The Paper Trail.

Almost every major newspaper in the nation has an online version, but for New York Times Digital, the challenge was to earn profits, respect -- and to let it stand on its own.

Drivers: Martin Nisenholtz, founder and CEO of New York Times Digital, explained: "The people moving fastest to the Internet for news are the busy global decision makers. We have a certain role in the culture, and their turning to the Net for information we produce creates a wonderful opportunity not just in the U.S., but potentially around the world."

Relationship with Parent: New York Times Digital had difficulty setting up its own culture and P&L, according to Nisenholtz. "The problem is not that [the par ent company is] ill-intentioned, but it views you as a pure adjunct even as it's trying to grow you, and to value-add you. So a big [advertiser] may say, 'Hey, we're spending $25 million with you, why don't you just give me that?' And the parent says, 'We'll give it to you if you buy another page in the New York Times.' And then you've destroyed the little entity's value. It's hard to charge for something once you've given it away," he said.

Transition: "Attaining orbit within the universe of the core business is a special balancing act," Nisenholtz added. "We confronted the blood on the floor. If you just separate a division and assume people will work together for the better good of mankind, you'll find the sales force will undersell you, the content guys couldn't care, the brand conflicts are profound, and you won't get into the vehicles to promote your stuff. Until you bridge the culture and make sure everybody understands their success is your success and vice versa, you don't have anything."

Implementation: "The rubber hits the road, when you say to the core business, 'This brand extension no longer reports to you, and we're going to have to find ways to work together.' That's very troubling for the core business because we now have control over something that affects them. Getting that right is absolutely essential or else the whole business is in a dysfunctional state. The culture will kill you if it doesn't like what you're doing."

Focusing on the business structure of any newspaper, Nisenholtz explained, "The classified business long term is at risk, and if you don't leverage the asset, it becomes a liability.... Classified customers still view the newspaper as a significant way to drive their businesses. Customers will evolve over time, but not next year, not the year after. That's going to be a problem for guys who have bet the farm on hypergrowth. You have to hunker down and stay in longer."

Results: "The larger the Web site gets and the more people experience us online, counterintuitively the more print sub scribers we get," Nisenholtz said. "The New York Times on the Web this year will probably drive 40,000 credit card starts to the New York Times' print product, a significant number of new customers."

New York Times Digital

THE COMPANY:

New York Times Digital, the Internet division of the New York Times, which includes NYTimes.com. Since June 1999, NYTD has been its own division with a tracking stock.

THE CHALLENGE:

To leverage the strength of the New York Times while building a solid business model and separate corporate culture.