Net content companies announce layoffs, money shortages

Layoffs today at respected online magazine Salon.com and Oprah Winfrey-backed Oxygen Media are just the latest belt-tightening measures announced this week by online publishers.

Earlier this week, crime news site APBnews.com ran out of money and laid off its entire staff of 140 people, and CBS reported laying off 24 employees at its online unit.

The developments are a clear sign that the financial problems that have recently wracked dot-com companies will not be limited to online retailers, many of which have been teetering since March.

Dozens of upstart publishers have launched free Web sites, hoping to draw large audiences and big advertising dollars. But many have found it hard to stand out in a crowded field. Analysts said news sites in particular have struggled to find an audience, given that most general-interest sites offer a sampling of headlines from major wire services, such as Reuters and The Associated Press.

"News remains something that consumers remain happy to find at a general portal," said Aram Sinnreich, an analyst at Jupiter Communications. "There's a real difference in what consumers are willing to go to a portal for, and news loses out there."

Problems at Salon, APBnews and CBS follow similar troubles among online retailers. Victims so far include high-profile British fashion store Boo.com, shopping site Foofoo.com, Disney-owned Toysmart.com and Viacom-owned Red Rocket.

Digital online entertainment sites also have found themselves in trouble.

In May, Gen-Y Webcaster Digital Entertainment Network laid off 150 employees and announced plans to file for Chapter 11 bankruptcy protection. DEN was backed by high-profile investors including Chase Capital Partners, Microsoft, Dell Computer, NBC and former Warner Bros. co-chairman Terry Semel.

Both Salon and Oxygen Media said their layoffs were made for financial reasons.

Salon, founded about four years ago by two editors from the San Francisco Examiner newspaper, said the layoffs were part of an effort to trim their operating expenses by 20 percent. Salon is also planning to cut its freelance budget. The 13 layoffs represent less than 10 percent of the company's staff.

Salon, which features high-profile columnists such as humorist Garrison Keillor and feminist critic Camille Paglia, has spent more as it expands into a network of Web sites on news and other topics. The stock has foundered since debuting on the public markets at $10.50 last June, consistently trading below its offering price. The stock closed up 9 cents today to $2.13.

CBS said its layoffs--24 of about 100 employees at CBS Internet Group--are part of a reorganization that includes bringing in new management. CBS, which was recently acquired by MTV owner Viacom, has had little to say publicly about its Internet strategy since forming the online division in January. The unit consists mainly of stakes in Internet companies such as MarketWatch.com, which CBS acquired by bartering advertising time.

APBnews said Monday that it remains in negotiations for a possible buyer.

"There are very few barriers to entry on the Web, making it very difficult for any one news organization to differentiate themselves," said Jordan Rohan, an analyst at Wit Capital. "You probably will see further consolidation--that means both abandoned news efforts and acquisitions and mergers."