Borders Tries Web Frontier Again

Louis Borders is best known for starting two companies: The hugely successful bookstore chain that bears his name, and Webvan, the dot-com grocer that went belly-up in spectacular fashion.

Now, Borders is getting back in the game — but on a far smaller scale. On Monday, he is launching KeepMedia Inc., a Web site offering consumers unlimited access to a database of magazine articles for a flat monthly rate of $4.95.

Borders won't say how much of his own money he's putting into KeepMedia, but he allows that it's far less than the $850 million that Webvan burned through before failing in 2001.

"This is a very modest startup," Borders said. "There's no one doing what we're doing now. That's one of the benefits of operating in this post-bubble world."

KeepMedia is starting off with fewer than 50 employees from its base in Redwood Shores, Calif., just south of San Francisco. But Borders knows that great things can have humble beginnings.

He got his start in 1971 in Ann Arbor, Michigan, selling counterculture books with his brother from a second-story store which he described as "the size of a good-sized bathroom." Now Borders Group Inc. is the No. 2 bookstore chain in the country.

Borders got big by coming up with software systems that would creatively manage inventory. At each bookstore, stock lists were customized to adjust selections automatically based on reader preferences.

It's a similar plan with KeepMedia. After a client signs up and does several searches, the site offers up other articles on similar topics — not all of which are free.

Articles from current issues of magazines will be available at $1 a pop, or free to current subscribers. Users can also sign up for magazine subscriptions on the spot, another reason that partners like BusinessWeek, which already hosts a popular Web site, see KeepMedia as a good opportunity.

"We think this is a good way to broaden our audience. It's matter of going where the readers are," says Peggy White, general manager of BusinessWeek Online. "This is an experiment. We hope it works, but if it doesn't, lesson learned and on we go."

Conspicuously absent from the venture is Time Inc., one of the country's largest publishers of magazines with a portfolio that includes Time, Sports Illustrated, People and Fortune. So is Conde Nast Publications, the magazine giant that puts out Vogue, Gourmet and the New Yorker.

Time Inc. is pursuing its own program for getting online users to pay. Beginning in April, the company started closing off public access to many of its magazine's Web sites, such as InStyle.com.

Subscribers to InStyle can still get in, as can newsstand buyers who enter a special code from the table of contents. Members of AOL, a corporate cousin of Time Inc. under AOL Time Warner Inc., can surf all they want.

Ned Desmond, the head of Time Inc. Interactive, says the company is sticking with its own online payment program but has not ruled out joining forces with KeepMedia later.

"It's an interesting idea, and if it turns out to be a success we'll be in there," Desmond said. "We're watching it out of the corner of our eye, and we wish him luck."

Juliana Deeks, an analyst with Jupiter Research who was briefed on KeepMedia's plans, said she believes the company had a good chance to bring in consumers with its cheap price. "Overall they have a strong value proposition," she said.

Deeks said KeepMedia also offers a good deal to publishers with its novel way to make money and sell subscriptions. But she cautioned that in order to succeed, it was "critical" to bring in more big-name magazines to the site.

Borders is mindful that others before him have tried and failed to set up electronic newsstands. Steven Brill, who founded American Lawyer magazine and Court TV, folded Contentville two years ago.

Time Warner also failed with a venture called Pathfinder.

But White of Business Week is hopeful that Borders and his team, which include co-founder Doug Harrington, a former marketing executive at Webvan, can pull it off. "They seem to have robust technology and expertise," White said.

Other sites already exist to serve professionals, such as LexisNexis, but that company charges a per-document rate of $3 or $250 for unlimited use for a week. Factiva, a joint venture between Dow Jones & Co. and Reuters Group PLC, charges $69 per year plus $2.95 for each full text article.

So far, KeepMedia has made arrangements with about 140 magazines, including Forbes, U.S. News & World Report, Esquire, and six newspapers owned by Knight Ridder, the second-largest newspaper publisher in the United States.

But many of the other magazines on the initial list are less well-known and understandably eager for exposure. Corn and Soybean Digest, Waste Age, and National Hog Farmer are among the 69 niche magazines on board from Primedia Inc.

Executives at Foreign Policy magazine, a highbrow magazine based in Washington with a relatively modest circulation of 85,000, are enthusiastic about the potential exposure and increased readership they may get.

"It's the next step of moving to digital," says Lynn Newhouse, associate publisher of Foreign Policy. "Individual publishers have found ways to work it, but there's nothing there that works for the industry."

By Seth Sutel