Can Pathfinder find its way?

Depending on who you believe, Pathfinder is either hemorrhaging money and managers, hobbling on its last legs, or is stronger than ever, bringing in megahits and big revenues.

Forrester Research is convinced Pathfinder is on its way out. The company recently issued a two-page brief in the wake of news that a third top manager will be leaving this year, warning that if Pathfinder doesn't change, and change dramatically, it will go the way of the dodo.

"They're losing managers right and left," said Bill Bass, the analyst who wrote the brief. "They're losing cash right and left."

Pathfinder insiders, all of whom spoke on the condition of anonymity, agreed that Pathfinder is disorganized and in trouble.

But Paul Sagan, outgoing Pathfinder president and editor of new media at Time, decried reports of Pathfinder's demise, saying they are false and without merit. He said Pathfinder is doing better than ever.

"[Pathfinder] is having a quarter of record traffic and record revenues," Sagan said. "A lot of the people who are unhappy are the so-called analysts with whom we don't do business.

"We see ourselves as on track and continuing to do better," he added. "To be blunt, these people don't know. They are analysts who make money [selling these reports]. We don't buy their reports; we don't share our proprietary information with them. They have no idea what our numbers are."

But Bass said his two-page brief is based on an intensive industrywide report completed in December and updated in May. "We do site visits," he said. "We go to their briefings. You can make very, very reasonably educated guesses about how much somebody's making."

His estimates don't bode well for Time Warner's two-year-old Web site. One of the largest and best-known on the Net, Pathfinder is losing money, lacks organization, and is suffering from management woes, Bass contends.

"Forrester estimates that Time Warner is losing at least $8 million annually on Pathfinder's operations, and there is no end in sight," the report states.

Sagan would not comment specifically on profitability except to say the Forrester numbers are wrong. Time Warner does not break out profits and revenues for Pathfinder.

Sagan added that all new media companies are losing money because they're funneling funds back into their fledgling businesses.

"The numbers are wrong," he said. "Our goal," he added, "is not to be making money this year. Our goal is to be investing and making it a business of scale."

The report goes on to say that media mogul Ted Turner, now Time Warner's largest stockholder since he recently sold his company to it, will probably want changes at Pathfinder as well.

"With the consummation of the Time Warner-Turner marriage [last month], Pathfinder will find itself being compared to CNN Interactive, one of the few profitable Web properties," the report states. "It is unlikely that Turner will allow Pathfinder to continue on its merry money-losing way."

The report also addresses the leadership upheaval at Pathfinder, including the company's latest resignation: Sagan. After less than a year on the job, Sagan submitted his resignation last month, saying he wanted to take a sabbatical to spend time with his family. His last day is December 20.

Sagan dismissed speculation that his departure indicates trouble within the organization or that, as a few insiders put it, he was forced out. "I find it amusing that people won't accept the simple truth," he said.

But Sagan is not the first person in top management to leave.

James Kinsella, the founding editor, left in February and is now with MSNBC; Walter Isaacson, Time's first new media editor, left to become managing editor of Time magazine.

"Even in a medium where time is measured in dog years, this rate of turnover is unusual and marks a troubled enterprise," the Forrester brief says.

Regardless of the management changes, Bass concludes that Pathfinder's root problem is that it is too unfocused. While other sites such as ESPNet Sportszone have a unifying theme, Pathfinder's only commonality is that Time Warner owns all the properties highlighted on the site, he said.

"Pathfinder's mishmash of content is united only by its common Time Warner ownership," the report states. "This has spawned an unwieldy site that is wide-ranging but lacks depth. With stale weekly and monthly magazines providing the core of the content, the site has been forced to spend huge sums for additional staff to provide daily updates.

"Forrester believes that Time Warner should blow Pathfinder apart and rebuild the pieces as content networks--deep sites focused on special interests," the report says. It goes on to recommend that Time Warner and CNN build several different theme-based sites founded on their strong content.

Insiders say that is exactly what will happen in the next six months.

"The spin will be that Pathfinder helped [Time Warner's] core magazines launch on the Web and now Pathfinder is going to recede into the background," said one.

Sagan characterized the criticism as nonsense. Pathfinder, he said, is working on a redesign but said the concept of the service, despite what critics say, is working. "Last week we had 1.7 million sessions on Pathfinder," he said, adding that sessions reflect each time a user logs on.

"There's huge traffic and a huge demand for advertising," he said. Pathfinder does have a strong unifying theme--news and information based on brands that people trust, such as Time, People, and Sports Illustrated magazines. In the often anarchic world of the Web, having trusted products will take news organizations far, he added.

"Pathfinder shows up as the biggest, most popular news and information site on the Web," Sagan said. "We have very powerful publications, brands, and journalists, and that's the value that Pathfinder translates to the Web."

But insiders also criticize Pathfinder for the way is handling its new subscription service, Personal Edition, scheduled to launch November 18.

Customers will pay $4.95 a month, or $29.95 a year, for the service. CompuServe members will be able to log on for free through a bundling deal between the two companies.

Critics say the plan provides too little, too late. In its original conception, Pathfinder was to sign up many more partners and introduce the service earlier. But in the end, it only landed CompuServe.

"The execution was seriously botched," said one insider.

Sagan said that the criticism is ridiculous, and that the market is so young that it's impossible to say it's too late. He added that CompuServe, with 3 million members in the United States, is no small player, making it the number-two online service in the world after America Online.

"It's too early to be late on the Web," he said. "We're still at the very, very beginning of the market here. What we did in our bundling deal gave us exposure to the second-largest ISP on the globe. That kind of exposure on the Web is a hell of a deal for us. [The critics] don't understand what's going on."

He added that the Pathfinder Personal Edition is an experiment. "It's the beginning of going out and finding transactions. It's the beginning, not the end, of this space."