Better Late than Never

TheStreet.com (TSCM)
has taken far too long grasping one of the Web’s most basic concepts.
Content may be king, but free content holds the keys to the kingdom. And
the damage inflicted by its ill-advised subscription-based business model
may be irreparable. Or as Tom and David Gardner would say, “Most unFoolish.”

When brick-and-mortar snails started moving online years ago, the thought
of giving away the farm for free was an anathema. But it wasn’t long before
pioneering players started coming up with alternate revenue streams to make
that dream a reality. Before long, if you weren’t giving away the product,
you had rivals passing you standing still.

It was the first lesson in Net Economics 101, and companies who played
hooky that day flunked the final exam. Cheating off your neighbor was in
many cases even encouraged, but if you didn’t at least show up, you
wouldn’t walk on graduation day.

Take offline monster brands like New York Times (NYT),
Consumer Reports, and The Wall Street Journal. The heavies
unveiled Web strategies with offline revenue streams and have stuck to
their guns even in the face of overwhelming freebie competition. That’s
allowed a bevy of nobodies to pull up alongside and steal fistfuls of
market share.

I’ll single out Consumer
Reports just because its online initiative is the most laughable. By
nickel and diming consumers for a ridiculous $3.95 per month, the so-called
consumer products authority has allowed spring chickens like Epinions.com and BizRate.com to feast on its lunch.
By the time the old shoe wakes up and smells the coffee, it’ll be a
dinosaur in the new Net economy.

Without question, nothing has clobbered TheStreet.com’s growth more than its
pay-for-play business model. The company has curiously fought tooth and
nail to stay true to its roots, but for a newcomer so intimately wed to the
Internet, it’s shown a head-scratching stubbornness when it comes to
shedding its decidedly offline revenue model.

Some make the mistake because they simply don’t understand consumer
behavior on the information superhighway. Content that might not be worth
the Web page it’s printed on becomes ten times more valuable when given
away free to Net surfers.

As a consumer, there’s very little in the way of cyber-content that I would
pony up ten bucks a month for. Sure, Jimmy Cramer is good for a nutritious
daily dose of financial knee slappers, but one cyber-celebrity can’t carry
an entire company on his back. At least not one whose bread and butter is
pure content.

TheStreet.com desperately hopes it’s not too late to pull a rabbit out of
its hat, and that goes double for retail investors in its own stock.
Unveiling a new pseudo-free Web strategy, the company has been busy digging
for revenue streams elsewhere.

So far the upstart announced plans to reel in BiGFiSH Management, a firm that
puts together those lucrative conventions and tradeshow cash cows. The idea
is to market conference events under TheStreet.com brand name. Problem is,
how much is that really worth these days? According to some industry
analysts, not much.

Next on tap is a new investment book from TheStreet. But unlike you’d
expect, it won’t come courtesy of Cramer’s always entertaining gray matter.
He’s busy with side projects that range from his hedge fund to penning
columns for a gaggle of offline media outlets.

So what’s with the dog and pony show? The Fool’s Gardners have been turning out books
for years,

but you don’t see them throwing a tea party every time they
unveil another How To bestseller.

If you want the recipe for success on Wall Street and Main Street, start by
making the site completely spanking free. Support it with ads, tradeshows,
whatever. Then stop spending so much money.

The Net sweethearts have been tightening the belt in preparation of a nasty
backlash from intolerant investors tired of waiting for profitability. And,
unless you’re building tomorrow’s Wal-Mart (WMT)
of the Internet, investors want to at least see the appearance of moving
toward the black.

While they say the cream rises to the top, it’s starting to look more and
more like sink or swim. And investors drowning in a sea of uncertainty and
volatility are sure to toss hemorrhaging balance sheets overboard first.
It’s not too late yet, but with widening losses in its latest Q1 results,
TheStreet.com had better grab a bucket and bail.

Any questions or comments, love letters or hate mail? As always, feel free
to forward them to kblack@internet.com.