The staff gathered that Friday afternoon in what was called the President’s Office, a typically spacious, senior-management-type room dominated by a large fireplace. Grouped by department, people anxiously clustered around various landmarks: the bowl of Bits & Bites, the leather couch, the table featuring both a “fine selection of non-imported beer,” in the words of one staffer, and cheap wine in plastic glasses. Armed with a choice from the Molson Party Packs and a handful of Cheez Doodles, the staff tuned in to their CEO’s latest speech: “We’re well on our way to being millionaires.” After toasting the launch of e-magazineMykidsbenefit.com, staff drifted back to their cubicles, finished their daily assignments and went home.

The somber mood of MKB‘s June 15, 2000, launch foreshadowed the lightning-quick demise of what was originally promoted as a brilliant initiative to offer customized magazines over the Internet and take preference marketing to a new level. About a month and a half after its launch, MKB slashed three-quarters of its staff, mostly from the sales and marketing departments. By the beginning of August, the e-mag had ceased publication. While the official reason given for the collapse was the withdrawal of expected funding from Scotia Capital-not unusual, given the investment community’s anxiety over last spring’s massive realignment of tech stocks-other problems were evident long before this crisis. The bursting of the dot-com bubble aside, the late arrival and unconventional methods of the editorial team, as well as the ever-changing business concept, pointed toward the e-magazine’s uncertain future from the start. What most people believed to be an exciting new editorial start-up was simply another attempt by Mykidsbenefit CEO Michael Smythe to weave a successful company from the same marketing formula he has been touting for more than a decade.

TWO VIBRANT AND CHARISMATIC young men once held big dreams of ushering Canadians into the new digital culture. Andrew Heintzman and Evan Solomon made their names by founding Shift magazine and miraculously keeping the arts-and-Canadian-culture-turned-digital-culture mag alive since its 1992 launch. Although Shift has yet to turn a profit, its critically acclaimed design and cool, slick subject matter crowned the two as Canada’s new media darlings.

Thus, when Smythe needed a hip, young team to further develop his company’s online magazine, he chose Heintzman and Solomon’s new project, their consulting company Realize Media. Enamoured with what they believed to be potentially industry-changing technology (“No one had ever designed content to work on this kind of platform,” says Solomon), Smythe convinced Heintzman and Solomon to build the vehicle upon which the technology would be marketed: presumably the first-ever customized electronic magazine. At this point, Realize had met with the company’s senior management, and although they were not investors, “we did what we thought was due diligence,” says Solomon.

Realize had good reason to sign the contract-namely, the impressive reputations of the senior staff. “These guys weren’t dummies. It wasn’t a fly-by-night operation.” It was true that MKB’s seven-person management team had impressive pedigrees, most having worked for such major companies as Manulife Financial, Nortel Networks and Simon & Schuster. Yet the concept of the magazine-still raved about, even long after the fact, by MKB president Hart Hillman-was also very attractive.

“Wouldn’t it be cool,” proposes Hillman, “if we could capture all your interest areas and somehow put them into a magazine that was customized to your areas of interest? So when you open the magazine, only the things you’re interested in are in the magazine, and they change every week-with fresh articles, original content, articles written by really good, up-and-coming writers. Wouldn’t it be neat,” Hillman, the former president of CDG Books Canada (which is the Canadian publisher of the For Dummies series), continues, “if we could give this to people for literally nothing, other than the benefit that we would accrue by getting into their households so that we could put in appropriate advertising with appropriate articles?”

In reality, the situation was far less fairy-tale. Despite Mykidsbenefit being promoted first as an e-magazine with fabulous benefits for its subscribers, benefits such as online shopping discounts and cash rebates on purchases, the formation of a true editorial team was left until less than three months before the launch. The original plan for the magazine was to hire students to pluck free content from websites and repackage it into new, informative articles.

Only after management recognized that recycled material, plus book excerpts-gained through Hillman’s publishing industry connections-wouldn’t cut it was Realize Media brought in to flesh out the bare-bones editorial department created by one of the original editorial employees, Dave Watt, initially designated the preference editor for entertainment. Watt, a 12-year veteran of public relations, was redesignated manager of editorial operations. His new assignment: to find a pay Web content provider (he ultimately came up with the ill-fitting ScreamingMedia), while editorial staff building was delegated to Realize’s new editorial director, Matthew Church, former editor-in-chief of the in-flight magazine enRoute.

In mid-April, while Solomon, Heintzman and Church began redefining MKB’s shell of an idea for an e-mag into workable goals (cutting the nearly 800 proposed topic areas to about 200, for example), hiring began in earnest. Realize Media’s first wave of editorial staffers, of which there would eventually be 23, began on May 15, just a month before the date on which the test launch was scheduled.

It wasn’t until Friday of that week that the editorial people were completely set up with individual computers, Internet access (from which researchers were expected to find the majority of story information) and phones. Basics, like access to news databases such as Lexis-Nexis and reference books such as dictionaries and telephone directories, were not supplied (writers brought dictionaries from home and called Bell Canada for phone books). “There weren’t the resources to deliver the ‘first-class, world-class’ articles management wanted,” recalls Raizel Robin, one of four researchers who also served as writers.

Once the department was more or less properly equipped, the unconventional editorial work environment, which involved the separation of research and reporting from the writing process, provided another hurdle. Realize chose this model, based on similar hierarchies at weeklies such as Time and Maclean’s, to encourage a more effective use of employees’ time according to their “talents”-and to allow for a speedy turnover of what were to be service-oriented pieces. “It was, by definition, an assembly line,” explains Church. “We were designing something that was much quicker and formulaic. It wasn’t about literary journalism. It was about solid, reliable service pieces that would tell people stuff that they would like or need to know.”

The model was this: the editorial staff was divided into teams, and each team-consisting of one editor, one writer and three or four researchers-was responsible for creating content about its designated list of subject areas, or “preferences”: anything from “books,” “camping” or “technology,” to “trees and shrubs,” “mutual funds” or “exotic getaways.” After a weekly meeting at which story ideas were pitched, discussed and assigned, researchers would dig up as much information as they could find on the Internet, e-mail info packages to the writers, who in turn would e-mail in their finished articles. Then each piece would pass through the editors and a copyeditor before being posted online.

The premise was simple enough. Yet the division created discomfort for those accustomed to more traditional journalism. Ryan Bigge, a Toronto-based freelancer hired as a staff writer, recalls feeling odd about not doing his own research. Though Bigge and Tim Madden, his designated researcher for technology and business-oriented stories, agreed that Madden should do any interviews required for a story, Bigge was still uneasy. “I was always worried whether or not I could use the quote,” he recalls. Another researcher, Alicia Androich, understands Bigge’s concern: “The main problem was that a writer has his own idea of what the story should be,” she says. “It’s hard to get into somebody’s mind-set.”

Alternately, researchers (and sometimes the editors) scanned Web content provider ScreamingMedia’s vast archives for suitable stories. Staffers soon discovered that surfing through ScreamingMedia’s over 2,800 publications-purported to include titles such as Red Herring, Business 2.0 and RollingStone.com-mostly turned up press releases, pieces from GeoCities personal websites and articles from small local publications in the United States. Most frustrating, however, was that even some well-written and well-researched pieces were of no use to MKB because of its focus on service journalism. Furthermore, because each preference area was only updated every other week, articles needed a certain timelessness. ScreamingMedia, on the other hand, is essentially a sort of news ticker. “Anything you found that was half decent, you put in,” says researcher/writer Lara Mills. Eventually, editorial was forced to boost the proportion of original content to 60 percent from the planned 30 to 40 percent because of the lack of relevant, appropriate Web content.

As the original content requirement increased, so did the pressure on both researchers and writers to up their production. While researchers frantically surfed the Net and conducted interviews, writers pumped out anywhere from two to seven 500- to 700-word stories a day. Not surprisingly, this affected the quality of the writing. As Toronto writer and critic Bert Archer admits, “Great writing was not what it was about.” Although Archer, one of the most prolific of the five main staff writers, rather enjoyed the challenge of almost instantly turning plain research into readable-and sometimes entertaining-material, he was in the minority. “There was no heart in it, no trying to make it clever,” says Toronto-based writer Sheila Heti, who is best known as a budding short story writer. “No one had any illusions to what we were putting out. It wasn’t something I invested myself in intellectually or creatively.”

A final insult to traditional editorial convention was the proposal to create “edutisements,” described in the human resources orientation binder as articles “sponsored by” or “associated with” an advertiser, but crafted by MKB writers. Though the edutisement itself wouldn’t mention the advertiser, the content was supposed to “create a perceived need for the client’s particular products or services in the mind of the subscriber.” Editorial director Church didn’t agree with the edutisement concept, but felt that an article written for the “minivans” section that included an ad for Chrysler on the same page wasn’t really different from the advertising in most niche print magazines. Others weren’t so comfortable. “Would we eventually have to write for McDonald’s?” researcher/writer Robin wondered. “Editorial and business were obviously coming from two different ends of the universe.” And yet, Mykidsbenefit CEO Smythe was quoted just before the launch as saying it was his belief that on the Internet “content is still king.”

However, the business staff viewed the Mykidsbenefit scheme as a sort of “one hand washes the other” situation. From their perspective, they were empowering subscribers, who, by letting MKB know their interests, would-in a way-be choosing their own advertising. “It’s a very pure way of marketing,” explains Hillman. “Wouldn’t it be great if you only got marketed those areas that you’re interested in?” Eventually, Church realized that MKB’s focus wasn’t really putting out a great e-magazine at all. “It was aboutdatabase,” he explains. “It was about having 2.5 million names, differentiated and self-defined, so that you would know that 400,000 of them liked, I don’t know, beach volleyball or whatever it may be.”

ONCE UPON A TIME, THERE LIVED A man with the ability to weave a speech so captivating, so magical, that almost every listener was inspired to believe anything he said. Michael Smythe worked his magic in boardrooms and at seminars throughout the country, promoting his trademarked personal formula for success: Distinct Value multiplied by Quantity equals Wealth (or DV x Q = WealthTM). And the way Smythe proposed to create distinctive value was through “permissioned” digital marketing: the distribution of carefully crafted communications to prospective clients who had given prior permission to receive them. He spun a consulting company from the cloth of this business-to-business concept and called it PAMM-Direct Inc.

In 1997, following his own advice, he decided to sell a collection of carefully crafted motivational and educational recordings (his and those of others) over the Internet through a new company called Proof in Advance. Canadians, however, were skeptical about buying online and weren’t interested in How to Teach Your Baby to Read. And so it didn’t work. Undaunted, Smythe then spun out another company: one that would deliver carefully crafted e-mail communications about merchandise (the latest fashions, for example), hyperlinked to retail outlets. Student recruiters, who would make money from each click-through purchase made, were the base of this company, as they were to be the ones sending the e-mails. He called this company Studentprofit.com. The notion was that the students would benefit from the money earned while the participating families would benefit from the discounted purchases. Smythe, however, made the mistake of approaching school boards, which were understandably wary about using their students as salespeople.

Ultimately, financial difficulties, namely spending $30 or more to recruit each student, prevented Studentprofit.com from taking off. But Smythe still had a dream and, by late 1999, a large senior management staff and $10 million in venture capital. Thus, Studentprofit.com morphed intoMykidsbenefit.com (after a brief incarnation as Myemag.com), the target shifted from student e-salespeople to parents willing to shop online, and the carefully crafted e-mail communications, with hyperlinks to retail affiliates, became a customizable electronic magazine-with hyperlinks to retail affiliates.

During the dot-com mania, the need to move “at Internet speed” was regularly invoked. Hillman does it still: “One of the characteristics that became very apparent is that you’ve got to constantly evolve,” he says. “You’ve got to constantly change. You don’t run it like a normal business. You don’t run it quarter to quarter. You certainly don’t run it on a year plan. You really have to, week to week, change.”

In reality, however, MKB’s constant switching of tactics demonstrated a lack of focus. There was, for example, the initial recruitment process, begun when the company was still Studentprofit. The company initiated a viral e-mail campaign-sort of like an e-mail chain letter-to gain subscribers. Every new subscriber received $20, plus $5 for every person he referred who also signed on. This process was initially supposed to be capped when the subscriber list hit 5,000, but Smythe and the marketing department kept going, believing that higher numbers would attract more advertisers. The result was over 400,000 subscribers in record time. Some subscribers did receive their $20, but on various posting boards and websites, such as e-mail newsletter site Themestream.com, there are angry rants posted from those who are still owed money.

Another aspect that was consistently changing was the demands on the technology staff. As soon as an interesting new Web development broke, Smythe had to have it. An actual bricks-and-mortar warehouse, filled with product from the Studentprofit days, had to be dissolved and reintegrated as a virtual store using affiliates. The amount of the cash rebate for magazine subscribers who bought through the magazine’s affiliates was calculated as a percentage of items purchased. But this also had to be synchronized with the computer systems of those affiliates who had real-world stores so as to allow for the correct calculation of the rebate owed to subscribers who made purchases in person. At times it seemed as if the complexity of these tasks was lost in the classic power struggle between tech and the sales staff.

The complex technological endeavour of bringing together several complicated software applications and making sure the whole package ran smoothly fell to MKB’s executive vice-president of operations and technology, Dave Codack. The problem was that the business model itself was constantly in flux, hence the demands made of the technology regularly changed as well. One request from Smythe and the sales department proved to be too much.

While Codack laboured with Deloitte Consulting on the basic compatibility issues between the preference selection process, the BroadVision content software, ScreamingMedia’s software, the link to potential advertisers and the customer loyalty program, the sales staff wanted him to integrate a method of allowing small businesses to advertise in the e-mags, but only to subscribers in the area within the advertiser’s specific geographic region. At this point, however, incorporating this type of special advertising feature was the last thing on the minds of the technical staff, who were trying to ensure the consistent and reliable delivery of the magazine by the launch date.

While the tech staff was busy working the bugs out of the software package, the editorial staff was busy creating the content. And though staff began to question the relentlessly upbeat manner in which everything was presented, MKB’s management kept them predominantly out of the loop regarding the company’s financial straits until the end. Because editorial worked on a different floor from the rest of the company, staffers were less exposed to the rampant rumour mill-about management power struggles and an imminent third round of layoffs-that eventually brought other departments to a standstill. “Our job was to keep our heads down and fulfill our contract,” says Solomon. The segregation allowed management to spoon-feed bad news-like the dismissal of a whole department or the failure to secure more funding-to the editorial staff little by little, through periodic town hall-style company meetings. Despite Smythe’s optimistic controlled messages (“We’re leaner and meaner and more attractive to advertisers now,” he reportedly enthused after he laid off a large portion of the sales staff), editorial staffers grew increasingly skeptical about MKB’s future. “We were doing less and less work because it didn’t appear that anything was going up anymore,” preference editor Leslie Lucas recalls about the final week. “It was a really poisoned environment.”

THE RISE AND FALL OF MYKIDSBENEFIT.COM WAS A classic example of how not to run an Internet business. The Internet does change how business is conducted but it doesn’t justify casting aside good, old-fashioned business sense. A full business plan and a viable source of income are still necessary for success. Although Mykidsbenefit‘s heavy reliance on advertising for revenue was not unlike a print magazine’s, online and print are completely different worlds. Though advertisers in print magazines base ad purchases on passalong stats and audience numbers, the online equivalent-eyeballs on the page-hasn’t delivered the same results. The still-conventional ad companies know now that loyalty on the Net, with the distractions of hyperlinks and the ubiquitous “back” button, is practically nonexistent.

While MKB tried to create loyalty with its cash-back program, with bought readers, site attachment-or “stickiness”-isn’t very likely. The relationship that a magazine develops with its audience-the trust in editorial integrity, the expectation of a certain product, the comfortable and familiar environment-cannot stem from a marketing strategy. MKB‘s means of finding readers, as well as the initial plan to simply repackage free content, suggested its focus was never on the idea of developing a robust service magazine.

But nobody was duped into it, Hillman believes. Nobody was seduced. “This was a high risk venture,” he says. “Yeah, maybe high reward, and I think that’s why a lot of people got into it. But high risk. Everybody who bought into the dream, everybody who drank the Kool-Aid, if you will, did it with their eyes wide open.”

The editorial people may have willingly downed the Kool-Aid, but they also remained skeptical. “After my first week there,” recalls staff writer Bigge, “I told people it wouldn’t last three months.” After the second week, his prediction dropped to six weeks. Most don’t regret the MKB experience, though. “At my new job,” says copyeditor Wendi Phillips, “it’s like a badge of honour.” Phillips and others parlayed their time at MKBinto new online gigs, some at established companies like Rogers iMedia and Alliance Atlantis, others at younger ventures like Toronto-based startup incubator Brightspark. And some still think customizable magazines may be the way of the future. Evan Solomon is one. “The good side to this story is that the potential to build a magazine like this has yet to work,” he says. “The idea of this project is still an exciting one. Realize was interested in this model for publishing.”

For Smythe, the end of Mykidsbenefit meant another beginning. He envisions himself succeeding at preference marketing, no matter how many times he has to reinvent and repackage his message. And whileMykidsbenefit didn’t work, as a secured creditor, he now partly owns the elaborate technology that could carry out his mission. The knowledge and expertise to effectively put this technology to use, however, disappeared when he laid off all but a handful of the employees who had pulled it all together. For him, though, the story isn’t over. He’s attempting to weave yet another company from his marvelous marketing cloth and to spin his magical words. “Michael’s a dreamer,” says Hillman. “And you know what? There’s nothing wrong with that.” And for Michael Smythe, dreams are what e-business is made of.