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Untangled Web Presents Challenge for IB’s Model

July 1, 2008

By Leslie Brooks Suzukamo, Pioneer Press, St. Paul, Minn.

Jul. 1–When Internet Broadcasting Systems hatched its business of helping local TV stations build and run their own Web sites 12 years ago, few people knew much about the Internet.

Now, a Web presence is a no-brainer and creating one is getting easier every day.

And that’s trouble for Internet Broadcasting.

None of the Twin Cities’ local TV stations, for example, uses its services.

“I don’t think there’s clearly as much of a need for them anymore, particularly for a large (media) group or a large station,” said Tom Lindner, vice president and news director for KARE 11, the Twin Cities’ top-rated TV station. Gannett, the station’s parent company, runs KARE 11′s Web site.

Internet Broadcasting’s top executives acknowledge the changing realities and say they are creating a new business model.

The company has already been through a slew of changes in the past year or so with the arrival of a new CEO, AOL veteran David Lebow, the retirement of its founder, former WCCO-TV news executive Reid Johnson, and the move to new headquarters in St. Paul from the old digs in Mendota Heights.

Now IB, as it prefers to be known, is embarking on its biggest challenge: reinventing itself.

A LA CARTE MODEL

Internet Broadcasting still focuses on drumming up local news. It touts the scale of its viewership for all its Web sites and a story-swapping deal with cable news giant CNN to attract national advertising.

But the company is changing its emphasis. Instead

of providing a turnkey solution handling a station’s entire Web business, it’s letting customers pick and customize from a list of services and content.

“Part of our partnership (with local TV stations) is letting go of the notion that there is only one type of service, that it’s a fixed-price service,” said Jeff Kimball, the company’s chief operating officer, who just moved his family from the Washington, D.C., area to Edina this month.

“We are,” he proclaimed, “an a la carte business.”

Going a la carte means inventing more dishes to order, though.

Key to that effort is a new products development team, headed up by a baby-faced, 22-year-old Ithaca College graduate named Mike Potter.

Taking a page from Google, his team is focused not on content, but applications — small computer programs or “widgets” that can jazz up a Web site.

One such tool, called Slantly, piggybacks on the social networking craze of Web sites like MySpace and Facebook.

“People can find news, sports and entertainment but those are facts.” Potter said. “People are actually interested in bias — opinion, arguments, which controversies are people arguing about, which people are arguing about them, how do they compare with the online community, how do I compare with my friends?” Potter said.

Slantly creates online polls, but in addition to tabulating how people feel about a particular issue, it helps participants connect with others who feel the same way.

Users can even transfer their Slantly results to a personal Web site like a Facebook account, where they can share it with their friends. The cost of Slantly could be supported by license fees, advertising or some combination of the two, Potter said.

“We’re not another Facebook,” Potter said. “We’re the layer on top of Facebook.”

If Slantly doesn’t sound like traditional news content, that’s the point.

THE AOL EFFECT

While IB got its start from a local TV news insider, its new leaders cut their teeth on the Web.

CEO Lebow spent five years with AOL. Lebow lives in Connecticut and works out of IB’s New York office, shuttling back and forth regularly to IB’s headquarters off Shepard Road in St. Paul.

He and fellow AOL veteran Kimball have stocked the company’s executive ranks with AOL alumni. Depending upon how you think of AOL, that can be good or bad.

On the one hand, AOL helped define the dot-com era. At the height of its power, AOL bought Time Warner in a mammoth deal, but the company has been losing steam ever since. Now many believe Time Warner will sell it.

Lebow said his experiences at AOL taught him to move quickly and take nothing for granted.

“Fear is always a motivator to me,” Lebow said. “We better look every day at every customer and what we do for them.”

Those customers are hurting. IB’sTV-station clients are watching as advertising revenue drains away from the broadcasting side of the business toward the Web.

The nation’s top 100 advertisers shifted $1 billion from TV and newspapers to the Internet last year, according to an analysis by Advertising Age.

Presumably, some of that Internet advertising went to TV and newspaper Web sites. But it did not balance out the losses on the other side of those businesses. Cutbacks have been common.

And more of IB’s customers are becoming competitors.

Early on, Internet Broadcasting ran a Web site for CBS affiliate WCCO-TV called Channel 4000, mostly because of IB’s founder’s history there. But now the station has severed those ties and started wcco.com. Station officials said they wanted the Web site to look like other CBS affiliates.

Lindner, the KARE 11 executive, said IB did an outstanding job two years ago producing the NBC Winter Olympics Web site. IB serves many smaller stations and gives their sites more polish and probably saves them money, Lindner said.

But he notes that NBC decided this year to take the 2008 Summer Olympics Web site in-house and that Gannett produces the sites for all its TV stations.

Internet Broadcasting handles 78 Web sites, but NBC Universal and Cox Media are its largest customers.

IB has been dogged by reports in the Internet trade press that the company will lose eight NBC station Web sites at the end of the year, when the contract expires.

Although executives say they have no fear that will happen, Kimball admitted the nature of the relationship with NBC might change.

Company leaders insist IB is profitable and financially sound, but the privately held company would not disclose financial details.

ON THE ATTACK

Rather than pulling back, Internet Broadcasting has gone on the attack. It has beefed up its staff to 415 employees nationwide, up from 300 in 2005, and it plans to hire 37 more people this year.

The company now has 300 workers at its headquarters in St. Paul, up from 250 last year.

And in addition to Slantly, IB has some other new widgets in the works.

In July, the company will launch NowLocal, a “news aggregator” that searches the Web for news stories on whatever topic the user wants.

IB’s executives believe their tool will be more useful than competitors like Topix or Google News because it will be able to zero in on locally produced stories in a particular market. The theory is that local news producers have a better idea of what is relevant to their readers than a story that may have been produced in, say, Bangalore.

The company has even tweaked old programs for other uses.

A program used on election nights to map out how precincts or states voted has been rewritten to help dog owners find places where their pups can run free or find other dogs for play dates.

Internet Broadcasting hopes that people will find such quirky applications irresistible and that TV and other media outlets will want them on their sites.

So IB is changing, and hoping its customers notice.

“If we didn’t change, we would be in trouble,” said Kimball. “As I tell my team, the situation is urgent, but not dire.”

Leslie Brooks Suzukamo can be reached at 651-228-5475.

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