Monday, June 07, 2010

Journalists running start-ups face tall odds

Fed up with furloughs and down-sizing – or forced involuntarily out of their jobs – journalists across the land are taking matters into their own hands by starting their own news sites.

While I applaud these brave and commendable efforts, I fear a good many journalistic entrepreneurs are doomed to fail because they are not objectively confronting the steep odds they face – or putting nearly enough thought and effort into giving themselves a fighting chance to succeed.

After talking to one enterprising journalist after another, I have found almost uniformly that they are making the mistake that has proven to be the downfall of many an entrepreneur: Instead of trying to build a business, they are trying to give themselves the job they always wanted.

The passion for the product they are creating causes entrepreneurs to work so hard on their journalism that it distracts them from the real job of building an enterprise that not only sustains itself for the good of the community but also provides a sustainable lifestyle for the journalist himself.

In an effort to calibrate the daunting, come-from-behind challenge faced by virtually every journalism start-up, I decided to compare the traffic of three recently launched news sites with the online audience of the incumbent newspaper in each of the markets they serve.

I looked at one site apiece from a rural, metro and statewide market, but I am not identifying the sites because I don’t want to single out the idealistic and hard-working entrepreneurs who generously described their efforts. Here is what I found:

The newbie journalism sites generate such low traffic that they fall below the radar of many rating services. But Alexa.Com ranks websites through a proprietary formula that takes into account unique visitors and page views. This system, though not 100% transparent, makes it possible to gauge the relative size of one website to another.

In the Alexa system, where Google ranks No. 1 for having the most traffic, the rural journalism start-up, which has been in business for more than a year, ranks at about 17,000,000 vs. 350,000 for the site of the dominant newspaper in the market.

The metro start-up, which is about half a year old, ranks about 174,000 vs. 640 for the incumbent local daily. The statewide start-up is 1,300,000 vs. 2,100 for the primary paper in the market.

With all the brand power, market presence and resources at their command, many newspapers struggle to extract full value from the investment they have made in their websites. So, you can imagine the challenge faced by a small, essentially unknown start-up with limited staff and financial wherewithal – especially when their focus is on journalism, instead of business.

While journalists at news start-ups think nothing of routinely devoting more than a dozen hours a day to running down stories and tweaking their websites, the pace typically leaves them with neither the time nor the energy to think about such key success factors as building audience and developing a healthy financial basis for their endeavors.

These issues ought to be Job One for any start-up, regardless of whether it intends to operate as a for-profit or non-profit venture. But they usually take second place, if they are seriously in the running at all.

To be sure, the operators of start-up news sites have the sound bites down. Stop me if you have heard them before:

:: “We are better than the local paper.”

:: “We are counting on site contributors and visitors to spread the word about us.”

:: “We have (or are seeking) foundation support.”

:: “We intend to sell advertising or sponsorships.”

:: “We are hoping for reader contributions.”

:: “We might publish a subscription newsletter.”

Although the sound bites fairly cover the possibilities for achieving ongoing viability, conversations with most operators quickly reveal that they actually have no concrete plans for pursuing them.

The journalists are so busy being journalists – and, frankly, too confident that the quality of their coverage will be sufficiently compelling to attract an ever-growing audience – that they put scant effort into marketing, promoting and monetizing their sites.

Unless they invest as much deliberate effort in building audience and revenues as they do into chasing stories, the journalists run the very real risk of going broke and/or wearing themselves out before they achieve the critical mass necessary to ensure the long-term viability of their ventures.

Working without a proper business plan and hoping for best is a well known recipe for disaster. Unfortunately, that’s what most start-ups are doing.

28 Comments:

Blogger Fran said...

Very nice work.
You are right on the mark.

7:43 AM  
Blogger Newsosaur said...

From reader Philip Moore:

In an era where offset printing, desktop publishing and digital image technology have made going to press far cheaper and far easier than ever before, it amazes me that people still want to beat the dead horse of the Internet. More than a decade of web publishing has clearly and conclusively demonstrated that you can't make money selling news. It just won't work.

The moneymaking model is write news, sell ads, print a paper and give it away for free. Not only can out of work journalist survive this way, it’s most likely the shape of things to come for all newspapers. Ink on paper continues to draw the dollars and the eyeballs.

As for the web, it’s probable that future newspapers will post the formatted print pages online for those who want to look up stories that way. That way, web readership compliments, rather than competes, with the print product. If you’re giving it away, hits just mean a few more eyeballs, which makes everyone happy.

8:54 AM  
Blogger Tim said...

What's your take then, on Patch.com, the network of local sites being funded by AOL? It's a startup, but the local editors aren't charged with dealing with the business side of things. There's a separate sales/marketing staff for that.

1:15 PM  
Blogger Chris Seper said...

A couple key moments that led me to launch a new media startup - and help me and my staff get into year 2.

First was attending a Newspaper Next seminar that discussed the need to do a job for your customers. People don't want quarter-inch drills they want quarter-inch holes, goes the mantra.

Secondly, a couple of business mentors who reminded me - constantly - that to build a business I would need to spend as much time selling as I would producing content.

The business model outlined by the journalists you spoke to is flawed. No successful model - VentureBeat, TechCrunch, Stack Media, Politico and so on - lives on ads alone. Instead, they live off monetizing their expertise in the area they write about (hosting conferences, events, syndication, etc.).

Journalists need to ask: What job do people need done? They shouldn't ask: How can I get people to read the stuff I like?

1:22 PM  
Blogger Rose said...

Great post, Alan. When we launched our new nonprofit journalism startup, The Bay Citizen, we deliberately made the decision to create a news organization that stands on three strong "legs": 1) the newsroom, 2) the business team, and 3) the technology team. While the focus of the organization is (rightfully so) on the news we produce, we knew that we would need a robust business team to fund our ambitious goal of covering Bay Area civic and community news.

Now, six months after incorporating and less than 2 weeks after launching our website (www.baycitizen.org), I cannot fathom how other startups do it without a separate business or tech team. As it is, our journalists are usually working into the wee hours every evening in order to create at least 10 new articles every day. There just aren't enough hours in the day for them to do all the "other" stuff that goes into running a 25-person company: payroll, benefits, government paperwork, income statements, foundation proposals, membership drives, marketing campaigns, meeting with major donors, tweaking the website based on feedback, analyzing online traffic, etc.

Our model of separating the business team from the newsroom seems to be working so far - we launched with $8.7M in funding and have over 850 individual members to date. Our three-person business team continues to work every day to raise more funds and pour every incremental dollar raised into growing our news creation and distribution capabilities. And that means that our newsroom can focus on what they do best - report on the news!

Rose Roll
Director of Membership and Marketing, The Bay Citizen

2:06 PM  
Blogger Jeff said...

RE: Philip's comments
We started a weekly paper last year in a small market competing with a Gannett-owned daily and have some success but our wins have only come because of a $39 annual subscription. It's the only thing that has kept us afloat and gave us much-needed cash flow.
Our local advertisers, while somewhat supportive, haven't embraced community journalism for the betterment of the community. They want circulation numbers for their advertising dollars. We can't compete, yet.

2:27 PM  
Blogger Bill Fathers said...

Well done. You captured my experience perfectly. Trouble is, even if I'd read this post before starting my online magazine I think I would happily have ignored it and assumed you were talking about other people - losers, not like me.

It's a very sobering, miserable exposition.

2:44 PM  
Blogger benk said...

Very thoughtful piece. It's actually very similar to how entrepreneurs start technology startups -- often, it's the engineers/technologists who are enamored by a technology who start companies, without first thinking about business models. It's also true that some of these new journalism ventures are setting themselves up for failure, because they are attempting to apply the same business structure and model of traditional journalism to the new world of the Internet, without the same scale that the newspapers formerly enjoyed (ie, with respect to investment in staffing and depth of content vs. actual revenues).

4:15 PM  
Blogger Eesha Williams said...

The rural site that this article mentions is www.ValleyPost.org

We are trying to use the Pacifica Radio business model. Pacifica has had employed dozens of reporters for decades. They have no ads. There are two great books about Pacifia on www.amazon.com -- both are by Matthew Lasar.

Eesha Williams
Dummerston, Vermont

5:30 PM  
Blogger LCS249 said...

Some time back I heard that the two businesses most likely to fail were publications and restaurants. Don't know if that's still true ...

The Web has changed everything. I was speaking with a long-time journalist from upstate NY who said, "one day we noticed that there was a large group of people marching along outside the building and they were all wearing red hats. Everyone asked each other what that was about and no one knew ... but instead of one person going down to ask - as a reporter - everyone jumped online to search."

5:38 PM  
Blogger Mike Fourcher said...

This post is entirely on the mark. I've also noticed, however, that many of these lifestyle news pubs are more like personal butterfly collections than attempts to produce content readers will want. For many of these micro-publishers, no amount of business sense could help them. They don't want to be helped. They just want charity.

6:18 PM  
Blogger Bruce Wood said...

Phillip Moore wrote: "The moneymaking model is write news, sell ads, print a paper and give it away for free. Not only can out of work journalist survive this way, it’s most likely the shape of things to come for all newspapers."

We converted to that model about 1994. It's been around for awhile. Done properly, it's a win-win for everyone.

6:44 PM  
Blogger dboraks said...

You offer a good and sobering bit of advice for any journalists with dreams of running their own local news websites. After 3 1/2 years in business, I have found - as Rose Roll says - that I need a team to help me. It doesn't have to be a full-time team. A loose combination of volunteer and paid advisers and professionals who can take on non-news tasks. In my experience, they're right here in the community.

In addition to the editor/reporter (me), our site has one other full-time paid person. She's a rare jack-of-all-trades (bookkeeper, web manager, designer, marketing coordinator). We also pay for contract or part-time professional services (legal, payroll/ accounting, ad sales, and web development) on a monthly or project basis. (In some cases, we've also traded ads for services.)

We've used both volunteer and paid help for marketing and membership development. Once people in the community get what you're doing, many are happy to help out, and often they bring a level of skill to their roles equal to what you as a journalist can bring.

I also agree with DigiDave - keeping your costs down is essential - and do-able. As with any small business, the whole trick here is to watch those monthly numbers. What do you need to spend this month, and what do you have coming in?

One last thought: Marketing can't be a "wish list" item. It's essential. While internet marketers are out in force promoting SEO and maximizing visitors through Web tools and their "secrets" about driving traffic, that doesn't really determine the success of a local news website. Loyal return visitors do. (The conventional wisdom among internet marketers is to maximize the total number of visitors, especially new ones. The opposite is true for us - we need a loyal following of returning visitors - 70% or 80% returnees vs. 30% or 20% new is good.)

We've found that old-fashioned marketing makes the difference: direct mail, sponsorships, presence (and signage) at community events, fliers in kids' school folders, posters on high-traffic bulletin boards and storefronts, and of course lots of online and offline word of mouth from folks who've read your stuff. There's a lot of legwork involved in this, but it's absolutely essential. "If you build it they will come" is a fallacy.

David Boraks
DavidsonNews.net
Davidson, N.C.

4:42 AM  
Blogger rplothow said...

Heaven knows, Alan, that I disagree with a lot of what you write, but I humbly submit that you've nailed this one. The disconnection (notice no use of "disconnect" as a noun) between business and journalism is long misunderstood. Business models support journalism, not the other way around. We could probably get away with putting out the raw fiber of a local newspaper -- calendars, obits, weddings, anniversaries, letters to the editor, sports scores and basic coverage of the government. We do the rest because it's why we're in the business, and because it attracts an extra handful of readers.

There is no basis for the notion, however, that "free is the future." If anything, it'll go the other way -- a higher percentage of our revenue from both print and online will likely come from subscribers than in the past. Selling news can't be considered a failed model until it's actually been tried (it works here in eastern Idaho just fine).

Roger Plothow
Editor and Publisher
Post Register, Idaho Falls, ID

8:12 AM  
Blogger Don't Print That! said...

L.A. Youth, the non-profit newspaper written by and about teens, was launched in 1988 with foundation support. Now, 22 years later we continue to be supported by foundations but diversified funding (i.e. individuals, corporations, earned income, etc.) is the key to sustainability. A strong board and a relationship with the community and civic leaders is important.

10:27 AM  
Blogger Rosenblum said...

Alan, the problem is not with journalists being entrepreneurs, its with journalists being crap entrepreneurs. And the reason they are crap entrepreneurs is because they are always getting into the wrong business. They think that people bought newspapers because of the 'news'. Nonsense. First, the purchase price of papers barely covered the cost of paper itself. The money in newspapers was in the advertising, which journalists pay scant attention to. Craig Newmark hit the nail on the head when he went after classifieds. If Craigslist were about listing news stories, no one would be using it at all. Newspapers primary business was to carry ads from the department stores. That's what paid the journalists salaries. The news was just the filler that held the ads together. Journalist/entrepreneurs today, for the most part, continue to live in the dream world that anyone was ever willing to pay for their work. They never were. Not without movie listings, classifieds, real estate and so on. If they want to be entrepreneurs, they have to embrace the whole business, not the dead end that was their tiny bit.

3:07 PM  
Blogger Palmer Brown, Man behind the curtain said...

I had to fight past the Alexa reference... but, a good read and more than fair analysis.

@Rosenblum beat me to my thoughts. What is/was often overlooked or was too tough to acknowledge was the motivation for buying newspapers. It's not just news. People have bought and subscribed to the newspaper for the advertising and classified listings. As the industry let that business get away from them, so went the readership.

BTW, Alexa methodology explained: "By a show of hands, who likes scrapple?"

C'mon, Alexa has ZERO credibility in the digital world.

8:05 AM  
Blogger roguewarde said...

I managed for more than three years to publish a regional literary magazine, The Rogue Voice, with a friend on the designed-for-failure model described here: No business plan, cash flow, or skilled business manager.

We did OK for a while because our monthly mag created a stir, and my business partner had recently come into some money.

He underwrote the venture until he got tired of losing more than was coming in. We'd built up an ad base, mostly on accident, which helped defray some of the expense of printing. But it was never enough.

Finally, after the near-collapse of the economy, we had to let it go. As much as I enjoyed publishing, I would never do it again without a plan, financial backing and a business manager whose only job is to bring in more business.

1:14 PM  
Blogger Jeffrey Noedel said...

I founded an online 24/7 real-time newspaper in Mid-Missouri 2-1/2 years ago. Centered on a town of 2,700 -- overall service area of 5,000 people. We have almost 7,500 unique visitors per month and are still growing. Best Alexa for a small Missouri town newspaper, if Alexa means anything to you.

We compete with a journalistically-lethargic, sales-energetic 100-year-old weekly paper former-monopoly.

We started selling annual subscriptions ($19.95) five months ago, and now have sold 170 -- have 100 display advertisers paying solid ad rates (but our rates are far less than the entrenched former-monopoly gets). Hundreds of fiercely loyal readers. We're doing a lot of things right, but still we're hanging on by our fingernails. I pay a very small staff, and I still work for free. This venture has nearly ruined me financially, but I still love coming in to work everyday.

I balance my time doing much more aggressive reporting than the former-monopoly provides with lots of audience promotions (I was a PR exec in previous career). Some would say I promote too much; they're wrong. Our audience also LOVES innovation, like Internet TV and Internet radio.

My point...I think we've done most things right, and it's still very, very hard. I think most people in my shoes (perhaps rightly) would have quit.

Even after you get everything set right (and I doubt ANYONE has everything set right), you need TIME. You have to be able to do this for years.

If you are thinking of doing this for a few months and having a new paycheck, you're being foolish.

I agree with the central theme here that a very equal balance between sales and reporting is needed. I'd drop the call for a tech department. I'd propose the third leg of the stool is audience promotions (which helps sell ads and subscriptions).

And on top of all that, be independently wealthy. Or be able to live on almost nothing -- like an air fern. Or go ahead now, at start-up, and declare bankruptcy and get your debts out of the way.

Aside from working for no pay for a few years, it's the most fun you'll ever have in your whole life. The cowboy days of Internet local news. I love my job.

Jeff Noedel
Editor and Publisher
CountyNewsLIVE.com
Hermann, Missouri

4:09 PM  
Blogger Palmer Brown, Man behind the curtain said...

@Jeff - You post made me smile. Painted an accurate picture and always glad to see somebody doing what they love to do.

5:10 PM  
Blogger Mr Max said...

"All the news that fits we print"

Is there less news on Monday or are the less ads for Monday's paper.

Most journalist can't seem to figure this out.

6:46 AM  
Blogger MelTaylor said...

Quite possibly the most important, critical and timely post you have ever written. And I find most of them vital.

"The world's finest journalism will never see the light of day, if you can't afford a pencil"

Like the Newspaper, profit must come first. then operations. followed by editorial. in that order.


Mel
www.MelTaylorMedia.com

4:33 PM  
Blogger Howard Owens said...

Philip Moore wrote:

"More than a decade of web publishing has clearly and conclusively demonstrated that you can't make money selling news. It just won't work."

Bunk.

I've been making my living solely off of advertising on an online-only news site for more than a year. Business continue to grow. Advertisers literally fight over space on the site. Our audience continues to grow and our core audience frankly admits, "I'm addicted to the site."

There's no reason from where I'm sitting for there not to have a good deal of optimism about the furture of local online news.

Alan, you're absolutely right that journalists going into this need a business plan, but a business plan is more than just figuring out how to market and make money. It's also developing a strategy, which includes answering the why of what you're doing. The content leg needs to be just as strong as the rest of it. The mistake I see a lot of journalist making is transferring their attitudes about journalism from the print world into the web world. If you don't understand how web journalism works, you won't grow your audience.

3:17 AM  
Blogger Dusty said...

Why should we expect journalists to be business people at all? What would be nice would be if more folks with business expertise would partner up with some of us journos who have launched our own start-ups and who are producing quality work that has found ample readership - start-ups based on solid business plans and strategies but lack the resources and business personnel to execute. Expecting us to do it all is absurd on several levels. The fact that we do shows the depth of our commitment and passion, something not enough business folk seem to share. (I'll add that the venture capitalists I've spoken to and the main recipients of funding from VCs and foundations belie much expertise about business and the ability to analyze business plans from those folks. Many journos are idiots, but I think your aim is off.)

Steve Rhodes
beachwoodreporter.com

1:46 PM  
Blogger Michael said...

One week after our launch, I’ve actually been shocked by the number of people who have approached me asking to buy ads (current count: seven, I think). I don’t know if it’s the fact that we’ve got a print product in addition to online, or because we’ve got a particularly narrow topical audience (Portland’s 53,000 households with more adults than autos), or because we’re standing on the shoulders of giants, but I’m very pleasantly surprised.

Two things that I think helped: (1) Lining up local ads from a couple fairly well-known local brands before our launch. (2) Selling ourselves as a publication with a mission. Business owners have beliefs, too.

12:41 AM  
Blogger WS said...

Thank God Howard O. finally posted because I was starting to froth while reading all the comments before him.

For God's sake, this CAN be done. I don't know who all these people are who tried and failed but we have succeeded without even having originally set out to do this, and we are not geniuses, not MBAs, etc.

We do believe CONTENT IS KING. And QUEEN. And PRINCE. And PRINCESS. And EMPEROR. I cannot say that enough.

But yes, of course you do have to have somebody focusing on the revenue generation. In our case, that's my husband's gig. He helps a bit with the content too - he worked in old-media journalism once upon a time and got his degree in it too - but that's a supporting role (he'll send the BlackBerry pic from the breaking-news scene and phone in the info from cops, that kind of thing. We are both credentialed.).

The content is my side of the house, with the help of paid freelancers, and with the help of community collaboration. NOT "Hey, Mr. X, will you go write up the community council meeting for us for free?" but rather, story tips, quick accounts of things that make more sense first-person anyway, like the school play and/or the car break-in, etc.

And I wish Mr. Newsosaur had included us in his informal survey because if you made the same new vs. old comparison in our area - you would have had a *vastly* different result. And you could have used Quantcast instead of Alexa. Not perfect, I know, but if both sides of the equation are "quantified" at least you're sort of comparing apples to apples.

We by the way are in a meganeighborhood (collection of smaller hoods in a peninsula that self-identifies as one hood) of 70,000 (pending next census), publish in blog format with few jumps, and do 25,000 pageviews a day, 25,000+ uniques a week.

I personally don't want to see AOL and D*t*sphere neutronbomb the neighborhood-news landscape into cookiecutterhood so I am rooting for fellow indie operators, as long as they are SERIOUS about this - SERIOUS about digging up the news that matters to their neighborhood.

(And yes, pretty sunsets can be news, breaking up the community-council reports, transportation tangles, political filings, crime roundups, development discoveries, etc., so by SERIOUS I don't mean all-grim.)

C'mon, you can do it! Listen to Howard & us. And dozens (at least) of others who would say the same thing if they'd seen this. Hopefully soon to be hundreds. Maybe thousands. Go, indies!

- Tracy in W. Seattle

12:22 AM  
Blogger MelTaylor said...

Thought this could could spark some positive thinking. We are trying to form a 'psuedo-collective' with indie publishers that need sales and business support. We call it an 'online news incubator'. The thinking goes: 20 local sites will never be able to find 20 quality sales reps in one market, but why not have 1 excellent sales person rep all 20 sites? Here's an overview of how it might work:

http://meltaylormedia.com/2010/06/start-a-hyper-local-network/

mel taylor
www.MelTaylorMedia.com

3:52 PM  
Blogger Nate said...

I think the press itself has bought the "get rich quick" viability of ad supported online content businesses.

I will say that True Slant, I believe is one content based network "worked."
I think it helped that it was a group blog and well designed (who seemed to know their audience reasonably well). I don't know its financials, but it was recently acquired.

It would be interesting to here examples that have worked (and even some that have failed) so that others might learn from their collective experiences.

6:05 PM  

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