October 23, 2002
Case Study

The Onion - How the Web's Most Beloved Humor Site Stays Profitable

SUMMARY: So many independently owned Web sites have gone under in the past year, that many fans of The Onion worried it might topple too. Never fear. The site is profitable and staying strong.

Although our Case Study is a fun read (hey, it is The Onion after all), it also includes some genuinely useful info on online ad sales that might help your own site improve.
Although millions of its Web fans are unaware of it, The Onion started as a printed tabloid.

"A bunch of college kids in Madison Wisconsin were putting out copies of what they thought was good satirical humor," explains current Publisher (Ms.) Chris Cranmer. It was good enough that entrepreneur Scott Dikkers bought it from them to run as a formal publishing company. "I'm not sure what the amount of the sale was, but I'm sure it wasn't much."

Dikkers' joking goal: To have The Onion delivered to doorsteps across America just like The New York Times.

Then the Internet showed up and Dickers realized his joke could become a reality.

Should they abandon local print editions? Should they say yes to the VCs and partner-wanna-bes pounding at the door? Would online ads be enough to keep them alive, even if the online ad economy tanked?

The Onion's staff was a very tight team. All had been on board for years, some since the very start. It felt like a family. The paper was also already profitable. It was working and they liked working on it together.

No one wanted to make a radical change, grab VC funds, hire on loads more people, just to become potentially richer faster.

Cranmer says, "We had tons of offers. We still have tons of offers - they just never stop. But we've always been confident in our own abilities. Even if it's going to take us longer to make it on our own in five years, instead of a quick fix by going to a portal like Yahoo, we'd rather do it our way."

The Onion's site was launched in 1996 initially mainly to please the writers. (Note: during our interview with her, Cranmer mentioned her writers' desires more frequently than any publisher we've ever spoken to.) "Our initial goal with the Web was to get out to as many people so they could read us. The writers were very happy just reaching more people," says Cranmer.

There was not a budget for online marketing, and the printed paper itself was only being distributed in Madison, Milwaukee and Chicago. Somehow the site found itself being inundated with visitors from all over the world.

"We had just amazing g*rowth every year. It just got crazier and crazier." (Typo ours.)

At first, selling ads profitably was pretty easy. As the economy tanked, the ad sales team (all of whom have been with the company now for seven or more years) pulled out all the stops to keep the site profitable. Cranmer outlined three of their tactics for us:

Tactic #1: Focus Ad Reps' Territories to Maximize Sales

Instead of selling online versus print ads, Cranmer divides territories by local (which is mainly print) versus national (which is mainly online). All national reps worked their way up from the local level.

Recently she has reworked national territories so that reps are now given clients based on which agency the client's with. "We used to assign accounts client by client, but we found this is better because that a rep would tend to get to know an agency well. When the agency had a new client, they would call the person they'd worked with before. It just made sense to go down this line. It wasn't hard for us to do at all."

Tactic #2: Deal with Clients, not Networks or Brokers

"Back in the days when the networks were big, we would be working with a client who was buying direct from us and then two days later a network insertion order would come along for a deal for a client we'd already had for years."

"We realized we didn't need to deal with networks. Thankfully we have a lot of great relations with big agencies and clients, so we're not worried about having too much inventory hanging out there."

Plus dealing with third party brokers had another price, sometimes they'd represent a CPA buy as CPM. (i.e. the broker would pay The Onion a flat CPM cost per thousand, but in turn would bill the client at CPA cost per action.)

"I'll never forget the day when some network had [famed CPA advertiser] Orbitz ads included as a part of the buy. I'll never forget those Orbitz pop-ups. I called my reps 'Who did that???' thinking somebody had sold CPA without me knowing about it."

Pseudo CPM buys come with a price tag: Everyone in the know in the ad community thinks you've changed your practices. Naturally this was frustrating for Cranmer who had spent years turning down CPA offers flat.

"We lost a lot of buys because I wouldn't take them. It was a difficult decision. I believe in Internet ads being a branding tool."

Tactic #3: Offer Unusual Sizes

"Every proposal that comes in says, 'What can you do for us that's different from other guys?' Every one."

After vertical skyscrapers became so popular, The Onion became one of the first mainstream sites to offer extra-large horizontal banners. (Check out the top of their home page, link below.)

They also recently started giving every advertiser running a contest or sweeps extra exposure on The Onion's new 'Contests' section which is nothing more than a series of box ads. "We kept getting more and more contests, we said let's just post it all in one area. It's part of their campaign. They're not paying extra," explains Cranmer.

Plus, about a year ago Cranmer switched the site's 40-character text-link ads from a f*ree bonus to a paid ad unit. "Text links have always done very, very well for us in terms of clicks," she says. "In early years they'd buy the banner and nothing else, and we'd put up the link as a f*reebie. They performed so well we eventually made them an actual ad unit for sale."

She notes there does not seem to be a big limit on the number of text links you can post before people will stop clicking on them. For example, we counted 20 in a row on today's home page.

"I know from feedback from our readers that they're very content oriented. They don't like a lot of in-your-face advertising. They email us, 'Hey if you keep it as low key as possible, I'll click on it for you. I'll help you out by checking out these sponsors' products."

Aside from ads, The Onion also supports itself with three main ancillary revenue streams:

Ancillary #1: The Store

It started with just a few t-shirts featuring simple slogans such as "You are dumb." and "I enjoy drinking beer." Now the online store carries a wide variety of stuff, from magnetic headline kits to bumper stickers.

With lots of input from the writers, Cranmer adds three to four new products every single month, and removes anything that is not selling very well. (In fact she notes her big battle is in stopping writers from vetoing older products with still-strong sales that they are bored with.) The store is completely built and powered in-house.

Ancillary #2: Repurposing Archive Content

You can purchase a CD of writers reading best-of articles into a microphone, and yes plenty of people have.

Although The Onion's first print book featured entirely new content, the Company has also published three print books based on archived material. Titles include, 'The Onion's Finest News Reporting, Volume One' and 'The Onion Ad Nauseam.' These are distributed nationally at regular bookstores.

Ancillary #3: Personals Ads

The Onion's personal ads are powered by Spring Street Networks, who also feed ads from Nerve and Salon into a common pool. Each site gets a cut of the take without having to actually do too much work.

Aside from the Web site, The Onion is currently published in three other formats: A regular radio show that is syndicated through America's largest radio network Westwood One, a mobile/PDA edition through AvantGo, and print editions now in four cities including the latest launch in New York.

Why continue producing a local print tabloid? Cranmer gave us four reasons:

1. Everybody on the staff really likes it. "There's something really great about holding a paper in your hands."

2. Local print readers love it too, so much so that The Onion is deluged with phone calls every week a few hours after the f*ree print edition is distributed, because often copies are gone so fast that people miss them.

3. Making the writers happy. When The Onion's Managing Editor wanted to move back home to New York, Cranmer launched a Manhattan print edition partly to help his dream come true.

4. Steady ad revenue you can count on. Cranmer says, "With the Internet being as shaky as it is, sometimes we have a fantastic month and then nothing happens. You don't know. Offline is hugely constant. I can go to bed knowing exactly what's going to happen for each quarter."

"We've been able to keep things small and tight and make it a profitable venture for all of us," says Cranmer. Both online and offline editions of The Onion are profitable although these days, "online is predominant."

Radio syndication revenues are negligible, but Cranmer says she will definitely keep up the program because "the marketing aspect of it is fantastic." It's a big traffic driver.

The Onion actually stopped their Mobile/PDA distribution for a while when AvantGo announced last year that the formerly free service would go paid. "It was insane, like $60,000 a year. I thought are you kidding?" says Cranmer.

At first she did not think anyone would notice the absence of the service, once advertised with the slogan, 'The Onion has gotten smaller and harder to read.' "We took it down for about a week and we had hundreds and hundreds of emails." The site's tech team cobbled together their own wireless feed, and later AvantGo caved in. "And that was that."

Nope, hardly anybody's buying ads on the feed, so far anyway. Cranmer figures why not keep readers happy in the meantime.

The site itself gets 1.3 million visitors accounting for 5.3 million pageviews per week (yes, that is week, not month). In contrast, The Onion's print editions reach 300,000 readers who pick up f*ree local copies, and 20,000 who pay a token subscription fee to have it mailed to them.

Other ancillary sales are small slice of the pie compared to ad dollars. Cranmer notes that store sales always peak for two-three days after she puts new products in each month (note: continually freshen your inventory to keep sales high) and also during the gift-giving season.

You may have noticed one format The Onion does not publish in: Email. Cranmer notes she is cracking under reader and advertiser pressure to launch an email edition soon. "We want it to be good. We don't just want to rush in and dump headlines into it and say, go check these out. We wanted something a little different. We're still knocking around what that difference will be."

Which pretty much sums of The Onion's whole philosophy of getting ahead in business: By really, really trying.

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