The New York Times' Digital Makeover
Martin Nisenholtz is presiding over a surge in digital revenue at the old gray lady.
By John Heilemann, Business 2.0 Magazine

(Business 2.0 Magazine) -- The steamy summer Friday morning when I visit Martin Nisenholtz comes at the end of a bleak week of news for his employer, the New York Times Co. (Charts) A few days earlier, it announced that it's planning to shrink the Times - both the size of the paper (by 1.5 inches) and its production-related workforce (by a third).

Yet Nisenholtz, the senior vice president for digital operations, has reason to be cheerful. Amid uninspiring second-quarter results in which the company's revenue and profit were basically flat from the same period a year earlier, Internet revenue soared from $49 million to $66 million. Radiating pride, Nisenholtz declares, "We're really in an amazing position.... We're in the best shape we've ever been in."

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Nisenholtz's optimism is not just fired by the numbers. For more than a decade, since he left Ameritech and joined the Times, no one has pushed harder for the company to embrace the Web and all its possibilities. The resistance he met was often stiff.

But now the Times is emerging as arguably the most Web-savvy newspaper outfit in America. And while it's far too early to say how successful its online adventurousness will be - or whether it has the balls and vision to transition from a mainly print operation to a mainly digital one-there's no doubt that the company is at least steaming in the right direction. "The Times is like a battleship," Nisenholtz observes. "It turns very slowly, but once it turns, look out!"

Nisenholtz, 51, dates the turning point to early 2005, when, as he explains it, "the executive committee of the company created a strategy that said we're in the business of convening communities here; we're not just in the business of pushing information at people." Behind that strategy, Nisenholtz adds, was a recognition of "the importance of the social Web - that the center of the universe is moving to our users, and that our users want to remix and use the content that we have in ways that are suitable to them."

Thus began a dizzying flurry of Netcentric changes at the Times - some financial, some technological, some cultural: The purchase of About.com in March 2005 for approximately $410 million. The integration of the print and online newsrooms. The dabbling with blogs and podcasts.

The launch of premium service TimesSelect, which placed the work of columnists and various features, such as e-mail alerts and multimedia, behind a pay wall for users not subscribing to the paper. And, most recently, the top-to-bottom redesign of NYTimes.com, complete with an array of Web 2.0-fueled innovations.

On a strictly green-eyeshade basis, the two most significant items on this list are About.com and TimesSelect. The former, Nisenholtz notes, "is blowing the doors off the business," with second-quarter revenue rising to $19.4 million from $12 million last year-a 63 percent increase that puts About on track for an annual run rate of more than $80 million.

As for TimesSelect, the service had roughly 513,000 subscribers in June, 190,000 of whom were paying the Web-only rate of $49.95 a year, thus contributing about $9.5 million to the bottom line.

When I ask if TimesSelect has been successful enough to suggest that more material be placed behind the wall, Nisenholtz replies, "The strategy isn't to move more content from the free site to the pay site; we need inventory to sell to advertisers. The strategy is to create a more robust TimesSelect" by using revenue from the service to pay for more unique content. "We think we have the right formula going," he says. "We don't want to screw it up."

Nisenholtz is equally bullish about the Web 2.0-ification of NYTimes.com. "We've got some really interesting blogs, from basically a standing start only six months ago," he says. "We've got 10,000 topic pages on the Internet waiting to be populated."

Still, Nisenholtz admits that some of the site's more forward-leaning features have yet to take off. On the Most Popular page, while the Most E-Mailed feature is, as he puts it, "the big kahuna, a significant driver of interest," Most Blogged and Most Searched are catching on more slowly. Tagging hasn't caught on at all.

And even RSS newsfeeds, which the Times adopted early, are still "a niche," Nisenholtz says. (In June, RSS feeds generated 12.2 million pageviews for the site out of a U.S. total of nearly 295 million.) "RSS is still very techie," he says. "Most people outside the business are totally unaware of it."

For Nisenholtz, making all this stuff appealing and accessible is a real challenge. "We touch 25 or 26 million people a month," he says, "and a very minimal number of them are technologically savvy.... Our median age online is 44 or 45 years old. So we have to find ways to bring people into the loop who don't know what a tag cloud is."

As Nisenholtz and his colleagues seek to strike this balance, their most valuable laboratory may prove to be MyTimes, the company's nascent foray into personalization. Debuting in limited beta (for just 5,000 users, including me) in July, the free service lets you customize your own news homepage, adding feeds from third-party blogs and news sources in addition to slicing and dicing Times content.

But what sets it apart from other user-customized online news sites is that it includes access to pages maintained by Times journalists - about two dozen of them at the moment, including such A-listers as Frank Rich, John Markoff, and David Carr-that contain their own bookmarks and feeds.

The journalists' participation in MyTimes is more than a cool feature. It's a sign of a seminal cultural shift taking place within the Times. Where once there was tension between old-line print people and the newfangled webheads, Nisenholtz explains, "the signal change of the past 18 months is that there are no pure print people left.... The newsroom is jazzed not only about the power of NYTimes.com around the world as a journalistic instrument but about what the Web can do uniquely as a new medium."

Nisenholtz is surely right about the cultural shift taking place at the Times. But though it's true that some of the change (especially among younger reporters) is being driven by excitement, an equal or greater amount is propelled by fear.

And who can blame them, given the constant stream of headlines about the precipitous and apparently inexorable decline in newspaper economics and the creeping sense that all the gloomy prophecies about the future of print are finally coming home to roost?

Nisenholtz points out that, when he first met Times publisher Arthur Sulzberger Jr., "Arthur basically said to me, 'We're not in the ink-on-paper business, we're in the news business. It doesn't matter how we distribute information; what matters is that we can make money out of it.'" Even so, Nisenholtz is loath to predict the death of print. "We expect the print side of the business to continue to grow," he tells me. "We just expect the digital side of the business to grow much faster."

About the second half of that equation, he'll get no argument from me. About the first ... well, let's say I have my doubts. And though he'd never say as much, I suspect that Nisenholtz does too. Which is why he's running so hard toward the future, even before many of the Times's readers are remotely ready to go there.

John Heilemann wrote "Pride Before the Fall." His next book is "The Valley." He lives in Brooklyn.

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.