‘Community news sites are not a business yet’

Although Jan Schaffer just produced a masterful analysis of how to run a grassroots news site, she came up dry on the crucial question of how to turn those journalistic labors of love into sustainable businesses.

The best she could do was tell the truth: “Community news sites are not a business yet,” says the forthright Schaffer.

She ought to know. As the director of the J-Lab at American University in Washington, DC, she put $833,000 into 46 start-up news sites between 2005 and 2009 in an ambitious project called New Voices.

In a must-read assessment of the Knight- Foundation-backed program, Shaffer said a third of the ventures already have called it quits and that the remainder endure in large part because the founders are working for little or no pay. “Again and again,” wrote Schaffer, “we’ve seen volunteer New Voices efforts that are sustaining themselves with little income.”

Although the start-ups have produced lots of quality journalism and many valuable lessons for community building and audience development, Shaffer candidly states in the report published last week that no one has figured out how to turn these ventures into successful businesses.

“There is a mismatch between instilling sustainable civic demand for local news information and developing sustainable economic models,” wrote Schaffer. “While most of the New Voices sites are exploring hybrid models of support, none is raising enough money to pay full salaries and benefits.”

Noting that “the most robust” sites in her portfolio are operated as a “labor of love,” Schaffer said most of the entrepreneurs in her program “get little to no compensation for the untold hours of work they put into their sites” or “run their sites on top of paid jobs elsewhere.”

The limited revenues the sites do generate come from a variety of sources, including “donations, sponsorships, advertising, coupon deals, events, fee-based training, crowd-funded stories, consulting and grants.”

Despite the selflessness of the founders of these sites, the burnout rate is high for most of the citizens they hopefully recruited as community journalists. Said Schaffer:

“Citizen journalism math is working out this way: Fewer than one in 10 of those you train will stick around to be regular contributors. And even then, they may be ‘regular’ for only a short period of time.”

The survival rate among the New Voices sites mirrors the longevity of the typical start-up in the United States, according to a 2005 report by the Small Business Administration.

Noting that the failure rate for new companies is similar in nearly every sort of endeavor, the SBA found that approximately a third fail within two years of launch and that half of them are gone four years later. The study was completed prior to the global economic meltdown, so results today may vary.

While deep commitment may extend the life spans of many journalistic start-ups beyond the norm identified by the SBA, economic realities like food, shelter, kids and car payments eventually could take their toll on even the most dedicated entrepreneurs. Then, where will we be?

As previously discussed here, it takes far more than good intentions and great journalism to build a sustainable business. And, as discussed here, there never will be enough money from non-profits to fund all the entrepreneurs hoping for support for their journalistic aspirations.

While it is unfortunate that Schaffer did not find the magic bullet for saving journalism, the greatest value of her candid report could well be that it underscores the urgency of doing so.