Another setback for non-profit news

A year ago, I wrote that David S. Bennahum might do for non-profit journalism what Ray Kroc, the founder of McDonald’s, did for hamburgers. But it has not worked out that way.

Bennahum’s disciplined approach to franchising a network of non-profit news ventures has faltered, casting further doubt on whether there is a viable model for filling the void in local coverage left by the meltdown of the mainstream media.

In an email today, Bennahum, the founder of the American News Network, said a 50% drop in revenues forced him to shut his Washington (DC) Independent and sharply cut staffing at the New Mexico Independent.

Bennahum said other sites would continue operating in Colorado, Florida, Iowa, Michigan, Minnesota, North Carolina and Texas, even though staffing has been cut in half in a year when revenues plunged to $2 million from $4 million.

Unlike other news non-profits, which tend to be one-off labors of love cobbled together by trial and error, there was a certain discipline to the systematic way the 42-year-old Bennahum raised some $13 million to launch local sites while paying himself $200,000 a year.

Rather than fixating on the journalism produced at his sites, Bennahum put his energy into managing them: Raising non-profit backing, making money from ongoing operations, monitoring costs, calibrating the metrics of his ventures and even taking tips from Google on how to raise the yield on his banner ads.

Bennahum’s stumble is the latest in a series of setbacks that cast doubt on the ability of non-profit news sites to achieve long-term sustainability through ongoing support from advertising, subscriptions or even the sale of organic vodka martinis.

In a landmark report last month, Jan Schaffer of J-Lab, who put $833,000 into 46 start-up news sites, candidly stated that “community news sites are not a business yet.” Shaffer reported that 31% of the ventures failed (see her comment below) and that the remainder are enduring in large part because the founders are working for little or no pay.

Non-profit news ventures face a flotilla of formidable challenges in the crummiest economy since the 1930s. They include, but are not limited to, raising start-up money, gaining visibility, building traffic and monetizing their audiences through ad sales, subscriptions, live events or any other lawful means that come to mind.

As if those challenges were not enough, they now face competition from the likes of AOL’s Patch (in 18 states plus the District of Columbia) and Yahoo’s still-pending local news effort. AOL and Yahoo not only possess superior funding but also billions of free page views on their existing sites to promote their new local news efforts.

Equipped with these unfair advantages, Patch and the local Yahoo sites have the potential to obliterate individual local grassroots efforts once they achieve cruising altitude.

In light of the above, it appears that the only non-profit news ventures with a hope of success are those that have attracted long-term, multimillion-dollar funding from individual multimillionaires. The list of the fortunate few is very short:

:: ProPublica, which gets $10 million a year from a single wealthy San Francisco family.

:: The Bay Citizen, which launched with $9 million in funding (including $5 million from a single wealthy San Francisco businessman).

:: The Texas Tribune, which has raised $6 million, including at least $1 million from a single wealthy Austin businessman.

In other words, it looks like the only way to succeed in grassroots journalism may be by finding a sugar daddy. And that's not very grassroots-y, is it?