Texterity turns page, finds magazines eclipse e-books

BY TOM WITKOWSKI
     JOURNAL STAFF

SOUTHBOROUGH - Texterity Inc, a digital conversion technology company backed by about $5 million in venture capital, expects to hit profitability next quarter, largely due to a shift toward selling to the magazine publishing market.

Texterity tapped into a rapidly growing revenue stream when it switched its sales focus from book to magazine publishers. In the last year, the magazine market brought in half of the Southborough company’s revenue. That portion of the company’s sales is expected to grow to 80 percent by the end of 2005.

The company first raised venture capital in 2002, and $1 million raised last summer brought its total to about $5 million. Texterity grew to 35 people when it first went after the book publishing market, but its payroll shrunk to 17 when that market did not grow as expected. The company recently added salespeople and is back up to 21 employees.

“We’re in the single-digit millions in terms of revenue, but we’re growing really rapidly,” said Martin Hensel, the company’s president.

The company’s browser-based technology enables the digital delivery of magazines by transforming a high-resolution PDF file into Web format. Texterity’s recent success has come from enabling publishers to distribute magazines to new subscribers almost immediately. The company currently enables 36 titles to be distributed this way for customers and expects that to grow to 100 titles by spring.

Because subscribers can read the digital version online, the publishers also learn about how subscribers read the magazines and the advertisements, said Hensel.

“Publishers are looking at ways to get away from their reliance on the advertising model, especially (business-to-business) publishers, and looking at new ways to deliver metrics to advertisers,” said Rob Brai, publisher at Northstar Travel Media LLC of Secaucus, N.J. “When you’ve got your readers online, you’re able to capture metrics - what pages are they clicking on, how long are they on.”

Publishers can save on postage, printing and distribution costs, but can also find new sources of revenue by creating new digital versions of magazines targeted to specific audiences, he said. Brai’s company is considering different versions of the travel magazines and directories it sells to travel agents and others in the travel industry, he said.

Texterity continues to sell to customers in the e-book industry, and that revenue is growing, although at a slower pace.

“We weren’t so sure about the e-books concept, but we thought Martin was onto something in terms of the technology,” said Jack Stewart, managing director of the Venture Capital Fund of New England in Wellesley. The other investors are Brook Venture Fund of Wakefield and Blue Sky Ventures of Olympic Valley, Calif.

“It looks like (the magazine digital conversion product) is going to be enough to get the company to profitability, probably in the first quarter,” said Stewart. The rapid success in the magazine market has investors optimistic.

“We’ve been able to use a heck of a lot less money and actually be alive and prospering,” Stewart said. “The idea was, this was going to take a long time, but at the end of it, we’re going to have a plausible company with a lot less investment.”

Reprinted from Boston Business Journal October 29-November 4, 2004. All Rights Reserved. Copyright 2004 Boston Business Journal