He asks whether our model for the growth of advertising revenues–to 49% of all revenues by year three from 18% in year one–is possible or desirable at a lean not-for-profit new organization. First, to determine whether such growth is possible we looked to Joel Kramer, CEO at MinnPost.com. Kramer told David Westphal in a piece at OJR in October that he hopes 70% of MinnPost’s revenues will come from advertising by 2011.

Here’s the paragraph from the OJR piece:

Q. What was your hope, what is your hope on the mix of advertising and contributed revenue?

A. When we started we said our hope was, by 2011, 70 percent advertising, 30 percent membership. Right now it’s running about 50-50, maybe a little higher on the membership side. It’s pure guesswork because it’s a new model. The key is to get to a sustainable model by 2011. There are a lot of reasons to become optimistic, but the advertising side really needs to get better.

Kramer has since been hard at work developing display ad business (MinnPost was charging a $15 cpm earlier this summer) and new advertising units, including a Twitter-like service that he thinks could be a new form of classifieds for local news.

Our model only has 49% of revenues coming from advertising in the third year. Still, it’s a fair point to wonder whether not-for-profits should join the scramble for advertising and sponsorships when for-profits are having such a hard time of it themselves. Kramer himself comments on Barnett’s post to say our model appears to overestimate potential advertising and underestimate membership revenues. He also does a good job of answering Barnett on the pressures such a lean organization faces in separating business from editorial.

Again, we’d love to play that scenario out in our Google doc to see if those differences amount to a wash. (The New Business Models for News Project has been funded by the Knight Foundation.)

Last month, at a conference on non-profit media hosted by Duke University, Joel Kramer of MinnPost.com and Jon Sawyer of the Pulitzer Center, presented an outline for a nationwide “donor collaborative” (download the pdf of their whitepaper). The network would allow these new shoestring news organizations, many of which are filling coverage holes left as metro newspapers cut back, to expand their fundraising efforts.

The collaborative would grant money based on the not-for-profits success at raising revenues through other areas (donations, subscriptions, etc.). Grants would be a percentage of the organization’s previous year’s revenues, with a matching system for donations from individuals.

The network could also be a boon to foundations and philanthropists who want to help new news organizations. With successful for-profit newspapers the norm for the last century or so, philanthropists have been focused on helping the poor, curing disease or funding local arts projects. They are used to (and more comfortable) funding discrete programs–unlike news operations which require continuous funding. They have little experience with which to judge the viability of a news startup. As Kramer and Sawyer write:

It will require substantial effort on their part to make sense of the landscape and decide which enterprises to support. Because of the low barrier to entry, there will be many new startups in this space, and many of them may not have the skill or capacity to diversify their revenue streams, so they will be dependent on their foundation supporters for their survival.

Check out the conference website for all of the non-profit model papers.