Reader's Digest Wants to Sell You Drugs

Feb 26 1999

It may be the Internet business plan of the moment - using a media property to drive direct sales - but it's an idea that wasn't invented on the Net, or even by Barry Diller on cable TV. No, it's an idea that Reader's Digest, that bastion of all things middle American, has been pursuing offline for two generations.

So it's a bit surprising how little Internet press attention was paid to yesterday's announcement that Readers Digest plans to invest $100 million over the next two years to boost its Internet presence, pushing hard into the direct marketing of pharmecuticals, dietary supplements and personal financial services.

Although advance word of the plan leaked out among the New York media establishment thanks to a New York Post article Wednesday, the Wall Street Journal followed up today with the official word from CEO Thomas Ryder, who said that Reader's Digest plans to expand the 20 Web sites it currently operates as well as make investments in other Web sites, rebranding or cobranding them with the Reader's Digest name, according to WSJ scribe Wendy Bounds.

But the real juice came from a sidebar story out of San Francisco by the Journal's Nick Wingfield. According to Wingfield, the announcement is a 180-degree turn for the company, which jumped into the Net early when it took a majority stake in search engine LookSmart in 1995. But "after making its initial investments - a total of $10 million over two years, according to people familiar with the matter - Readers Digest balked at funding LookSmart any further," Wingfield wrote.

Investors aren't sure about the company's decision four years later to pump 10 times the LookSmart investment into Net matters, according to Wingfield. He noted that the company's shares rose a lukewarm 5/8 to 31 3/16 on the ".com" strategy announcement.

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