July 26, 1999

The Subsidiary: MagazineOutlet.com

By Clinton Wilder

Sidebar stories:

Integration Throughout The Company: Prudential California Realty The Subsidiary: MagazineOutlet.com The Partnership: PetSmart The Transformation: Homebid.com

ewSub Services Inc. of Stamford, Conn., is no stranger to mass markets. It mails 150 million marketing pieces a month, offering consumers magazine subscriptions with their credit-card bills, airline frequent-flier statements, and mail-order catalogs. With expertise in consumer marketing and affiliate programs, NewSub's business seemed remarkably similar to the Web.

But not quite similar enough. To ensure that its online business would stay focused, NewSub formed a wholly owned subsidiary, MagazineOutlet.com, whose site of the same name was launched in May. "No matter how close your business might be to the Web model, E-business takes a specialized knowledge and focus," says Marti Schiff, NewSub's VP of online businesses and president of the subsidiary.

MagazineOutlet.com works closely with--and often functions like--a division of the privately held NewSub. But its subsidiary status helps the company meet perhaps the most daunting challenge facing all electronic businesses: hiring talent. "We really needed to go outside the company for the technology skills for E-business," Schiff says. "We needed Webmasters, database administrators, Internet architects--people familiar with creating E-commerce-enabled environments that hook into legacy systems."

NewSub says its tightly integrated subsidiary model is the best approach to meet its key technology challenges: taking advantage of legacy order-processing and customer-service systems while creating unique features for Web business. The company's traditional business runs on a custom-built fulfillment system that uses an Oracle8 database on the back end. "It can scale on a dime," Schiff says. "In the Internet space, that gives us a gigantic advantage."

The Web site is built on Microsoft's Net technology, including Internet Information Server and Windows NT. Developers from service provider Proxicom Inc. built the site's components, including the shopping cart, online catalogs, and Web databases, according to MagazineOutlet.com's specifications. Proxicom is still involved in ongoing development.

NewSub's established business isn't about branding; customers don't need to know its name when they accept a discounted subscription offer to Newsweek that comes along with their Visa bill. But on the Web, the company is hedging that bet a little bit. Although the main business is running the online "magazine store" for Web sites such as American Express and ABC, the company wants MagazineOutlet.com to be a brand, too. "We want to reinforce the partners' brands rather than our own, but on the Web you also have to leverage your own brand," Schiff says. "We mail 150 million pieces a month, and we intend to place our URL address in as many of those as we can."

Like other companies entering E-business, NewSub faces the possibility of cannibalizing its traditional channels. But Schiff says there's been little opposition to going full-steam ahead online. "Everyone here realizes that this will be a giant channel," she says. "It's very important for us to seek new channels and dominate them. That's why we set this up, so that we have people focused on it completely. I know that it's all I think about."

Go on to the next story, "The Partnership: PetSmart"
Return to the opener, "E-Business: What's The Model?"

Illustration by Hank Osuna
Photo by Edward Santalone

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