Thursday, June 04, 2015

1 of 4 news start-ups flamed out

In 2009, David Boraks wrote an inspiring guest post here about the launch of his hyper-local news site in Davidson County, NC. Last week, he reluctantly shut it down, saying, “Alas, we haven’t turned it into a sustainable business.”

He is far from alone. One of every four news startups has failed, according to a survey I conducted of the 141 ventures listed in an online directory published by the Columbia Journalism Review since 2010. 

The survey methodology was simple. I searched for every site listed in the CJR list and counted the number that either were defunct or had not posted any new content since 2014. Because CJR depends on news entrepreneurs themselves to list their efforts, not all start-ups  or eventual crackups  are included. 

But the CJR sample is big and diverse enough to alarm those who hope grassroots journalism will replace the news-gathering resources that have been reduced over the years by newspapers and other local media. Since 2000, one out of three newsroom jobs has been nuked at the nation's newspapers, according a survey by the American Society of News Editors.    

The idled projects on the CJR list range from A2 Politico, an Ann Arbor (MI) effort which evidently has not been updated since 2013, to Yadkin Valley (NC) Sports, whose web address leads to a placeholder site with no content whatsoever. 

The toll also includes such high-profile, well-funded and ill-managed ventures as the Chicago News Cooperative and the Bay Citizen in Northern California. A late-breaking addition is the Bold Italic, a recently discontinued effort in San Francisco that had been funded by Gannett as a digital innovation laboratory. 

Although my survey did not delve into the circumstances contributing to the demise of each of the various news ventures, the cause of death in most cases likely was the one cited by Boraks in the farewell message to his readers in North Carolina:

“We’ve been unable to sell enough advertising to local businesses to sustain the sites, to pay me and, lately, to pay our staff,” he wrote. “At the same time, voluntary support from readers – which has always been limited – has dropped off.”

Although it is painful to watch  journalism entrepreneurs flame out, it is important to note that far more new businesses fail than succeed. Even in the technology world, where a handful of garage tinkerers indeed became billionaires, some 80% to 90% of all start-ups fail.

Failures occur in Silicon Valley in spite of the millions of dollars in reasonably patient venture funding that supports most nascent companies. Further, there is an abiding focus, if not to say frenzy, at nearly every start-up company on building the value of the enterprise as quickly as possible so it can go public or get bought by a sugar daddy like Google or Facebook. 

Neither of the above conditions is present at most news ventures, where the founders are admirably intent on afflicting the comfortable and comforting afflicted but put scant attention into funding the next payroll.  

As reported previously here, the Pew Research Center found that nearly a third of news start-ups spent less than 10% of their staff time on business development, while more than half said such activities occupied between 10% and 24% of their time. By contrast, 85% of the ventures said editorial tasks consumed at least half of their time. 

Unless and until people conducting news ventures take the business of their businesses as seriously as they take their journalism, the failures will continue.  

Saying he had struggled to save his news project from a number of near-death experiences over the years, Borak clearly was intent on building a sustainable business.  The lack of support for his effort among readers and advertisers suggests that the most intractable problem for news ventures may be a hopeless reluctance in the marketplace for paying for what journalists do.
    
Even dedicated newsmen cant afford to work for nothing. As rewarding and exhilarating as the experience was, Borak told his readers in his final missive, “We’re in debt, we’re exhausted and it’s time to go.” 

10 Comments:

Blogger Unknown said...

Considering half of all businesses fail in the first five years, the fact that only 25 percent of news startups have gone belly up would seem to be an encouraging sign.

3:59 PM  
Blogger Jim Hopkins said...

You noted that "the Pew Research Center found that nearly a third of news start-ups spent less than 10% of their staff time on business development, while more than half said such activities occupied between 10% and 24% of their time. By contrast, 85% of the ventures said editorial tasks consumed at least half of their time."

This makes me wonder how many of these startups were launched by former editorial workers vs. someone who worked on the business side.

7:20 PM  
Blogger nilvek said...

Op-ed in Times yesterday speaks to this issue: http://www.nytimes.com/2015/06/04/opinion/zeynep-tufekci-mark-zuckerberg-let-me-pay-for-facebook.html?_r=0

In effect, web advertising doesn't work, except on the macro-level (1 cent a hit works for Google with its billions of hits, but not for the rest of us) and when the data are massaged to the max, setting up affinities, etc. And it doesn't generate enough revenue for sites the Newsosaur is writing about.

Another revenue stream is needed. Ensuring privacy for $5-$20 a month is an interesting idea, but won't help the minis.

In the end, if local news has value -- and it does, if it's any good, I believe -- the community is going to have to pay for it, through paywalls or an NPR model or foundations or something we haven't thought of yet. The idea of a user account that charges a few pennies per story per reader is an interesting one (in NYTimes piece) but don't think technology is there yet.

Perhaps the nation and communities need to operate w/o professional news coverage and experience a crisis or two before the value again becomes manifest. One of my sons -- 30-something -- went for years with Huffington and other aggregators before he realized he wanted a site he could depend on, and subscribed to nytimes.com. We're still in transition from where we were to where we're going. It's been painful, and it's probably going to be for a while longer.

We all know that the Gatehouses and Liberties and CNHIs lost their way (i.e. lost their commitment to serving localities, entering the business to milk the bottom line.) Obviously, that ethos isn't going to work in the new reality -- now, content matters again! -- and, in the end, that's probably good, as long as people with brains and commitment (and who can make a sufficient living) step forward.

With news of FAO Schwarz's closing, newspapers aren't alone. Everyone's feeling the dislocation.

6:43 AM  
Blogger LCS249 said...

Just wondering if this is any different than it has always been. As far back as the 70s I heard that magazines and restaurants were the two most likely businesses to fail and fold.

9:20 AM  
Blogger Mike Phillips said...

As startups go, only one failure in four is great! You're right about founders who don't take the business of the venture seriously enough. Some research I did awhile back indicated that it would take a population base of at least 80,000 and a robust local retail economy to sustain a mom-and-pop news venture. It also indicated that merchants at that scale need a complete array of marketing assistance -- not just advertising. My research is three years old -- which means it's ancient. The need for constantly creating and upgrading mobile apps for an ever-growing universe of platforms is greatly understated in my research by today's realities. That adds to the cost and the challenge -- but also to the marketing opportunities. If, that is, you're up to the business side of the business...
--Mike Phillips, recovering publisher

11:40 AM  
Blogger Anthony Fioranelli said...

The reality is, the local daily is still your best bang for your buck, if you can convince the publishers that celebrity news is NOT news. I believe that is a contributing factor in the newspapers downfall.

1:48 PM  
Blogger Unknown said...

Alan, There is no question this is a challenging field.
But I think your ratio of 1 in 4 is off. CJR doesn't update its database. If it was updating regularly, the list probably would include a lot more sites and the failure rate would be lower.
My own database, www.micheleslist.org, which has been regularly updated since 2010, lists about 300 sites. I have never calculated a ratio but I'd say the drop off rate is not that high - more in the ballpark of one in 10.
For example, in 2014, I dropped 18 sites from my database. Ten of them ceased publication but the rest were either sold to another publication or merged with another news organization. With about 250 sites on the list in 2014, that failure ratio would be one failure in 25.
I have recently completed my annual survey of the publishers and will share results soon. I ask a lot of questions about revenue and profitability.

7:21 AM  
Blogger Newsosaur said...

With respect to the prior comment, the tally of the fail rate on the CJR list is accurate. If Michelle or someone else does a bottoms-up census of the fail rate at Michelle's list and it is is markedly different from what I have found, I will be happy to link to it.

6:10 PM  
Blogger PE Eye said...

A success rate of 75% is better than all start ups.

7:01 AM  
Blogger policywonk said...

I suspect that if CJR updated its lists that the failure rate would be a lot higher. And how many of those that are supposedly still up and running pay writers little to nothing? I won't write for news outlets online that say they can't pay now but might be able to pay me in the future, and I can't afford to rite for others that pay at rates less than 40 cents a word (like the Sun-Times, which offered me 9 cents a word! A parakeet couldn't survive on that).

6:57 PM  

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