The First 20

A Business History of Slate

How this magazine has made money, from paywall to spon con.

business slate.

Photo illustration by Slate. Photo by saidauita/Thinkstock.

Here’s how Slate founder Michael Kinsley described you readers to the Chicago Tribune in 1999: “Web readers surf. They go quickly from site to site. If they really like a particular site, they may visit it often, but they are unlikely to devote a continuous half-hour or more to any one site the way you might read a traditional paper magazine in one sitting.”

Half an hour? We wish. About half of you who landed on this page are already gone.

Kinsley was explaining why Slate, not three years old, had decided to abandon an 11-month-old paywall. For $19.95 a year, subscribers had access to all Slate content, seven email newsletters, and a “deluxe Slate umbrella.” Between 20,000 and 25,000 people had subscribed since Slate put up the gates in 1998, bringing in almost half a million dollars. But acquiring each subscriber cost between $50 and $100, so the mag lost money on every sign-up.

To compound the problem, Slate, whose operating costs were thought to be in the vicinity of $5 million a per year, was attracting just 220,000 unique visitors a month. Most had access to just a tiny sliver of the magazine’s content: The stories selected for the unpaywalled “front porch.”

“We had no advertising prospects,” publisher Scott Moore recalled later. Even in the age of dial-up internet, it was clear that impeding the reach of digital content was removing one of its prime advantages over print: its boundlessness.

The paywall fell, and within three months, Slate’s audience had tripled. In the following nine months, it tripled again. A year after Slate went free, the site drew as many “uniques” as the Washington Post and was just a few hundred thousand behind the New York Times.

And so began the history of Slate making money—a history that reflects the lurching evolution of the digital media revenue model.

In 2014, a month after stepping down as editor in chief, David Plotz listed 76 ways to make money in digital media. But Slate, like most digital media companies, still makes the lion’s share of its revenue—more than 90 percent—from advertising.

For this article I talked to current and former Slate honchos and asked them: Who is paying me to write on the internet all day? And why? I asked them to treat me as they would a reporter from another publication, and I didn’t get access to the company’s financial reports. (I also didn’t ask about expenditures like salaries, just about revenue.)

What I learned is that, for everything that has changed in 20 years, Slate still struggles with two questions. The first is one that we have become pretty good at answering: How do you make money off digital advertising? The second is one we’re still working on: How do you make money off anything but digital advertising?

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At first it wasn’t easy to convince advertisers that the internet, with its stamp-size ads, could do much for brand awareness. Ad buyers saw online ads as inferior to television, radio, and magazine ads, and payed commensurately lower rates.

From Slate’s launch, there were attempts to raise revenue from other sources—and not just by charging readers to read the website. Slate on Paper, a monthly compendium of Slate articles, was briefly sold at Starbucks for $3—in keeping with the conceit that Slate was a weekly magazine that just happened to be on the web. But around the end of the millennium, as internet traffic continued to grow and Slate grew along with it, Moore came to see magazines like Time as a misleading model. Slate still called itself “the number one internet magazine,” but its business, he realized, was more like radio and television: It cost the same amount to make no matter how many people consumed it. “Slate costs us the same amount to produce today with a readership of 5 million a month that it cost us two and a half years ago when we were subscription-based and had an audience of 200,000 a month,” Moore said in 2001. “But our revenue has gone up about tenfold during that time.”

Advertisers caught up. Jacob Weisberg succeeded Kinsley as editor in chief in 2002; around that time, Weisberg recalls, it became easier to sell internet ads: “There were more standards around how digital advertising was bought and sold, and the ad units started to be standardized.” In 2003, Slate experienced its only quarter of profit under Microsoft.

“We have always believed it would be a moneymaker,” Bill Gates wrote to the Times’ David Carr, when Slate finally turned an operating profit. “The readership levels we have today have gotten us past break-even, and those levels will continue to grow.”

But Microsoft might not have been the best place for that to happen. Slate was dependent on the sales team of the MSN web portal, where it was an afterthought. Weisberg and Cyrus Krohn, who took over from Moore, angled for a sale. Weisberg believed that building a successful business would be crucial to the magazine’s editorial success and that that couldn’t happen under Microsoft.

It took a while for Gates to come around, but he agreed to help find Slate a good home. The first call Weisberg made was to Don Graham, the chairman of the Washington Post Co. The Post purchased Slate in December 2004 for between $10 million and $20 million. Not everyone thought it was a good deal. “Take Slate,” said the media critic Hugh Hewitt. “It’s Mickey Kaus and the furniture.”

Cliff Sloan, a lawyer at the Washington Post, felt more optimistic. “There was great enthusiasm for Slate’s editorial content,” he said. “I was very optimistic about its business potential. I thought the quality of the site and the quality of the audience made for a good business proposition.”

As Slate publisher, Sloan set out to align the magazine’s business reputation with its editorial reputation. “We quickly got a reputation among advertisers and ad agencies for being a place where people could bring innovative, fun ideas,” he said. For Visa’s “Flip” campaign, the whole home page flipped over. For a PBS show about the Western frontier, the home page took on the aesthetic of a Wild West saloon. “We thought this was something totally consistent with the approach and personality of the site on the editorial side.”

But the most significant advance was advertisements that took the form of editorial content. In 2005, for example, Slate unrolled an “adverblogs” series called “Cool Capitals,” in which four bloggers (including regular Slate contributors) wrote peppy posts about Vienna, Antwerp, Amsterdam, and Zurich. Like Slate staffers, the writers were given topics but were free to pursue their interests. The posts were sponsored by a coalition of European tourism boards and marked as advertising content. They weren’t intended to trick readers into believing they were reading Slate articles—but the idea was to give advertisers a bit of the editorial brand’s aura.

At the end of that year, Graham wrote that Slate had turned in “unexpectedly good results.”

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In Slate’s second decade, the competition caught up. A magazine characterized in 2006 as a “lonely oak in the online forest” was joined by Politico, Vice, BuzzFeed, Vox, and a revamped digital Atlantic. Slate expanded a handful of editorial ventures, like SlateV, a video production arm, in 2007; business site The Big Money in 2008; and DoubleX, which focused on women’s issues, in 2009. DoubleX was folded back into the main site later in 2009; The Big Money folded in 2010. Neither appeared to be headed toward profitability. In 2011, online publishing revenue at the Washington Post Co. dipped and Slate laid off a handful of staffers, including some editorial stalwarts.

Almost all publications are dependent on advertising. The big newspaper companies, like Gannett, McClatchy, and the New York Times Co., make considerably more money from advertising than subscriptions. Digital media companies, like Vox, BuzzFeed, and Business Insider, also rely heavily on ad revenue. This year, spending on digital ads—led by surging mobile ad dollars—will surpass TV-ad spending.

But that growth is highly concentrated. According to a Pew survey from June, five tech companies—Google, Facebook, Yahoo, Microsoft, and Twitter—collect 65 percent of all digital ad spending.

“That scares most publishers,” said Keith Hernandez, president of The Slate Group. “I think everybody realizes that if you’re just beholden to advertising, you’re at the mercy of the ebbs and flows of that industry.”

Slate had pursued other sources of revenue since removing the paywall, including live podcast tapings, Amazon’s affiliate program, and the Slate Store, which opened in 2013 and closed shortly thereafter. In 2015, Slate launched Panoply, a podcast network that would handle Slate’s in-house podcasts and help produce and distribute audio programming by other outlets. (The road to Kinsley’s continuous half-hour ran through the ears, not the eyes.)

Slate has never had the audience of a Huffington Post, a Yahoo, or a BuzzFeed. But demographically speaking, the magazine’s readers have been an advertiser’s dream since the Microsoft days. “We had audiences that were often higher quality, by all these strange metrics that advertisers care about: education, affluence, are these people decision-makers,” said John Alderman, who was Slate’s publisher during the Great Recession. “We had that quality of audience.”

For the most part, though, even coveted Slate readers saw the same ads as everybody else. Mass web advertising was getting less effective, and more unpleasant as advertisers struggled to attract attention. Click-through rates on online ads have fallen from 44 percent when Slate was founded to 10 percent in 2006 to 0.1 percent today. Ad buyers were turning toward “programmatic” ads, the shoe spots that follow you around the web. That meant fewer dollars spent directly on Slate-dot-com. Much web advertising was beginning to resemble the chumbox, that grid of thumbnail ads that laid bare the “deepest libidinal channels of the brain,” as John Mahoney wrote on the Awl. Audiences increasingly consumed Slate articles on Facebook or through other off-site channels, where monetization was more difficult.

In 2012, Slate launched Slate Custom, an in-house agency that designs campaigns for brands like Lexus, to build on the kind of “sponsored content” the magazine had been producing since Cool Capitals. Today, Slate Custom is responsible for about half of the company’s advertising revenue. Similarly, Panoply sells traditional podcast ads and also makes shows for sponsors. One such show, sci-fi drama The Message, a co-production with General Electric, became the No. 1 podcast on iTunes last year.

This investment in bespoke production has paid off. In 2013, Slate became profitable for the first time since the Microsoft era, editor-in-chief Julia Turner told Politico when she took the reins.

Sponsored content has its critics. A few years ago, ex-Slatester Jack Shafer criticized publishers for deliberately blurring the line between editorial content and advertising. The risk, Shafer suggested, was not so much creating immediate confusion (sponsored stories from reputable publishers are typically clearly labeled) as creating a long-term impression that editorial and advertising, journalism’s church and state, had “essentially merged operations.”

Hernandez believes that well-designed advertising campaigns have their own appeal to readers. “For me, the big bet is in the custom studio,” he said. “More and more clients are looking for fewer and better partners, and I think we’ve hit the final point where they care less about scale for scale’s sake and more about quality introspection from the few partners they’re working with.” He also points out that sponsored stories are more explicitly labeled than before—which has led to more, not fewer, people clicking on them.

The sponsored-content business depends on a site with a strong identity and a loyal readership—and in that sense it plays to Slate’s strengths. In recent years the magazine has made efforts to track reader loyalty as well as overall traffic—a shift from industry norms, but one the business side hopes will help convince advertisers of the value of its relationship with its readers.

Of course, that relationship reaches its height with you, Slate Plus members. Plus launched in April 2014, offering dedicated readers special access and perks—and a way to support the magazine directly. The idea was to help Slate reduce its dependence on advertising. Membership has since grown to more than 17,000—not enough to replace ads as a source of revenue, but not peanuts either.

After all, if anyone is going to spend a continuous half-hour reading Slate, it’s you. And you’re a third of the way there.