Wednesday, October 06, 2010

‘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.


Blogger Howard Owens said...

With all due respect to you and Jan, Jan didn't interview me or find out what we're doing. I've also got to believe she didn't talk to some of the other financially successful online ventures.

What I have going is a business. Period. We are generating significant revenue relative to our size and growing.

I know some other local news site publishers doing the same.

If we can do it, others can, too.

It is just frankly utter bull shit to say this isn't a business.

What it is is an immature industry space with the normal ratio of some successes and some failures. Not everybody is cut out for what it takes to build a dream into a business, but there are people showing it can be done. Your attempt to write it off as an entire failure is both myopic and without a factual foundation (that's a nicer way than saying bull shit).

6:56 AM  
Blogger James Breiner said...

Hey, Alan,

A chain of 13 community news sites in Chile is generating about $2 million a year. They´re using a mix of what we would call contract publishing (50%), local advertising (40%) and training funds.

Latin America doesn´t have the broad and deep nonprofit network that we can draw on in the US, so they have to look elsewhere.

9:43 AM  
Blogger WS said...

Please tell the IRS and the Washington State Department of Revenue that we're not a business. They are welcome to refund our tens of thousands of dollars in tax money.

But on the other hand, I'd hate to have that news be received by the community nonprofits to whom we've contributed thousands in event-sponsorship dollars and advertising this year alone. And good thing the reporters and photographers to whom we've paid thousands have already cashed their checks, or else I guess the news we're not a business would be a shock to them.

Yup, businesses in ALL lines of business fail. Yup, businesses in ALL lines of business have some tough going in the early years, with their founders putting in killer hours. And yup, I would sure as hell HOPE most businesses are a labor of love - what is this life worth if you're not doing something you love? (Which is why I left my old-media gig to go fulltime with our Not-A-Business, which by the way is entirely bootstrapped - maybe the bootstrappers should be more closely studied than those who sought grants to get off the ground.)

I read Jan's work from which the quote is pulled and, despite the sensational nature of the quote, the overall picture did not appear as dire as depicted here.

Nuff said, getting back to our thriving Not-A=Business. - TR

9:47 AM  
Blogger Unknown said...

The flip side of so many sites going out of business after just a few years is that some of us are still in business beyond that critical time frame, and we're generating revenues. I'm not sure about the sustainability of the non-profit model, though I'm sure it can work in some cases. Based on about four years' experience, I'd say a for-profit neighborhood or community website with a mix of paid and volunteer staff can thrive on $100k to 150k a year in revenue generated from a combination of local advertising and public-radio-style community support. Expand that into a small network of sister sites, and the financial picture looks better.

It doesn't happen without effort and without non-journalists on the payroll - to handle ad sales, reader relations, marketing, and tech. It needs to be a business after all.

David Boraks

5:26 PM  
Blogger Brian Cubbison said...

The report seems to be a study of grant recipients. If there's a lesson, it might be that such small-scale PBS-style funding can support some good journalism, but it's not an incubator for entrepreneurs. Maybe the urgency of paying the bills and putting food on the table from the beginning has a way of producing hardy businesses. And some of those will fail anyway. What I learn from Howard's efforts is that the only truly viable business model for now is still driven by advertising, sold by a local business to other local businesses.

6:46 PM  
Blogger Bob said...

I would point your attention, and Jan's as well, to the Observer group of community news sites and newspapers around Cleveland (start with and though there are 5 or 6 others as well). They are mostly for-profit, though the Heights Observer (with which I'm involved) is not-for-profit. All have started with only small infusions of cash, and they depend on community-generated content. They are not big businesses, but they are profitable and self-sustaining - mostly based on print ad revenue which remains healthy at the hyperlocal level. It's not an easy business, and it's not likely to make anyone rich anytime soon. And it demonstrates that print remains economically viable and necessary - at least for now, given a small enough market. But none of these would survive without the online component as well - and all have been developed with the assumption that the print component might some day become unnecessary.

5:41 AM  
Blogger Jay Rosen said...

At least Newsosaur didn't stick in the usual, "we're told that citizen journalism is the future of local media..." or "Internet evangelists say everything will work out..." or "hyperlocal is all the rage..." those pet, pat, pap phrases by which so many commentators with newsroom backgrounds introduce their butt, er... sorry I mean their "but." As in: "We're told that citizen journalism is the future of all local media, but a new report from the Center for..."

Thanks for not doing that, Alan.

6:55 AM  
Blogger johny radio said...

Hi newsosaur

With all due respect, Why do you want a public service to be a business? Many community services would simply not exist, or would be very compromised, if they had to survive on profits. The whole point of going non-profit is to avoid selling out your mission to advertisers or the vagaries of the marketplace. Which is exactly what's wrong with mainstream news media.

Was jan's project based on the expectation that funded projects would become profitable? If so, did her grant application process require projects to explain their strategies for profitability, before she funded them? If many of their plans (or implementation) failed, doesn't the funder who chose the projects bear some responsibility?

I cannot agree with the poster who implied that community work should be PURELY a labor of love. That's like saying teachers should be poorly paid, because otherwise they will just be "in it for the money". Everyone has to eat. Jan's report is evidence that if people are not paid, they will walk away from the project-- not for lack of passion or commitment. We all have bills to pay, even community journalists.

Nor can i agree with your statement in your email that "the Internet is not as yet a meaningful contributor of new original content." The net has got to be the single biggest source of new original content in the world. Unprofitable does not indicate that something is "not meaningful"; nor does "profitable" indicate "meaningful".

"there never will be enough money from non-profits to fund all the entrepreneurs hoping for support".
--so? Are they "all" deserving?

9:43 AM  
Blogger GeeArmstrong said...

Jim B: love to learn more about the "contract" element of the model you reference.

1:28 PM  
Blogger jstevens said...

Many of the "citizen journalism" sites started without a bit of consideration for involving local businesses, as if advertising is evil.

That's incredibly short-sighted, on two fronts:

One, you want the business community to be involved in anything you do, because they're part of any community.

And two, it's a good way of supporting the "must-do" journalism, which in the whole scheme of things, is a small part of any community conversation and every-day live. Just look at any newspaper in the heyday of newspapers, analyze ALL the information (including display ads, classifieds, tv guides, stock tables, obits, sports) and ID the percentage of "civic" must-do journalism. 5 percent of the space?

J-Lab's mission is to make sure that must-do journalism survives. But it won't work if must-do journalism tries to live in isolation from everything else going on in a community.

The tradition media -- so out of touch with the emerging news ecosystem -- tends to focus on the "citizen journalism" sites to support their woe-is-us-journalism-will-never-survive story.

The reality? The financial successes FAR outweigh the losers. Just look at the continually lengthening list of ad-supported sites and networks here:

Just the sites within the networks at the bottom of the list FAR outnumber the sites that J-Lab looked at. And they're pulling in, all together, hundreds of millions of dollars.

Yes, the most successful so far are the are topic-based sites. But they've been around the longest, and are figuring out what works and what doesn't. Just because they don't cover locally oriented, must-do journalism doesn't mean that they aren't doing journalism. The point is that many of them are doing must-do journalism in their community, or are part of a network in which must-do journalism is occurring.

Throughout journalism history, the most courageous journalists never sold out to advertisers, even when advertisers didn't like a story and, occasionally, pulled their ads.

We could institute a little of that juice in our entrepreneurial jurnos who are making a go of it in local communities. We could make sure that the owners of small-, medium- and large businessesin a community have as much access as anyone else. We could form networks to take advantage of numbers and reach for our local and regional businesses to provide enough funding for jurnos to have health insurance. We could call in foundation or donation money when an issue gets so sticky that advertisers threaten to censor it.

5:55 PM  
Blogger Syed said...

In light of current business trends in online advertising, creating more and more niche-content sites just doesn't make any sense. Smaller content-producing organizations would have significantly better odds at profitability if they would just band together to share backend technical and administrative services. Everyone's editorial process can be completely independent--it's the business-side of things that shouldn't be. And there's no reason that a small content-production organization can't be profitable. Case in point: Ars Technica. This small group of technology reporters produces outstanding in-depth content on a host of technology-oriented issues. A full-time team of eight generates about 19 million pageviews per month. There's no reason why local journalism couldn't post these kind of numbers--if small news organizations could/would concentrate exclusively on their content.

8:08 AM  

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