Yin Eats Yang

I happen to have had a good seat on the sidelines of some media plays that culminated last week in the latest acquisition of old media by new. Herewith is my report on the winners and losers, lessons and ironies.

Michael Goff, the founder of Out, which was among the publications acquired by the Internet start-up PlanetOut in its sweeping roll-up of almost the entirety of gay media, had an office next to mine in a loft on 14th Street where we traded media gossip. He was my first introduction – this was in the early nineties – to that new breed of business-plan-writing young people capable of reducing almost everything to a compelling marketing formulation. In the instance of Out (I suggested Out; Goff wanted to call it Rogue), he insisted, and kept insisting with irresistible forcefulness, that gays represented an easy-to-target high-disposable-income demographic group and hence a perfect category for an affluent-lifestyle magazine. (It was either Goff’s consummate business persona or my perpetual cluelessness that kept me from realizing for quite a while that Goff himself was gay.)

His point was that gay people lead an economic life as well as a sexual life, and that buying power is a much sexier attribute than sexuality. (He believed, on this basis, that you could combine gay men with lesbians and no one would be the wiser.) Goff disparaged The Advocate, also acquired last week by PlanetOut, as ghetto media without access to broad national consumer advertising. (The conventional wisdom was that The Advocate was old media to Out’s new version of gay media, and that it would shortly fold – in fact, it thrived.)

Goff’s Out, which launched in 1992 to enormous publicity and with numerous big-brand advertisers making their first direct pitches to the gay market, was meant to take gayness totally mainstream. David Geffen, Calvin Klein, Ross Bleckner were Goff’s model readers (the biker dykes and gay accountants weren’t whom he had in mind). Out was a variation on Details, or Esquire, or GQ. It consciously, even militantly, banned anything tawdry or downmarket – including advertising of a sexual, or even suggestive, nature (you couldn’t say “shit” in Out).

“There is nothing slick about PlanetOut. It feels efficient, local, unassuming. And authentic: Real gay people probably want to know real gay people.”

It wasn’t that long after the launch of Out that, in the new Internet world just beginning, I met Tom Rielly, who was running a group called Digital Queers that helped gay organizations get wired (or even just get computers). I doubt if either Rielly or Goff was yet thinking in terms of yin of new and yang of old media, but they were certainly complementary, contrary figures. Goff would have been an ideal executive in any media enterprise – he was a remarkable schmoozer – whereas Rielly might not have been employable in any other media world outside the early Web. Where Goff is tall, Armani-resplendent, controlled, Rielly is sort of a roly-poly mess, somewhere between dishevelment and flamboyance. Conversationally, Goff is precise, competitive, litigator-like, while Rielly is always in the middle of indiscriminate utterances, or on the verge of tears or mawkish intensity. They were a remarkably vivid head-and-heart dichotomy.

Goff’s perfectly logical idea, in mid-1995, was that Rielly – “nerd boy” – should come and work for Goff and run an adjunct Website for the magazine. But Rielly procrastinated and failed to return Goff’s phone calls and screwed up the opportunity (Rielly’s idea of negotiating is to drop out of sight). “A flake,” Goff pronounced, and launched out.com, largely a promotional affair for the magazine, without Rielly.

Goff was openly scornful of online stuff anyway – “I’ve been on AOL,” he would say with mighty contempt – and his intention, like that of most serious magazine publishers, was to make only a minimal Web investment. After all, the online world was exactly what he was against in gay media – the sexuality, the backroom quality, the secrecy. The online gay world embarrassed him.

On the other hand, anonymity, eroticism, safe sex, and the easy ability to chat with like-minded souls was available for $3.50 an hour on AOL, and by 1995, the gay-and-lesbian forum was one of its most trafficked areas. The Internet was some risk-free Bloom-in-Nighttown place – sex was defining interactivity.

Ted Leonsis, the key executive in AOL’s move to become a new sort of media company, made Rielly’s plan to create a gay-focused online company one of the first of AOL’s Greenhouse investments. Not long afterward, Sequoia Capital, the venture-capital firm that funded Yahoo!, agreed to invest, too, and Rielly launched PlanetOut.

Goff had his lawyers shoot off a cease-and-desist letter – which Rielly ignored (“Just so Michael,” he said and shrugged).

But Goff was hardly worried. Goff envisioned a different kind of expansion of gay media – gay catalogues, gay resorts, gay casinos. Indeed, he saw Out’s franchise as a play much more for affluent dollars than for gay ones. Such ambitions, however, shortly led him into a conflict with his primary investor, Bob Hardman, whose initial $500,000 investment was on its way to ballooning to $8 million and who saw no end in sight for Out’s losses. Goff, who’d lined up a direct-marketing company to buy out Hardman, threatened to quit if Hardman wouldn’t sell. “You don’t have a magazine without me,” Goff pronounced (in the immortal words of all magazine founders). Unexpectedly, Hardman accepted Goff’s resignation (though, in a double reversal, Goff negotiated the terms of his resignation in such a way that he held substantial rights over the direction of the company).

Goff’s decision, in the fall of 1996, to take a job at Microsoft running its city-site project, Sidewalk (while Goff is someone who would never be too early to a trend, he’d never be too late, either), was one of those portentous signals and much-discussed career moves suggesting big changes in the way people thought about their media careers.

Rielly, on the other hand, became the bane of his venture-capital backers. “They said I was flaky and unreliable, which I am, but they knew that going in,” Rielly sniffs. Rielly was saved at the precipice only because Leonsis and AOL continued to support him and because PlanetOut had enough cash in the bank to buy out the Sequoia group. That left Rielly, however, with only $400,000 on hand and a monthly burn rate of $225,000.

Rielly was tanking while Goff, at 30, with a natural Microsoft arrogance and aggressiveness, was quickly becoming one of Bill Gates’s key advisers on media matters. Sidewalk, Goff’s maiden Web effort, was the most ambitious launch to date in the history of the Internet.

Rielly, meanwhile, traded in his chief-executive title for a new role, which he dubbed “chief homosexual officer,” and appointed Megan Smith, a 33-year-old engineer, to replace him as PlanetOut’s CEO. There’s a theory – let’s call it the Steve Case theory – that says the most important thing a manager can do is opt out of management. Again, Goff and Rielly represent divergent poles – Goff is a control freak; Rielly runs from responsibility, a condition Megan Smith describes as his “checking-in-and-out behavior.”

Smith herself, on the other hand, is an almost fifties sort of manager (even down to the name Smith). With a little critical interpretation, you could see her at GM or P&G. She’s a stalwart of old-fashioned company dedication – selfless, serene, and preternaturally sunny and optimistic.

As Goff launched the massively funded Sidewalk, Smith cut PlanetOut’s burn rate from $225,000 to $40,000, then to $20,000.

They were not, Sidewalk and PlanetOut, dissimilar ideas. On the basis of his experience with Out and the gay community, Goff talked expertly about the new Internet-media concept of community – of how people with similar interests can be brought together in a commercially advantageous setting.

But Goff’s Sidewalk began as a ghost town and remained a ghost town. A few hundred million dollars failed to create a community. As Sidewalk failed, Goff moved over to MSN and encountered a similar failure to connect. The Internet’s much-vaunted viral effect became on Microsoft’s watch something of an antibody problem.

In early 1997, Out closed its Website and made a deal to funnel its remaining traffic to PlanetOut. Smith identifies this 25 percent increase in its traffic as the critical viral moment for PlanetOut – from this point, traffic grew exponentially. The natural limit on a gay magazine – that a large part of the universe of readers of gay magazines don’t want to be associated with a gay magazine – disappears online, the perfect furtive medium.

It is obviously important not to make too much of the irony that the consummate polished marketing guy failed while the misfit clown succeeded. There are, of course, perfectly awful marketing assholes making billions all the time, and clownish screwup behavior is almost invariably and severely penalized.

Still, there’s a point here.

Henry Scott, a former executive at the New York Times who took over Out after Goff left, describes Out as having a consistent soul problem: “This is partly Michael’s legacy, but I am to blame, too. The point is that neither of us was particularly interested in gay media – wouldn’t be caught dead reading gay magazines.”

In the old-media paradigm, the media is about power, authority, legitimacy. The operative goal of Goff’s Out magazine was to take gay interests and sensibilities and join them to some hip, moneyed mainstream. (The idea at Sidewalk, too, was that it would, in one fell swoop, wow the world.)

I don’t think this is what new media does, or is capable of doing. New media is less symbolic, less evocative, less about making any specific kind of point. It’s much more small-time. There is nothing particularly slick about PlanetOut. It feels efficient, local, unassuming. And authentic: Real gay people probably want to know real gay people rather than the Will & Grace type. When Rielly talks about PlanetOut, he invariably relates it to his identity search – his first gay chat room in 1984 on CompuServe, the BBS services he frequented, the fidonet echoes, the Usenet newsgroups, and the Web. Boy-meets-boy, at its most efficient, is an unromanticized function.

Old media is about illusion. New media is about practicalities (a.k.a. the user experience).

After blocking various proposals to sell Out, which, operating near a financial break-even point, had been unable to build its circulation or advertising base, Goff gave up his hold on the magazine in December.

PlanetOut, with new money from Internet notables like Nicholas Negroponte and Rob Glazer, additional capital from America Online, and a new venture round from the Mayfield Fund, began to negotiate the acquisition of Out and The Advocate and assorted smaller gay publications, for $30 million worth of its several-hundred-million-dollar pre-IPO valued stock, betting that it could convert its much larger online user base into magazine readers.

In due course, PlanetOut will be the first gay-oriented public company, an idea that does not now seem particularly surprising. And, of course, Tom Rielly will be wonderfully wealthy.

As for Michael Goff, well, he’s become a venture capitalist.

Yin Eats Yang