Salon, Online Mag, Going Public
Steven M. Zeitchik -- Publishers Weekly, 5/3/1999
In yet another example of the IPO craze that has gripped technology startups, Salon.com has announced its intention to go public.In its prospectus, the political and cultural online magazine outlined a strategy that would focus on advertising and increased branding. It broke down its destination sites into 10 categories, including Salon Books and Salon Comics.
"Our success depends upon our ability to attract and retain a large number of users by developing original and compelling Internet content and services," the company stated in its prospectus.
Salon.com had an accumulated deficit through December 31, 1998, of $10.5 million. In the fiscal year ended March 31, 1998, the online magazine's revenues totaled $1.2 million, with a net loss of $3.8 million. For the nine-month period ended December 31, 1998, sales were $2.1 million, a net loss of $4.3 million. Salon.com said it expects to incur operating losses for the foreseeable future.
The magazine plans to generate revenues in three ways: advertising, sponsorships and e-commerce. Since its founding in 1995, Borders has been Salon's most important backer, accounting for 37% of revenues in fiscal 1998 and 18% of revenues in the first nine months of fiscal 1999. Despite its relationship with Borders, in November Salon.com signed a two-year partnership agreement with Barnesandnoble.com (News, Nov. 23, 1998).
According to the prospectus, 2.5 million shares will be offered for somewhere between $10.50 and $13.50, netting the company approximately $27 million. At least $12 million will go to general corporate purposes; the company will use $6 million to expand its sales force, marketing and distribution activities; and $9 million will be used to expand business operations, including such things as adding staff (the magazine currently has 74 employees) and building technology infrastructure.
Despite Salon's financial performance, the immediate history of similar companies paints a sanguine picture: iVillage.com, comparable in its emphasis on editorial and cybercommunity, took off last month after it went public.
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