Online Policy Group

by Robert DiGiacomo, Philadelphia Gay News, November 24, 2000

The merger of the web's two biggest gay portals - rivals Gay.com and PlanetOut.com - will result in what will arguably be the first gay and lesbian mega media company.

The newly formed PlanetOut Partners Inc. will include the two Web portals as well as Liberation Publications Inc., publishers of The Advocate and Out magazines and Alyson Books, which PlanetOut agreed to purchase earlier this year.

The Gay.com/PlanetOut merger, announced Nov. 16, reflects each site's success in attracting users, advertisers and investors, and the tremendous challenge of building a money-making dot-com company. Despite having more than 3.5 million unique users each month, signing major advertisers including American Airlines, IBM and Saturn, and this year alone raising a combined total of more than $30 million from investors, neither site is profitable.

The merger, company executives say, will achieve much-needed economies of scale in operations and technology, while maintaining each site's independent address and identity.

The financial terms of the deal were not disclosed by the privately held companies.

"Part of the idea was to create more of a corporate backbone that then allows us to put more resources into each product and create more products," said Megan Smith, Planet Out's chief executive officer, who will be the president of the new company. "It didn't make sense to have two sales teams and two marketing teams. We will be able to focus on these two incredible products each company has built and continue to build them."

Smith projects the San Francisco-based company - which, as a result of the merger, is likely to make some layoffs among its staff of 180 - could earn its first profit by the end of next year.

"We have two really healthy businesses," Smith said. "Both of these companies are the first in their history that serve gay and lesbian customers to have the venture capitalists step up ... neither is profitable, but there hasn't been a lack of investment interest. The fact that PlanetOut closed $10.5 million in funding when all these businesses were closing down speaks volumes."

According to Lowell Selvin, chief executive officer of Gay.com's parent, Online Partners Inc., who will retain the same title for the new company, the merger was aided by the sites' complementary strengths.      

PlanetOut has made its name through content areas, notably in film, entertainment and travel, and partnerships with mainstream media like America Online, Yahoo! and MSNBC. Gay.com's primary strengths lie in its extensive chat areas and its international reach, including sites for United Kingdom, France and Mexico.

"PlanetOut's and Gay.com's strategies were clearly converging and today they remain relatively complementary," Selvin said. "Yet, over time the two companies would have started looking more and more the same. We also found ourselves that when we were working to sell to large advertisers and business partners that we weren't able to just talk about this great community. We found ourselves talking about one another."

With PlanetOut also in the process of acquiring Liberation Publications, whose Advocate and Out are the nation's highest-circulating gay and lesbian magazines, the new company will have tremendous control over content and access to information.

How will the casual user be affected?

Both Smith and Selvin say the user's experience won't change because both sites will continue to operate as their own sites, with customized content and opportunities for interaction in chat and message areas.

"We argue it's an increase in the diversity of voices," Selvin said. "First, we have historically the world's largest gay and lesbian distribution channel for information. With our election coverage, we had everyone from Bruce Vilanch and Kate Clinton to Tammy Baldwin and David Mixner interacting with people. These are very diverse voices. Secondly, look at our message boards. You no longer have to wait and hope your letter to the editor will be published."

Smith also believes the sites' high-degree of interactivity will keep them accountable to users.

"Interactive media is a little different than traditional media because editors and publishers have more control over what's there," she said. "In interactive media, customers control chat boards and message boards and forums. That's a huge difference."

Will Doherty, executive director of Online Policy Group, a new organization whose goals include improving access for the gay and lesbian community, was cautiously optimistic about the merger's effect.

"To the extent that PlanetOut Partners is able to continue to grow their news department and insulate it from the effects of media convergence, then the merger is a positive step because it will increase the likelihood of survival of an established portal serving the l/g/b/t community," Doherty said. "In general, competitive pressures are a positive influence on diversifying sources for the news. If competition, in a dot-com shakeout economy, results in a business failure, then a merger may be the only way to insure profitability while still serving the needs of the l/g/b/t community."

For now, however, it seems Gay.com and PlanetOut will continue to look and function the same.

"Immediately, you won't see any difference," Smith said. "The biggest changes will come over time. We will have an even stronger company. You will see more innovation in the different products. We think it's a net-net positive for what customers see."

Robert DiGiacomo is a Philadelphia-based writer.