For-Profit Web Venture Shifts Gears, Hoping to Find a Way to Make a Profit

Fathom, with backing from major universities, changes strategy on marketing and content

By SCOTT CARLSON

Columbia University's for-profit online venture, Fathom, is having difficulty attracting both customers and outside investors, forcing the university to spend $10-million to keep the project afloat.

The difficulties were discussed in a report produced by a subcommittee of Columbia's University Senate last month. A draft of the report said that Fathom is undergoing "a significant change in course."

The revisions indicate that in the two months since the site went online, Fathom's original business plan has shown less potential for profit than its developers might have hoped. They planned to get users, lured by encyclopedia-type articles, to buy scholarly books and distance-education courses produced by a number of institutions, from which Fathom would get a marketing fee or a percentage of a sale.

Although that strategy will remain in place, Fathom is focusing on a new plan to generate revenue and build a base of loyal users: The site will rely on Columbia and Fathom's 12 other member institutions to create and contribute shorter, noncredit online courses and seminars to accompany the free content, such as the articles, already offered on the site.

The company also hopes to save money by postponing efforts to advertise Fathom, concentrating instead on building a word-of-mouth customer base of students and professors at, and alumni of, the member institutions. Those institutions include the American Film Institute, the British Library, the Cambridge University Press, Columbia, the London School of Economics and Political Science, the Natural History Museum in London, the New York Public Library, RAND, the Science Museum in London, the University of Chicago, the Victoria & Albert Museum, and the Woods Hole Oceanographic Institution.

The senate subcommittee, which comprises students and faculty members and was formed three months ago to study Fathom, also reported that Columbia planned to put $10-million into the company to keep it going for at least the next two years. Richard W. Bulliet, a professor of history and co-chairman of the subcommittee, said that although some faculty members remain skeptical about Fathom's business model, administrators at Columbia think Fathom represents a valuable presence for the university on the Web, and that they are behind the project regardless of whether it is profitable.

That sentiment is backed up by Michael M. Crow, Columbia's executive vice provost. "What we've done is to say, Let's not worry about the clock," he says. "The investment banks can decide that they're not interested in the Internet anymore, yet we're still going to move forward." In September, Mr. Crow says, Fathom and Columbia set a goal to attract strategic investors within 90 days. Although some investors showed interest -- Mr. Crow won't name them -- their goals for the site were too "commercial."

"So we'll continue to move forward by ourselves," he says.

As far as investors go, Ann G. Kirschner, the president of Fathom, puts a sunny face on the chilly climate for dot-coms these days: From a competitive standpoint, "it's not a bad thing that there's not widely flowing capital, bringing investors into the marketplace who have no business being there," she says.

According to the report, Columbia has already poured $18.7-million into the project. Other partner institutions have not contributed nearly as much -- at least, not in hard cash. "Their investments are their content and their names," Mr. Crow says.

Fathom's early success has been mixed. Since opening what Columbia officials call a preview version of the site two months ago, Fathom won a mention for "best learning portal" in Yahoo! Internet Life, and Ms. Kirschner says the site has had 500,000 unique visitors.

It hasn't yet been as successful as a moneymaker or as a marketing tool for distance-learning courses, however. David P. Szatmary is the vice provost for educational outreach at the University of Washington, which has advertised many of its courses on the site. He said that only a few people have enrolled through Fathom. His university would need 100 to 200 students to enroll a year to make Fathom a worthwhile marketing venue.

He says that in six months the university will re-evaluate advertising on the site. Still, Mr. Szatmary says, the venture has just begun; he's optimistic about its potential.

Ms. Kirschner offers an explanation for the problem of attracting users to distance-learning courses, such as those offered by the University of Washington: The semester-long courses currently offered on Fathom, priced at $500 and above, are a daunting financial and time commitment for distance-learning neophytes. She hopes that the shorter courses and seminars will attract first-time distance learners and ease them into the idea of taking longer, more-involved, and more-expensive courses.

The short seminars could be finished within a day or two, she says. Columbia already has developed about five prototype courses, which are already available to its own alumni. Mr. Crow says there are plans to develop another 100 to 200. The short courses will be available to the public in about two months and will cost $50 to $100, Ms. Kirschner says.

The institutions will pay for the development of their respective short courses and seminars. Neither Ms. Kirschner nor Mr. Crow would say how much a course would cost to develop, but Mr. Crow did say that course development could take anywhere from three months to a year.

Mr. Crow hopes that Fathom will start turning a profit within two years, but adds: "You can't really lay a normal template on top of it and ask, 'Well, when are they going to make money?' I think it's more complicated than that. ... This is a strategic activity for Columbia and its partners."

The subcommittee's report said that Fathom's plan to rely on advertising and book sales had "stirred skepticism," and some are dubious of the new approach, too. Eben Moglen, a Columbia law professor who specializes in Internet issues, has long been skeptical of Fathom's prospects. He cites the Walt Disney Company's recent decision to close its Go.com portal.

"If Disney can't make Go.com work, then Fathom.com is a dead idea," he says. "What have they got that Walt Disney didn't have? I take it the answer is attractive material. Let's be real. Nobody who thinks seriously about the shape of Internet media thinks Fathom is going anywhere."

Mr. Moglen is particularly offended by Fathom's commercial mission. He posits that Wall Street's dot-com boom spurred officials to create Fathom. "But the boom ended before they got their shoddy little enterprise to market, so now it has no meaningful role in the world. But they can't pull the plug on it, so they say, 'It's a strategic investment. We're not trying to make money.' Good. Then take the dot-com out of the name."

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