“It was a passive thing,” says Peter M. Zollman, a founder of AIM Group, a consultant on classified advertising. “Nobody had to do anything other than publish the paper.” Exacerbating this sense of financial entitlement was the knowledge that newspapers could charge as much as they liked, knowing advertisers both big and small could do nothing about it. “They were,” Zollman says, “rapacious.”
Such was the state of the newspaper business when Tony Ridder became the first Ridder to run a company in which his family had always been perceived as the junior partner. His concern about electronic classifieds appeared premature—the numbers offered nothing but assurance. All the numbers, save one. In 1995, Knight Ridder’s newspaper profit margin fell by 4 percent, to a still enviable 12.5 percent. The drop was attributed to the losses sustained by the Detroit Free Press, which was in the midst of a protracted strike.
Still, that number was unsettling for anyone worried about upsetting shareholders. Disappointment could turn to anger, which, in turn, could fuel a hostile takeover, to which Knight Ridder, with its single-tier stock structure, was particularly vulnerable. Ridder was determined to protect his company in the way he knew best: by increasing revenues and doubling the value of the stock. His employees may not have thought of him as a newspaperman, certainly not one like Jim Batten. But in that regard they were wrong.
Ridder was about to double down on his family’s business.
Meanwhile, at the Mercury News, Bob Ryan was undergoing an immersion course in the digital world for which his junior college code-writing course had not prepared him. So much had changed since his semester at Foothill Junior College, which he had paid for on his own after his employer would not. Ryan, who had been running the Merc’s foreign and national reports, was experiencing life on the other side of the digital divide, which meant he was now the editor whom the print-side reporters told to get lost.
In January 1995, Mercury Center became the first news site in the nation to migrate to the web. The move liberated the site from the digital limitations and financial burdens of AOL. Access was initially free; but within several months the Merc began charging subscribers $4.95 a month—a dollar if they took the print paper. This decision troubled Barry Parr. One advertiser had suggested to him that the Merc make its website free to everyone because the prospect of all those readers would lure advertisers. Parr ran the suggestion up the chain of command, and it was not well received: the Merc averaged a quarter of a billion dollars in annual revenues, and to the paper’s leaders, giving away all that content would turn the Merc into a $25 million business. Parr, who had already worked on digital startups, could offer no rebuttal, given that he was making the case for projected earnings, not the actual money flowing from all those readers (and advertisers) paying for the printed paper. He left soon after, for yet another startup, CNET, whose detailed technology coverage would, in time, come at the Merc’s expense.
No longer bound by the limits of AOL’s Rainman software, Mercury Center now opened to a home page filled not with boxes but with headlines that, with a click, opened to stories. There were the now-familiar features: NewsHound, a digital “clipping service” in which readers could personalize the sorts of stories they wanted delivered to their electronic inboxes; data search capacity; and Talent Scout, electronic want ads that featured résumé posting. The site updated news throughout the day and offered links to other web destinations, both local and national. And it had classified job ads through a searchable database called Career Mosaic. Advertisers signed on—IBM, Netcom, Coldwell Banker, and Del Monte, whose ad offered a hypertext cookbook.
Mercury Center was attracting users. The numbers, however, were modest—2,700 new web subscribers by late May 1995—as was revenue: $120,000 that month, with $19,000 from electronic classifieds.