Search Tool : Reader’s Digest Plans Cyber Effort

The Reader’s Digest Assn., nobody’s idea of a hip outfit, Tuesday unveiled its “online corporate strategy,” including an outpost on the World Wide Web and a new Internet search tool to compete with Yahoo, Excite and other electronic info gleaners.

If the staid publisher of the 74-year-old Reader’s Digest seems an unlikely entrant into a sector dominated by twentysomethings, well, that’s precisely the company’s problem. Reader’s Digest stock has been in the doldrums for years as the firm tries to wring growth from an aging and relatively downscale customer base.

“Their issues are finding new demographics and new products to sell,” analyst James D. Dougherty of Dean Witter Reynolds said, adding, “There’s no sign that any of their efforts are working yet.”

Still, the Pleasantville, N.Y.-based company does publish the world’s largest-circulation magazine, with 28 million copies sold monthly in 19 languages, and it possesses a huge database of people who buy its books, videos, music and other direct-mail offerings. Mail-order sales accounted for 68% of the company’s $3.1 billion in revenue last year, with only 24% from magazine subscriptions, a spokesman said.

By moving to the Internet, Reader’s Digest hopes to both exploit its existing marketing muscle and reach out to a younger, freer-spending clientele.

At a news conference Tuesday announcing the Oct. 28 launch of its Web site and search tool, Reader’s Digest made no claims to being an Internet pioneer. Sarah J. Hammann, director of new business development, said the online initiative has been under study for two years as part of “an aggressive follower’s strategy.”

The company developed the Web site, to be called Reader’s Digest World, with an in-house team of 100 employees. The search engine, however, is the product of an Australian start-up venture, LookSmart Limited, of which Reader’s Digest recently acquired a majority stake.

Evan Thornley, president and chief executive of LookSmart, said his firm and Reader’s Digest may appear to be an “odd couple” but that there are key similarities. With its homey mix of journalism, humor, health and self-help distilled from numerous sources, Reader’s Digest “invented the business of editorial selection and concentration” that LookSmart is adapting to the electronic environment, Thornley said.

Whereas other electronic search tools appear to be designed exclusively for “young, technically oriented males in Northern California,” Thornley said, LookSmart hopes to serve a mass market of “people with jobs and mortgages” who find it confusing and frustrating to find useful information in the chaotic bazaar of the Internet.

LookSmart’s 30-person editorial team is winnowing through the World Wide Web’s hundreds of thousands of sites in order to identify and make connections with about 85,000 sites considered interesting and appropriate for Reader’s Digest customers.

In addition to a “humor database” and a selection of articles from the print version of Reader’s Digest, the Web site will have a shopping area where consumers can purchase books, videos and recordings that the company now sells by direct mail.

Both LookSmart and Reader’s Digest World will be advertiser- supported and free of charge to consumers. Company executives Tuesday declined to project revenue from the online initiative, but it is safe to say it will be minuscule compared with the rest of the company’s operations. Total ad revenues for all Internet sites are projected at only $80 million this year, and competition is fierce.

“Sounds like a gamble,” said Shields & Co. analyst Ivan Obolensky.

Reader’s Digest shares closed at $40.75 on Tuesday on the New York Stock Exchange, down 12.5 cents.