Suite101 to experiment with co-op model as company abandons site revenue hopes

Executives at Vancouver’s Suite101.com Inc. are preparing to transfer operation of their money-losing online writer’s community to the editors who have been contributing to the site for the past six years. The unusual move comes as the company hopes to launch a new online learning initiative in a bid to preserve its remaining investment capital and find a viable revenue model. Barrie Bradshaw, director of business development at Suite101, tells Canadian NEW MEDIA the existing site should be transferred legally to its users and incorporated as a not-for-profit entity by the end of the month. Suite101.com was an Internet pioneer in creating a web community driven by content created by users. Founded in 1996, the site was paying contributors a nominal monthly fee to write articles on a broad range of topics, which were then discussed by visitors to the site. Late last month, Suite101 informed its more than 1,000 contributing editors that they would no longer be paid for their work as the company seeks ways to preserve its capital. Bradshaw says the monthly cost of those salaries amounted to $17,500 – an expense he says can’t be recovered given the site’s lack of a viable revenue stream. In addition to halting payments to contributing editors, the company has also announced head office staff reductions and the cancellation of some contracts for on-site content such as news, weather, and horoscopes. The moves come as Suite101’s founders shift focus to a new series of online learning modules they hope to sell to satisfy shareholder demands for a return on investment. The company will create a number of short, online course modules for sale to organizations such as ecom booksellers Barnes & Noble or Amazon.com and others. The courses, designed to take about a month to complete, will be offered on a range of topics that have book tie-ins, and that can be offered free or for a nominal charge by the bookseller as a value-added component. Suite101 will contract writers from its current online community of users to write the courses and related material such as workbooks. The online courses are expected to be an extension of the company’s only current revenue-generating activity, the writing of introductions for books offered for sale on the Barnes & Noble site. Suite101 is currently producing 50 such introductions a month, and has been contracted to write as many as 700 of them. The initiative appears to be just in time. Since 1996, Suite 101 has spent slightly more than $12 million on the site with negligible revenues to show in return. Its most recent financial results indicate that it had US$12,043 in revenue for the first three quarters of 2001. Nonetheless, the company maintains a bank account worth US$4.4 million – down from US$5.7 million at the end of its previous fiscal year. Its still-healthy war chest is the result of a US$5-million public offering at the height of the dot com mania in April 1999, and a further US$4.5 million raised as warrants and exercised through September 2000. Prior to going public on the Vancouver exchange, Suite101 had been wholly owned by the Bradshaw family through its company, i5ive Communications. Those funds, however, were raised without an explicit revenue plan. As Bradshaw explains in a Dec. 21, 2001 letter sent to contributing editors: "About four years ago the public markets began to identify extraordinary opportunities in Internet based companies as investors were lusting to get involved. This lust for gains offered by Internet companies drove the investors to invest in companies that did not have revenue models as part of their going ahead business plans. Suite101 was one of these companies. "After funding we looked at a number of revenue models and since our funding was modest in comparison to other Internet companies, we decided to wait and watch before adopting a revenue plan. Over the past 3 years, we have observed the demise of several what were well-funded Internet companies (sic). In retrospect, doing nothing was good strategy. If we had adopted and invested in what turned out to be flawed plans, we very likely would not be here today." Since then, the site’s community of 1,000 contributing editors has been publishing upwards of 2,500 articles each month with more than 45,000 articles in the archives. While impressive, the company has clearly been operating in an online environment where the promise of advertiser-driven revenues on community sites has not materialized. Still, the volume of content that has been created has Bradshaw bullish that the site can continue, albeit without a profit motive. Since the company’s decision to re-focus its resources, a committee of three online contributors with business backgrounds has been drafting a proposal for the takeover expected to be completed by the end of the month. "Let it be a co-op," says Bradshaw. "I think it’ll be a unique thing on the Internet. It’ll be, actually, a self-managed community by the community." He notes that the users won’t be asked to buy the site or to service its existing debt of approximately US$5.8 million, and will only be required to pay nominal hosting fees. Any revenues the site is able to generate will be re-invested in the not-for-profit entity. Bradshaw notes that while some contributing editors have expressed anger at the discontinuance of their honorarium, he expects no more than 100 to bail out of the project. He says many of the users have complained for a long time that they could do a better job running the site than head office, and that the new initiative will give them the opportunity to prove it. "So far, only two managing editors are set to leave and none of our senior managing editors. There’ll be less than 10 per cent shrinkage and we have 500 people waiting right now to come in and write for us. To get another 100 people back in here to write for us if that’s what we want to do? Not a problem."

Suite101 to experiment with co-op model as company abandons site revenue hopes

Broadcast | January 23, 2002

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