Larger than expected increases in school-based revenue from its Lightspan Network online site prompted Lightspan Inc. to reduce significantly the promotion budget for its free Lightspan.com Internet site as it aims to achieve profitability a year ahead of schedule.
The reductions will come from eliminating marketing programs aimed at consumers and the 14 positions associated with them. The layoffs and reductions should be completed by early September. Lightspan did not say how much money the changes would save.
"We are seeing great customer acceptance of our subscription Internet services with many schools looking for Web content to deliver on infrastructures that were installed with e-Rate funding," said Carl Zeiger, president, chief operating officer and acting chief financial officer of Lightspan. "We have decided to emphasize the subscription part of our K-12 Internet business and reduce the heavy promotional spending necessary to generate consumer traffic for our free site. These changes should allow Lightspan to focus on earlier profitability."
Lightspan had targeted the 2004 fiscal year for profitability and now believes it can "accelerate that goal by at least a year," said Joel Zettl, Lightspan vice president of finance. "As we investigated the costs associated with getting the Lightspan.com site working in our favor, we saw that there was no money in [accepting] Internet advertising. It did not look like a profitable business model."
Despite these changes, Lightspan will continue to enhance the content of its free and subscription sites.
New Management For Internet Operations
A change in management accompanied Lightspan's new subscription Internet focus with the appointment of Merritt David Farren to senior vice president and general manager of Internet operations. Farren, former senior vice president of corporate development, will oversee the company's Internet team, concentrating on developing its subscription services-Lightspan Network, eduTest.com and Lightspan Early Learning.
Farren replaces Winnie Wechsler who left the company earlier in the month. Wechsler had been a key player in running Lightspan's Internet businesses and was part of the team that studied the company's online strategy, Zettl said. Her expertise was in the advertising business model, and she chose to leave the company when its focus turned to subscription revenues, Zettl said.
Q2 Results Highlight Subscription Activities
In the second quarter of fiscal 2001, ended July 31, Internet revenues were up 633% to $3.2 million. The Lightspan Network had 2,018 subscribing schools as of July 31, a 121% increase over the same period last year. Lightspan said it could achieve its Internet revenue goals from subscription sales alone for the current fiscal year, as well as for 2002.
"Lightspan's business in both the K-12 and higher education markets is gradually transitioning from primarily software sales to a mix of software and Internet subscriptions. We're managing that transition and believe that Internet subscriptions will continue to make up a significant portion of our revenues, similar to the second quarter," said John Kernan, chairman and chief executive officer.
Company-wide, Lightspan's revenues increased to $19.1 million in the second quarter of fiscal 2001 compared to $4.2 million in the same period last year. Net loss expanded to $14.8 million in the quarter from $10.7 million last year.
Contact Information: Lightspan: 858-824-8000
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