Salon Media Deathwatch Revisited

The stockmarket crash on 14th April 2000 ended the dotcom era: a speculative bubble in technology and early internet stocks from 1995-2000.  During the crash and its fallout I edited the New York-based news and subculture site Disinformation (archives of site version three or four) which the dotcom consulting firm Razorfish had acquired in late 1999 for its Razorfish Subnetwork of web artistic properties run by co-founders Jeff Dachis and Craig Kanarick.

It became very common to keep a ‘deathwatch’ on companies that market analysts expected would either implode, run out of cash, or be acquired for bargain basement prices. I later wrote a Masters essay (PDF) on the dotcom era that reviewed this ‘deathwatch’ frenzy and the memoirs of companies that had over-expanded from their initial public offerings.

The internet publisher Salon Media (SLNM) was one company where analysts had consensus that it would probably fail. However, Salon survived: a different management team, launching a site subscription model, dropping ‘big name’ yet expensive writers, broadening its freelancer network, and other survival strategies. The ‘deathwatch’ pundits were wrong.

Salon’s latest 10-Q filing on 13th August 2010 have some eye-opening sections. Deutsche Bank Securities provided short-term financing throughout 2007-09. Convertible promissory notes to investment banker Bill Hambrecht, Adobe Systems co-founder and current chairman John Warnock, original founder David Talbot, and other investors have kept the site operational.  Editor-in-Chief Joan Walsh has cut production, content and administrative expenses whilst boosting sales and marketing costs to enhance revenues. However, quarterly results are affected by outstanding accounts receivables, interest payment expenses and funding the short-term financing, and continued though lower operational losses. SLNM’s trade as an ‘over the counter’-listed stock is negligible (Google Finance). At least the 10Q has an extensive list of Salon’s exposure to operational, information technology, creative, finance and market risks.

Things will get interesting for Salon Media when the convertible promissory notes ‘mature’ in March and October 2012 and may need to be repaid. Will the dotcom era ‘deathwatch’ resume?