If you go to this website, they allow you to subscribe to magazines through them; the idea is that you get a discount price, and when you change your address, they take care of changing all your subscriptions for you. They pay for webhosting, advertising, and (most significantly, to my thinking) people to man phones and email. How does a company like this make any money? The prices of magazines are fairly low that there can’t be much margin in the actual sale–and employing people to answer the phones and run the computers is hardly free. This can’t be a very profitable business model… can it?
Well, it probably doesn’t have much overhead (one guy runs the whole business, no physical stock, just webserver fees), and if your marketing skills are decent, you could hypothetically have thousands of purchases a month. I am sure they have a deal worked out with the magazines as well. Not to mention advertising on their site.
My understanding is that you can run a web-based business with minimal costs, there are free web-hosting servers, and even some of the moderately priced ones run less than 40 dollars a month. Everything else is profit.
BTW, I glanced at the site and didn’t see a contact number, but perhaps I am not looing hard enough. Even if they do though, you can hire companies to contract out your help desk needs, I have noticed many companies do this anymore.
BTW, found the right site, I apparently was getting bluedophin.com, and it didn’t have anything but advertisements.
My guess is that they have their customer care services subcontracted out- which is probably cheaper than paying a bunch of people themselves. (probably charged on a per-call basis)
That is the great thing about the Net. You can have a business that merely organizes information and creates better accessability. Who knows how much they make, but I imagine a smart looking site like that holds its own. 
Oddly enough, I interviewed and almost got hired by BlueDolphin a few years ago. I say it is odd because they are a very small company (just a big suite for space) like some of you suggested. The way they explained it to me, they were founded by ex bigwigs from the publishing. They cut various deals with magazines to get a fairly large cut when they sell subscriptions. They are like a smaller version of Publishers Clearing House tailored to the web age. They have been around for a long time (in internet terms) so I assume they are doing Ok.
I work for a small business that publishes legal newsletters, and we sell subscriptions through agencies as well as directly to subscribers. We give the agencies what amounts to a high-volume discount of 20% off our regular subscription price. I assume that the agency charges the customer close to the regular price and pockets the difference. (The agencies we work apparently don’t post their prices online, so I can’t verify this.)
My first office job was for a big (at the time) company in Boulder, Colorado that handled subscription fulfillment for many of the big magazines. It is a pretty common practice that Publisher’s Clearinghouse and other big name companies pay only 10% of the regular subscription price. The fly-by-night subscription companies can easily get discounts over 50% off the regular price.
So yes, it is very profitable. As with many products, a huge part of the cost is marketing. Magazines will gladly pay someone else to market for them. For most magazines the bottom line is the number of subscribers for advertising purposes.
former 2,000,000-circ monthly magazine editor here–
The money that readers pay for a magazine, whether they subscribe or buy at newsstand, has little impact on covering the actual costs of producing said magazine. The far larger part is paid for by selling ads. But the $-per-page rates you can charge advertisers is based on your readership–higher circulation = higher rates = more money. So publishers are desperate to do anything to get their circ. numbers up, even going so far as to virtually give their product away for free (which is why you can subscribe for $10 a year to many magazines).
That brings you to bluedolphin–publishers are willing to give them, Publishers Clearinghouse, etc., a huge chunk of the subscription price if they can land them new readers.