Among those who did not see the potential of Mercury Center, at least at first, was not a subordinate but a peer, Kathy Yates, the paper’s general manager. Yates was that rare Stanford Business School graduate who chose a career in newspapers. She believed they performed such a vital service, even if under editors like Ingle they were not always good with money.
Yates did not much care for Ingle, whom she found difficult. Mercury Center had struck her as an unwise investment, one that she saw producing little revenue. Ad sales at Mercury Center, in fact, were minimal—Ingle and his people were frustrated with a sales staff that seemed to him unwilling or incapable of convincing their clients to enhance their print ads with a cheap online edition. What little revenue Mercury Center brought in came through subscriptions (with aol taking its cut) and corporate sponsorships of such new, online products as the “mortgage hot line,” which updated mortgage rates periodically over the day. Ingle reminded Yates that Mercury Center was adding subscribers. Yates remained unimpressed.
Revenue was so modest, in fact, that Mercury Center’s marketing director, Barry Parr, later said that selling subscriptions felt like little more than “selling AOL for AOL.” But Ingle, Parr, and their staff were already seeing a way to break out on their own.
In the fall of 1994, Mosaic Communications, a startup in nearby Mountain View, had introduced software that could shift users away from the narrow confines of their online providers and begin navigating their way through a source of information and communication that had previously been accessible only to a handful of university-based technologists: the World Wide Web. They named the browser Netscape. When Barry Parr showed Kathy Yates how it worked, her doubts about the potential of the digital world evaporated. No longer would Mercury Center be limited by its partnership with AOL. Instead, the Merc could become a portal to a world with seemingly limitless possibilities.
“This,” she would recall thinking, “has just changed my career.”
How it would change, she could not know. But even as Yates began to envision great possibilities for the Mercury News through the web, one of Knight Ridder’s newest marketing people was forming a less sanguine view of the company’s future.
Like Yates, Charlene Li had chosen newspapers as a career, one of only two graduates from the Harvard Business School class of 1993 to do so. She had joined the company that August, and was assigned to develop new products, and with them, new sources of revenue. Li began working with the Mercury Center’s Barry Parr and helped develop an idea for an event that might better position the online service—an electronics fair. The event took place at the San Jose Convention Center and featured products by many of the area’s high-tech firms.
The fair broke even, and while in other circumstances this might have represented success—it is not uncommon for such events to lose money for the first two years—Knight Ridder abandoned the project. By the time she left in 1995, Li had learned two important lessons about innovation at the company: all new ideas had to go through an innovation committee (“an oxymoron,” she would later say) and had to produce revenue within six months.
Li spent her days with newspaper people and her evenings with technology people. The newspaper people, she saw, were still burdened by the failure of Viewtron. But the technology people regarded failure differently; it was a part of their world, because they lived in a world of risk. The people with whom she spent her days were, by the nature of their success, cautious, protective, defensive, and as a result, fearful. Not so the people with whom she hung out at night.
“This is a company,” she would recall thinking, “that’s gonna get eaten alive.”
4. The Heir