel of the organization was Business 2.0. So late last year, the idea was brought up to sell Business 2.0, and AOL Time Warner was still interested.
MG: Considering that AOL Time Warner didn’t keep most of the Business 2.0 staff, is Business 2.0 still the same magazine?
JD: No, it’s not. It’s a relaunch of eCompany Now. You can take the name, sure—but it’s the people that make up the DNA of a magazine. You can put Business 2.0 on Popular Science, and it doesn’t make it Business 2.0. The fact is that we had believed and hoped that there was going to be a more equitable split of people—that it would be 50-50, the best of both teams. But it wasn’t. They decided they didn’t want to do that.
MG: So now that you’re free and clear for the first time in four years, what are your career plans going forward?
JD: I just got back from this trip, which was a great way to refresh my batteries. I’ve been talking to a lot of people lately about all kinds of things—working on some new startups or working on some books…
MG: Are there any startups left out there?
JD: (Laughs) Yeah, there still are. What I like the most about Business 2.0 was actually starting it. When you have a small team, it’s much easier to get a sense of the unity and mission—and the zealotry in a way. We were all zealots and put a lot of energy and time and devotion and creativity into the magazine, which you can certainly do with a bigger magazine as well. But when you have a smaller organization, it’s a lot easier to all read from the same sheet of music. I really love that energy. Just as there were three years ago, there are a lot of good ideas and a lot of kooky ideas. I don’t want to get involved in any kooky ideas, but there are certainly opportunities for new companies.
MG: Would you stick with magazines or some kind of content business?
JD: I think so. I’ve been in journalism now for twenty years. I love the magazine tradition. I love the art of the magazine craft. It’s the most fun for me. It’s the most energizing area of journalism. I’d like to stick with that because I still get a huge charge out of it, even two decades later.
MG: Of course, it seems to be a thinning field these days. What’s your prognosis for the future of technology business magazines?
JD: You really have a different ballgame going on right now. In the past, you’ve seen a lot of independent publications in this space bought up by the major media houses. You saw Wired bought by Conde Naste. You saw Fast Company bought by Gruner & Jahr. You saw Business 2.0 bought by AOL Time Warner. So it’s a different battle. It’s more the war of the titans. Who can spend more on marketing? Who can really wrap their ad packages in with five other magazines? This is the evolution of successful companies. We were able to sell Business 2.0 because we were an attractive, successful property. Successful properties evolve and mutate and change. I still think the story that Business 2.0 is built on has a lot of legs. AOL Time Warner just spent $60 million on it. They’re going to put a lot of inertia into it, and from a marketing standpoint it seems like part of AOL already.
MG: With all of these magazines now in the hands of media giants, isn’t it somewhat unrealistic for an independent startup to compete in the space?
JD: I think it would be tough. Someone just asked me the other day, “If you launched Business 2.0 today would it be successful?” And I said, “It would not. It would not be successful if it was launched in the same form.” One of the first things we did in our very first issue was looked at the 10 driving principles of the new economy. We went to a lot of people and asked what is different about the way business is being done right now in terms of how you market to customers, retain customers, etc. We distilled that down until we figured out our constitution—our marching orders for the magazine. In the beginning, we had an ad campaign: “Do you get it.” Because some people did and some people didn’t. But now I think everyone gets it, and if you went in and launched a magazine that said, “Hey, here’s a story you may not have heard of, and it’s going to change business in a fundamental way,” you’d be laughed out of the room. Also, the economy is in a dumper right now. Ads were down this year in magazines, but I think pretty much everyone is in a lockdown right now at least until the end of year, especially with what happened on September 11 putting a cloud over things. Where is consumer confidence going? Where is spending going? I think everyone is in a bit of a wait-and-see mode. So to generate advertising for a broad-based consumer magazine would be very difficult right now.
MG: It seems like everybody got a little ahead of themselves in the late nineties, but now it seems like the retraction is just as exaggerated. Do you still believe the Internet will change everything?
JD: Yeah. It already has. Do you think companies are going to back to the way they were acquiring customers, retaining customers, and marketing to customers,? Do you think they are going to go back to the way they were doing that four or five years ago? Do you think the growth of the Internet will slow? Do you think the speed of getting online and moving around is going to go backwards? It’s not. It’s going to go forward. What we’ve seen is a slowdown or a falter-step here, but the story really does remain very strong. It’s kind of like the growth of the PC industry in the eighties: They had a couple of up years, a couple of down years, but the growth still remained strong. Another thing is that you almost have to take out the growth figures from last year because 1999 was such an aberration. Everything had to come down from that. But if you look at the growth rates from 1998 to 2001, you still see it going on an up curve. We had one of the most incredible years of our lives, and then we had one of the worst years of our lives back to back. Hopefully, there will be a leavening of that. People tend to react in extreme ways.
MG: Funny that few seemed to publicly predict this huge crash back in 1999.
JD: Well, it couldn’t last, but you have to make hay when the sun is shining. That’s what we did. We worked ourselves to death because it was an exciting time. In some ways, I miss those days because everything was about possibilities and being able to achieve and reach for the stars. Now, everything is about retrenchment and caution and, “Do we really want to do this?” The energy is really not there.
MG: Back then, it seemed like everyone wanted to be an entrepreneur.
JD: Yeah, and a lot of those guys are back to doing what they used to be doing. There were a lot of cockamamie ideas but people still said, we could do this if we try. I miss that kind of enthusiasm.
MG: Of course, there were a lot of Gordon Geckos out there too.
JD: That’s true. A lot of people wanted to do it for the wrong reasons. A lot of companies that were being launched were just stock market plays. I was approached by people who would say, “Yeah, we’re going to start this company, it’s going to be worth a billion and a half in 18 months.” But there are also companies like Amazon and Yahoo! and Ebay. You’re also seeing the evolution and the creation of companies that are the CBSs and General Electrics of our day—big companies that are going to be around for a long time. It’s a lot of fun to watch that as a journalist.
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