September 23, 2010
Audience engagement and business sense are essential to success of local news start ups
Do local online news sites fail because there is no revenue model? I suggest an alternative explanation: Online start ups often struggle because their leaders don’t know enough about running a business or making money on the Web (and some don’t want to learn)
I wrote this essay for “Realizing Potential, What Chicago’s Online Innovators Need,” a report by The Community Media Workshop. The report was commissioned by the Chicago Community Trust, a foundation I work with as a consultant to the Knight Foundation Community Information Challenge. The Trust will be releasing a series of fascinating reports on the news media landscape Thursday afternoon. Visit communitynewsmatters.org for details.
We’re seeing an explosion of local online news startups across the United States.
Key drivers: Jobless journalists start independent sites. Technology is easier to master. Community leaders and organizations step up to help fill gaps.
This is very evident in Chicago, where dozens of sites and blogs are providing news and information, and The Chicago Community Trust and other organizations are working to support the emerging news ecosystem.
Even so, sustainability is a key challenge for most online news publishers.
Mainstream media sources often suggest sites fail either because it’s just too difficult to make a go of independent online news or because there is no obvious single source of revenue for news (like there used to be—advertising).
I suggest an alternative explanation: Sites struggle because their leaders don’t know much about running a business or making money. Often, the leaders are journalists who are downright uncomfortable even talking about selling ads or raising money. Worse, they pin hopes on a single stream of revenue rather than planning for multiple sources and fail to plan for the time when they have enough people using their sites that they have something to sell.
Absent obtaining a grant that guarantees their independence and reinforces the idealistic notion that journalism is a public good rather than a product in a market, journalists can be just plain lost when it comes to making money from online news.
Still, many online news publishers are working on revenue and are optimistic that their local sites can be sustained.
As a fellow earlier this year at the Reynolds Journalism Institute, I developed a list of promising local news sites—both for-profit and nonprofit. We surveyed their publishers to identify best practices and key challenges they face.
Many publishers told us that engagement and community building are central to their sites. While their top priority is creating original news content, engaging and building community is a close second.
Some see community engagement as key to business success.
Paul Bass of the New Haven Independent said community has been the core mission of the nonprofit site. “We cultivated a community. We’re a journalism-driven community.”
Engagement may be a particularly strong factor for sites that chose to develop a membership or individual donations model, like that of National Public Radio.
Other sites are making money by hosting events and selling syndication rights to their content to other sites and publications.
Sponsorships are another vehicle that both for-profits and nonprofits can exploit. They may look like advertisements, but the buyer is paying to be associated with the site, rather than for potential click-throughs to the product advertised.
Still, our survey found that online local news sites rely most heavily on advertising for revenue. On average, advertising accounts for 45 percent of site revenue. Nearly half of the sites reported that 75 percent or more of their revenue comes from advertising.
Grants are the second largest source of revenue, followed by donations. Other sources such as sponsorships, subscriptions, memberships and services account for miniscule amounts.
While most of the sites report revenue and about one-fourth said they were profitable in 2009, three-quarters of the publishers said they are trying to increase revenue.
It’s clear that this will be a process of trial, error and experimentation around revenue. In Chicago, a couple of examples of exciting ideas are evident: Brad Flora of WindyCitizen.com just won a $250,000 Knight News Challenge grant to develop Real-Time Ads. The Chicago Community Trust is facilitating learning and discussion among local sites about forming an advertising network.
Chicago is not alone as a local news innovation space. In Seattle, for example, many neighborhoods have competing news websites, entrepreneurs are creating advertising and content networks, and the major traditional news organization, The Seattle Times, is partnering with local sites and bloggers. One of those partners is West Seattle Blog, a site that shows that the right combination of location, community, commitment and advertising know-how can create a profitable and valuable news source.
The story is the same all over the country. Patch.com, America Online’s entry into the micro-local marketplace, is evidence that an organization that is primarily about revenue and the web sees dollar signs in local advertising.
Whether an experiment fails or succeeds, the generalizations that seem to dominate mainstream media coverage do a disservice to important learning about the new local news landscape. Most of the field is still about trial and error. Until we define effective practices, how can we say whether a given model works or not?
Eric Newton, vice president for journalism programs at the Knight Foundation, describes a three-legged stool of the expertise needed: journalism, business, web.
I would also note the three roles overlap in ways that require reinvention of the church-state division of journalism from revenue generation.
That doesn’t mean every journalist should now be selling ads between reporting assignments. But clearly, the journalist must focus on engagement and value—as defined by the community—and must understand web culture and how to connect within it; the web specialist must not only build websites but must see technology through the prism of user preferences and community building; the business specialist must aggressively generate revenue in ways that are consistent with the brand, which is another way of staying consistent with how the site’s community sees it.
That approach ultimately will create diverse paths to sustainable community sites.
(Revenue and sustainability are key topics on the agenda of Block by Block: Community News Summit 2010 which starts Thursday evening and runs all day Friday. Find the live stream and blog here, follow bxb2010 on Twitter, or check out an informal conference blog here.)
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Tags: knight foundation, local news, chicago community trust, information needs
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