After watching the San Diego Union-Tribune shed nearly half its employees over the past two years, the husband and wife team saw an opportunity to fill the void with an editorial, development and sales staff of about 20 people supported by outside freelancers and bloggers for their first site. “Ad revenue at the San Diego Union-Tribune has dropped 40% since 2006,” Forbes.com recently reported in a story on the future of journalism in San Diego. As an incentive to pick up those advertisers, as well as additional new ones, SDNN allows its most successful freelancers to take a cut of the ad money generated by their stories, along with a smaller stipend, if they so chose. The site’s full-time staffers get regular salaries. In terms of its readership, the SDNN averages 156,000 unique visitors a month in the U.S., according to Quantcast.

Senturia, an adjunct professor of new venture creation at San Diego State University and a former software entrepreneur, acts as the network’s CEO and software manager. Bry, a former journalist who started her career as a political and business writer for The Sacramento Bee and the Los Angeles Times, acts as the network’s publisher and executive editor. We spoke with the couple last Friday as they sipped Martinis and Pinot Grigio in their hotel room in celebration of the near $2 million investment they received for their second site: Southwest Riverside News Network, which they plan to launch in the next few weeks.

What does the geographical plan look like for your upcoming expansion?
Neil: After we launch Southwest Riverside News Network, we’re going to roll out in another city in Southern California. After that we’re going to start to roll out in somewhat larger cities over the next 24 months. We’ve identified about 20 cities in total across the country, but I can’t tell you which ones yet. What’s interesting is that we picked those cities in varying configurations; some are big, some are small. The way we’ve gone about it is by asking, where is the biggest need and where is the biggest potential for profit?

While we think we know what we’re doing, we’re also willing to concede that we’re not sure whether it’s better to be in Billings, Montana, which has a local University, or Baton Rouge. We certainly want to be in Seattle, Denver and Phoenix, but we also want to be in small cities that get less coverage, like the Twin Cities.

One thing we do know for sure, it’s not a one-size-fits-all business. There are some parameters, but each city is different, so we have to learn as we go. The holy grail is a national network of local online sites working seven days a week, 365 days a year.

How much will that cost per city?
Neil: To do about 20 cities takes about $22 million, and this $2 million covered San Diego and Southwest Riverside. On average it’ll run us about $1 million to $1.5 million for the larger ones and $350,000 to $400,000 for the smaller ones. Plenty of the bigger guys like CNN have thought about this, but the key is in daily execution, cost construction, cost containment and web analytics, which we do a lot of. What we’ve leaned is that this is a business of picking up nickels. You’ve gotta pick them up one at a time, and you’ve gotta bend over to pick them up. There are billions of nickels, but there’s no vacuum cleaner.

In the past I ran a half-dozen software companies and that was great because you build a piece of software and you can sell it over and over and over again. But the news business is different. Everyday there’s a different amount of real news. Some days nothing happens, and some days you blow the door off. It’s the same whether it happens for us or for CNN.

How does your San Diego staff break down?
Barbara: It’s about 20 people, including the two of us. That encompasses the full-time journalists, the sales staff, and the technology staff. And then we have another 20 freelance writers and contributing editors and columnists.

San Diego News Network Newsroom

Neil: On the management side, which includes marketing and analytics, there are 6 or 7 staffers. On the editorial side, there are 8 full-time journalists, and then we have 4 sales people.

We also have bloggers from the community that contribute for free. Those bloggers are important, but the truth is, at the end of the day people want substantive content and you cannot get around that. Blogging is interesting, but it’s like whipped cream on apple pie. If you only had whipped cream, you’d get clogged arteries and drop dead.

How much do your full-time reporters make?
Barbara: Right now they make just below the market rate in San Diego, which is about $60,000, and they get health and dental insurance as well.

Neil: And every single person has stock in the company. Each person is a brand and a part of the process. The view is that if we don’t make it, our employees won’t get anything. You have to understand that a journalist has never in his life had equity. The people who get paid $180,000 a year at the LA Times and The Washington Post don’t own stock, unless they bought it in a public market. So there is a whole concept that says you now have a vested interest in this thing. It is no longer us and them; the worker and the management. Now there’s a correlation between how well we do as a whole and what you make.

But there’s also a correlation between salaries and the economy. When advertising picks back up, we’ll be able to pay our journalists more. We’d like to run cpms of 14, 15, and 16, but right now we’re running cpms of 8, 9, and 10.

What does it take to make a slimmer news organization work efficiently?
Barbara: For one, we’ve cut down on the amount of people proofreading and copyediting a story. Last Sunday there was a New York Times column by the public editor about Alessandra Stanley. Apparently over the years, she had made so many mistakes that at one point she had a copyeditor assigned to her to fact-check her work. First off, we couldn’t tolerate that at SDNN. If somebody made that many mistakes, believe me, they’d be gone. Secondly, in Stanley’s case, more mistakes were then made in the editing process. Ultimately, there were too many fingers on her stories.

Neil: Software is also a key component. I think The New York Times may have the best website and content management system in the world — navigating through their site is like cruising in a Lamborghini — and they easily spend $10 million to $15 million on it. One of the places where we’ve excelled is that we built really good proprietary and easy to use software, which we spent an initial $300,000 on, plus monthly fees to keep it up-to-speed and add new features. That’s nothing compared to The Times, but compared to other small news organizations that are trying to put their papers online, it’s a lot.

Neil Senturia and Barbara Bry

Pegasus News was founded around local news, but you don’t like the hyperlocal tag. Can you tell us why?
We launched at the time when hyperlocal was at the peak of being a big buzzword and we were sort of lumped in with that movement. But, I actually don’t believe there is a business model with hyperlocal. What we went after is what I call pan local.

You’ve got to have the hyperlocal neighborhood information in the context of what’s going on in the larger market. There is such a finite universe of people in a specific neighborhood that care enough to go out of their way to look for information and news about where they live, that universe is not enough to sell advertisers. But if you can put that in the context of ‘where am I going to go eat tonight, what’s going on locally in niche areas of interest that I have,’ that’s an opportunity to bring a lot more people into the fold. Then when you put neighborhood information in front of them they’re more likely to engage with it.

We cover all of Dallas-Fort Worth, but then we slice it up for the user geographically and behaviorally based on information that we gather from your clicks around our site.

We are not covering any one neighborhood at near the level of specificity that say a West Seattle Blog is. Though, there are some niches in those areas that we probably cover in that depth.

Still, local news is key to your editorial model. What is the plan for Pegasus News if the daily newspaper goes away?

A database of local political campaign contributions maintained by Pegasus News staff.

Even though The Dallas Morning News isn’t going away tomorrow, we think they’re going behind a paywall soon. On the one hand, it’s a great opportunity for us to fill a void, because I don’t believe a substantial number of people are going to pay for that content. The flip side is it’s very expensive content to produce.

My view is that ten years from now you’re going to see more good real useful local news coverage than at any time in our history. But, between now and then there is going to be something of a dark age. Say the Morning News quits covering city hall. We haven’t yet grown enough to have people covering city hall. I believe there comes a point where the models cross and Pegasus or a network of blogs become sustainable to fill that void and even surpass it.

The question becomes what happens during that interim period. I tell people all the time, if I were a small local government person who wanted to pull some shenanigans I would do it in the next three years. Seriously.

When we launched I set out to truly be a replacement for the daily newspaper, but the revenues aren’t there to sustain that. I would rather live and get our shots in and grow into that over a long period of time than kill ourselves and try to do something beyond our grasp.

What obstacles on the revenue side prevent you from taking that bigger role now?
The biggest obstacle for us on revenue has been brand awareness in the local marketplace. We’re pushing 500,000 monthly unique visitors. That is enough to sustain a business. The problem is we’re just now getting over the hump where we know when we go to talk to someone about advertising that they’re going to have heard of us. That’s starting to change, but it’s taken a long time.

What’s next?
We’re getting ready to launch sites in some of Gap Media’s markets. They own a bunch of the old ClearChannel stations, all in markets smaller than Dallas-Fort Worth. So, we will launch in Shreveport, Tyler and Yakima this year. We’ll have them on air constantly promoting us and their experienced sales staff out selling us.

First we’re doing a redesign, relaunch of Pegasus that will serve as the template for all of the sites to come. The database stuff is going to be done here in Dallas and we’ll have one person on the ground creating content in those markets.

Where do your revenues come from?
It’s all advertising, a combination of display, sponsorships, and direct marketing. A big part of our model is the ability to customize behaviorally and geographically. We’re able to sell ad campaigns that are very targeted. So even though it looks and feels like a display ad, there’s a lot more going on behind it.

We do some direct e-mail; some of our email blasts are ridiculously small. For instance, say you are FC Dallas and you want to push a ticket special for the game this weekend. We’ll send an email only to the 220 people who’ve shown an interest in FC Dallas based on their clicking patterns on our site.

We also have geo-located mobile ads on our iPhone app. Our app is much more transactional than news, so it lists garage sales, restaurants, concerts, gyms. We’ll show sponsored listings based on where the user is.

How much did the app cost to develop?
It’s hard to say because we developed it internally. It took two developers three weeks. It’s a very simple app. We’re starting to look at some of the iPhone 3.0 possibilities and that will cost us some money if we go forward.

How well has the iPhone app gone over with advertisers?
Really, really well. They’re very excited about it. I don’t think we have anybody running who’s just running mobile. Generally they’re doing it as an add-on. But when we tell them we’re going to reach out to everyone in a 3-mile radius of your business, they’re like ‘that’s awesome.’

Explain the idea behind Brooklyn Based. You’re sort of a hybrid between email product, website and events hosting business. Which of those is the most important?
The most important thing is our email list. Our Wednesday email is the Tip Sheet; it’s all event listings and it grounds the whole thing. Even if you don’t like the other two posts, at least on Wednesday you read about 10 events you want to go to that week.

On Tuesday and Thursday we have feature posts—a neighborhood story about a restaurant or an art event or an interview. We try to stay at 500 words or less with a higher level of writing and editing than your average blog. We’re not all snappy one-liners and 15-word paragraphs. We try to have a front-of-the-book-magazine feel to our posts.

Our blog is not the majority of our content. We’re not going to be one of the tabs in your Firefox. We’re the site where people say, I need something cool to do, what’s on Brooklyn Based?

You sell ads, but how much of your revenue comes from events?
I’d estimate 60 percent of our revenues come from sponsoring events, with the rest split between advertising and events we host ourselves. Our own events are a big chunk of cash, but we don’t do them very often.

So, can you explain how that media sponsorship works?
It fits somewhere in between PR, event planning and local blogging. We’ll sometimes send a fourth email in a week that’s labeled an invitation, that’s sort of our code that it’s an advertorial for an event we sponsor.

We do this with The Bell House in the Gowanus a lot. They come up with an idea for an event, they ask us to promote and organize part of it, and they give us a cut of the door. In January, we sponsored a Lost season premiere party for them. We brought in snacks and set up a Facebook page and promoted the event to our subscribers.

We’re working right now on a garden party with Brooklyn Botanic Garden. They want it to be more interesting than just hiring caterers and event planners, so we’re stepping into that role and utilizing our email list and media contacts.

How are the sponsored events different from Brooklyn Based-hosted events?
When it’s our own, we come up with an idea and pitch it to the venue. We get a portion of the door. We hosted a documentary film series. We did the Brooklyn premiere of Food, Inc. with local food types and made it a bigger event than just a screening. We’ve done a pig roast where we had 600 people lined up in Bushwick.

With these events, we are creating content, the content is just an event rather than a blog post. Bringing all of those elements together and planning it is a skill that people are willing to pay for. Venues are willing to pay for our list and the cachet that goes with the recognition that it’s an event that we’re producing. Our readers know that we only put our name on something that’s really fun. It’s a matter of aesthetics and curating.

How do you use social media, like Twitter. It sounds like a perfect fit for your business?
We use Twitter all the time. We use it to promote events and we use it a lot like a blog. If we have a hot piece of information, like an event we’re really excited about, we’ll often tweet it first, before putting it in the email. Or, if I’m out at a bar, and a celebrity comes in, I’ll tweet that out as a silly bit of content. It’s almost an award for our most committed readers. In fact, I have a personal Twitter account that I haven’t used in months simply because I find it more interesting and satisfying to tweet as Brooklyn Based.

What has been the biggest challenge for Brooklyn Based so far?
We’ve been having a hard time keeping up with advertising. We’re doing a complete redesign, and that should help. We need more space for ads than we have and we need them to be easier to manage. That said, I think we’re going to see ad revenue make up 40 percent of the pie soon.

I also don’t think we’ve properly sold ourselves at this point. People on our list are really engaged. We have a high open rate and higher than average click-through rate. Right now we charge a flat-fee for ads. If you buy a month of advertising we’ll do five appearances for the price of four.

I think we’ve been low-balling ourselves. But, we’re beginning to understand better all the time who we are, and who we’re selling to.

After the redesign, what’s the next step for Brooklyn Based?
As part of the redesign, we are going down the road of do we want to rebrand and have a new logo. Our long-term plan is to add cities and be able to sell across that network and we need the site and brand to be scalable.

On the promotion side, we are actively trying to branch out. We have great partnerships, but we need to make sure people understand we’re not just an arm of Bell House or the Roebling Tea Room. We’re talking about ways of courting more moms and kids events, and adding a bit more Park Slope to the Williamsburg we have in our email list.

The Arizona Guardian, a subscription-based news site in Phoenix, covers state politics as closely as any of its competitors. Except the Guardian’s five partners manage everything from the site’s political coverage to its information technology and sales. Their initial funder and co-owner, Bob Grossfeld — a political and media strategist — handles the Guardian’s marketing and web development. The other four co-owners, Patti Epler, Mary K. Reinhart, Paul Giblin and Dennis Welch — all veteran journalists — handle the editorial content with the help of one additional part-time reporter and occasional guest columnists.

The Guardian went live in January 2009 in the wake of an East Valley Tribune layoff storm. As of now the site pulls in about 8,000 unique visitors a month and enough paid subscribers to keep it in the black. The vast majority of those subscribers are members of the Arizona State Legislature and lobbyists, which the Guardian covers “from the inside out.” With hopes of expanding its audience, the site offers three subscription plans: a 6-month “Professional subscription” for $900, a 6-month “Non-Profit subscription” for $720, and a 6-month “Individual subscription” for $180.

We spoke with Patti and Bob earlier this week about their new news organization, which recently won an award for its state government coverage.

How did The Arizona Guardian get started?
Patti: After several of us were laid off from the East Valley Tribune, we got together and talked about starting a political news site. Hooking up with Bob is what really made it happen. What was stumping the band for us as journalists was “how do you do a website?” Bob was far more web-savvy than us and he also had the business side down. So, we came up with the idea of setting up a site that could compete with the Arizona Capitol Times’ Yellow Sheet Report, a subscription-only newsletter that covers politics and political gossip.

Bob: It’s an old-school cooperative. Everybody has something to contribute and it’s not all identical. But that doesn’t mean it’s not all equal. Aside from their time and energy, their investment was effectively their severance pay. We measured the equity by a term you often hear in the construction industry called sweat equity. Everybody had and has a contribution to make and how that contribution translates in terms of currency is somewhat secondary.

What were your upfront costs?
Patti: We basically started with no capitalization, as they like to say in this world. Bob threw $10,000 into a bank account that paid for the legal fees to set up the corporation, since we’re an LLC, as well as some business cards and other minor office expenses. He’s easily recouped that money by now. But there was certainly no major funding behind us.

When we first launched in January, we started working out of the Senate pressroom, which is where all of the other state Capitol reporters were. The Senate had been leasing space to those media outlets for the past 30-40 years. However, the Senate President had already decided to kick the press corps out of the pressroom, because he said he wanted the space for legislative meetings. But who knows? We still think it’s because we were aggressively covering his affairs.

Arizona Guardian co-owner and managing editor Patti Epler

So, we took our little laptops, our Internet cards and our cell phones, and worked out of the Senate hallway for the next couple of weeks. It was actually kind of fun and we got a lot of attention. Lobbyists and legislators would stop by and commiserate.

After that we finally rented some space in the League of Arizona Cities and Towns Building, which is still on the Capitol campus. And now that the rest of the press corps has been kicked out, they’re all moving into the League of Cities building with us.

Now that you guys are situated, are you making a profit?
Bob: Yup. At this point we’re making enough to get everybody paid and keep the place operating. Which is certainly a bit more than what some early predictions were, and a lot more than what some other operations around the country are making solely on advertising. We rely on advertising a bit, but most of our revenue comes from our subscriptions.

Right now about 75% of our readers are involved in state politics and about 25% are civilians, for lack of a better term. But that latter number has grown in the last quarter and eventually we expect that 75/25 will flip. All these news web aggregators can stretch themselves thin recycling other people’s work. But at the end of the day somebody has to do the real reporting, and that’s our niche.

Our model is based on the idea that you’ve got to eat, and effectively you eat what you kill. You want to eat this week? Great, you have to get more subscribers.

Are there ever any conflicts with Bob’s involvement in the political arena?
Patti: Yes. From the beginning when we decided we’d throw in with him, we made it clear that he would have no involvement in the editorial side, whatsoever. He likes to say, “I’m the only publisher in America who can be fired by his reporters.” And to a large degree that’s true, because we could vote him off the island if we ever needed to.

We also made a big point of disclosure. Of just openly saying, “here’s who are, here’s Bob. Bob’s well known in Arizona as a political strategist and in particular as a Democratic political strategist.” So, when we write a story about something that he has had some involvement in we put a note right in the story at that point that explains his background.

Now the people who initially looked at us as a front for the Democrats when we started, no longer think that all. We’ve done a good job of alleviating that.

Have you ever considered expanding to add a full-time sales person?
Patti: One of our goals is to build our business to a point where we can hire more people to take up some of the burden. What we need right now is someone who is a dedicated sales and marketing person. We’ve never had what I would consider a serious advertising or marketing campaign. But we’re doing well for never having really reached out to advertisers.

Bob: We signed up for a few ad networks, but the level of revenue we’ve made is minuscule compared to our subscriptions. Advertising works very well if your goal is to follow the same model that made the old newspapers fail, which is just get as many eyeballs as you possibly can. When you’re doing narrow casting to a niche audience, you can’t build your revenue model based on the quantity of eyeballs, because you’re never going to get there without sacrificing the very product you’re creating.

We could have done more things with advertisers, and probably could still. And at that point we wouldn’t be what we are. We wouldn’t be producing the product that the five of us saw the need for.

Bob Grossfeld and Republican political consultant Stan Barnes on KJZZ's Here and Now. (Photo by Paul Atkinson)

The Economist, in a story on the future of the news business, called Voice of San Diego a “small, scrappy news website,” praising them for covering “nitty-gritty issues such as water, crime and health care—the sort of stories that local newspapers used to cover extensively.” That coverage has included an award-winning series on local redevelopment projects gone wrong. Founded in 2004, the Voice now employs 11 reporters, supported by a combination of foundation support (including the Knight Foundation, which is also funding this project), individual donations, and advertising. Their readership has grown too, peaking this spring at just over 60,000 unique visitors per month, according to Quantcast. We spoke to Voice editor Andrew Donohue earlier this week.

Voice of San Diego Editor Andrew Donohue

What is the key to the success you guys have enjoyed that others coming behind should know?
I think a really important thing is to have people from outside of journalism on your board. There’s a natural tendency to try to put a bunch of journalists on your board, in actuality that’s what you know as a journalist. We have people who’ve run start ups, who’ve done venture capital, people who’ve had to know how to run smart agile and small companies and learned to adapt to changing technologies really quickly. That’s a huge plus for us. They challenge you to think in ways you probably wouldn’t have otherwise.

Another one is to be incredibly focused on what you’re covering and to know you’re personality from the start. So many people, if they’ve come from a big newspaper, want to try to be everything to everybody. They want to be that general interest, department store kind of publication. Inevitably, if you start something like this you’re going to have a small staff and you need to be incredibly focused and just be the best at something rather than being okay at a lot of things.

When you know your personality you can make news decisions a lot easier. Everyday you have to balance what you cover and decide if you’re going to chase that story or ignore it, put your head down and keep going on a longer-term project that you know you have and that you know no one else has. Or are you going to be one of eight reporters at a press conference?

I’m glad you mentioned the importance of being focused. You’ve written about the luxury your reporters enjoy in not worrying about being a general-interest paper of record, that they “learn how to let the small stuff slide in order to go after the more ambitious stories.” But, what happens if the San Diego Union-Tribune folds? That would take away your ability to lean on that paper of record and go after the high-impact stories, right?
You’ve asked a question that we’ve thought through a hundred times. First, my hope would be that even if the UT did cease to exist, there still would be other publications to do that day-to-day coverage.

Second, I think a lot of that information is being distributed directly by a lot of these organizations now. You have the fire department and police department with their own Twitter feeds and websites. For a long time reporters have served as the police blotter and simply transcribed that back to the public. A lot of the time people don’t need a reporter translating that stuff. So I’m hoping that the barriers to distribution being lower some of this stuff can be communicated to people without a middleman. The idea is that we would be there to fact check and go after the more interesting and necessary stories in-depth.

There will be an ecosystem to replace a lot of that, but what you’re going to see are a lot more but smaller publications.

But, do you envision an expansion of the Voice of San Diego to take up some of that slack? Which gaps would you fill?
We’re envisioning that anyways. We think there is some really interesting and intelligent ways of doing arts and sports coverage that haven’t been done by traditional media through blogs and building communities around readers.

We would certainly like to have a dedicated investigative team. We wouldn’t mind doubling back on some of the things we already cover. We have one full-time political reporter and a region certainly needs more than just one of those. So we’d certainly double back on things like politics, education, housing, and the economy. There are a lot of things we still don’t cover like health care. We have a lot of business stories here that aren’t always told.

So, how do you plan to pay for that expansion and build something that is sustainable without relying on foundation support?
Knight has always been clear that they are not a long-term solution. But, if you look at public broadcasting they still do get funding from foundations. So, we believe we are sustainable. But we don’t ever want to have to rely on only one or two revenue streams.

We’re starting to dream up a lot of different ways to monetize different things. We’re laying the foundation for a syndication service. Another is an obituary section with different levels of service that you would pay different amounts for. We’re also looking at producing reports or content for people very specifically.

None of those are in play right now, as far as getting money, or have any of the rules built around them, but that’s what we’re incubating.

Can you tell me more about the syndication idea?
With the contraction of the last six months, not only in print but also in radio and television, we’ve seen a drastic increase in the desire to partner with us. At the start we were overjoyed to have a partnership with say the NBC affiliate because we had access to a whole new audience that we wanted to get to our site and to magnify the impact of our stories.

The more that that’s happened, the more people have asked us to partner, we’ve realized that the quid pro quo, the trade off, isn’t as great for us now that we’ve done a pretty good job of getting into those markets.

The trade-off for our content no longer is just publicity and we can’t continue providing free content to a bunch of for-profit companies without exploring a way to get some of that money back. Also, if there is going to be a void in the media world we also have an obligation as a non-profit to fill it with public service reporting and high quality news.

Also, part of our metamorphosis is understanding that we’re not a website. A website is the main way that we distribute our information right now, but that’s not in our mission and that’s not our identity. As soon as we’re okay with that, then we’re okay with syndicating our content and then we understand there’s a lot of ways to engage people. For some people that may be the website, for others that’s us putting on on a forum about housing or the economy or post-election analysis.

Those other outlets cut both ways. Yes, they’re great exposure and allow us to fundraise, but they also allow us to get our stories out.

Notably, Shapiro’s territory includes Millburn and Westfield, where he rubs shoulders with some big-time media players–Patch (recently bought by AOL) and The New York Times’ The Local (in Millburn)–experimenting in hyperlocal.

How has the launch of Patch and The New York Times’ The Local blog affected your business?
It’s interesting; I’ve been pleasantly surprised so far with how it’s affected our business. Before they got there, I wondered how it was going to impact us. I thought the lure of a big company, with lots of money, would cause a problem. But, we’ve not only held our own, we’ve attracted a lot of their users and one of their reporters came over to us.

The only place it’s hurt us is in the area of publicity. Believe it or not, despite what we’re doing and the success we’ve had, not a single media outlet has covered us at all. They’ve done all of these stories about Patch, The New York Times, and BaristaNet and here we are, I created the site from scratch, we’re bringing in money, we’re bringing in more in revenues than any of those sites with the possible exception of BaristaNet, which has been around for years, and nobody has covered it. [Editor's Note: The NYT launched a self-service advertising vehicle for The Local on Wednesday.]

It’s kind of frustrating because it’s like, “this is newsworthy!” Here’s a local guy, with all local people competing with him in the same market and we’re never mentioned. If it was something where we weren’t getting traffic or we had no advertisers, I well could understand it. But at this point, we have more advertising than both of them combined. That’s incredible to me.

Have you done marketing to get the word out?
We’ve done PRNewswire and other things to get publicity but nobody picks it up. Otherwise we have grassroots pr. We’re at the Summit street fair and we’re doing email marketing. But, that kind of limits us at this point. Our traffic keeps going up, but if we could get mentioned in a major publication, even in the stories they’re doing about Patch or the Times, our users would go through the roof.

Talk about how you’ve been able to ramp up so quickly. Your staff has grown right along with your coverage area, how have you been able to manage it?
We now have over 100 paid freelance reporters, over 20 columnists and a 3-member sales team, all built up since October.

On the sales and business side, one avenue has been bringing on people like realtors or people with sales experience who are looking for part-time gigs. Like moms whose kids are gone in the morning until three, so they have that chunk of the day and then they’re back to being moms.

Basically, we’re always looking for sales people. We are struggling to handle the volume, we cannot handle the number of calls coming into us. Just in our 10 towns alone, there are approximately 20,000 businesses, so we need more bodies reaching out to the businesses that are not calling us.

What do you see as the potential for growth on your sites?
We have almost unlimited space for advertising, even if we hit the space we can start rotating ads. If we do a back of the envelope, it’s literally millions in revenue. We say to people you can advertise on our site for as little as $99 up to google.

We have a free business directory. For $99 you get an annual premium directory listing, which includes a logo or photo, a link to their website and it comes up first in the directory.
The same goes for real estate listing, which runs $15 to post your house for 3 months, as well as the community calendar. Inventory for those is basically unlimited, but our sales people aren’t even selling them right now.

As far as growing the number of towns, we could be in 100 towns tomorrow, but my feeling is you do it right. Before we launch, we go to do outreach to leaders, build a local advisory board, and put some reporters on the ground.

We’re probably going to continue a gradual expansion to more towns in our area. I don’t know if we’ll grow at the pace we went in the first year because 10 towns is a lot to cover.

Fortunately, a chance meeting with some like-minded funders at a journalism conference in 2006 brought him enough start-up money to launch Texas Watchdog, a nonprofit news site in Houston covering local and state government corruption and waste. The Watchdog’s first story went online in August 2008. Since then the three-member team has divided up the work needed to run an investigative news outlet. All three tackle the editorial work: reporting, editing and assigning stories to freelancers. In addition, Trent handles their public affairs and “carnival barking,” while his colleagues, Jennifer Peebles and Lee Ann O’Neal, manage the site’s databases and bookkeeping.

Texas Watchdog recently joined 25 other nonprofit news organizations at the Pocantico Estate in New York to lay the foundation for an investigative news network.

How did Texas Watchdog get started?
When the Sam Adams Alliance gave us our start-up money, part of the deal was that if we were to make this work, we would have to be in a place with a big enough market for this kind of journalism, a place where we can sustain the work we do. There are only a few places in the U.S. to do that, and I hate to say that because I was living in Nashville, Tennessee, at the time and I love Nashville. But you need to be in a state with a big media market, and that means California, New York, or Texas. These are the places where America’s ideas come from, for good or for bad. So, we ended up picking Houston, Texas, as a place to launch this idea.

In part we thought it was a great market down here, because it’s a big city that wasn’t drenched in media. There was room for us. And Houston has more than it’s share of billionaires, so we thought we might be able to knock on a door and make a 501(c)(3) work.

How do you keep new revenue coming in?
We’re real new, and this whole concept is real new. We don’t have a big benefactor yet. So, a big chunk of our revenue comes from running educational programs that teach people about journalism. Half of our time is doing investigative and enterprise journalism here in Texas. The other half is us, at different times, going around the country and getting revenue by teaching individual groups — whether civic groups, public policy groups or blogging groups — how to do, for lack of a better term, journalism. We teach them how to file a public records request. We teach them how to look at their city halls and their schools.

With the decline of newspapers, they’re getting less information than ever before, so we’re able to give them the tools to find that information themselves. We’ve been able to cobble together a budget, between our initial grant money and creating revenue this way, to get us to the end of the year.

What do your freelancers get out of that?
Well, I can’t tell you exactly how much we pay them. But I will say that we pay our freelancers very well. I know how it feels to be in that boat. I worked at a newspaper once that paid something like 50 bucks for a freelance front-page story. It made me want to walk into the publisher’s office and beat her like a baby seal. It was embarrassing. Good writing deserves good money. Although, keep in mind, our medical benefits amount to a couple of Band Aids and some Aspirin. We’re not in a good position there yet, but hopefully we’ll be there in the next few years.

Sounds good, maybe I’ll swing by Houston in the near future. Do you see any opportunities to expand in other ways?
If you look at New York City as an example, The Village Voice used to be the one waving its fists in the face of City Hall and at the same time doing great media and music coverage. Alternative weeklies have all gone down hill since those days. So, I wouldn’t mind expanding to other areas of coverage some day. But that’s really down the road. Right now our bread and butter is doing the investigative journalism that major metros just don’t have the time and budget to cover anymore. And the local-er, the better for me. If I could find corruption on the sewer commission, brother, I would work on that all day.

What about working in conjunction with other local news outlets?
We get picked up by other news outlets fairly often. But it’s weird. We’re here to help supplement what’s missing in journalism in Houston, but at the end of the day we’re a competitor. We’ve been all over this great story about the Houston airport, with these bizarre companies operating in secret, and nobody’s picked up on it yet. But that doesn’t shock me, because we did the same thing when I was in Denver. When I was working with The Denver Post, our competitor was the Rocky Mountain News, and when they broke something really good that we didn’t have, we tried to make every excuse in the world to convince our editors, “aw, that’s not a real story. We knew that all along.”

Click below to hear an audio clip from our interview with Trent Seibert.

The Texas Watchdog Team

Warfield and his partner, Jay Rickey, produce the emails for each market everyday, with production help from partners overseas. They see an opportunity to fill a void in local business journalism as both daily newspapers and business weeklies struggle with their print legacies and a sour advertising market. We spoke to Mr. Rickey late last week.

Can you describe the product and your editorial process?
Everyday is a grind. We’re generally running 35 to 40 headlines everyday in each of the five markets that we’re in. So, Edwin and I are buried in SEC filings. We get a lot of our news from public information that generally journalists don’t go get. We also post news from different sources, whether blogs and other news sites that allow us to reproduce their information or press releases we receive.

You have an outside contractor in India handling some of your production and editorial work. Can you tell us a bit more about that relationship?
They do a lot of work for us. We serve as the creativity behind all of the work, to make sure that it’s locally relevant. But as far as some of the manual labor, even some of the editorial judgment, there are companies over there formed by people who have earned their MBA in America and went back to India. They’re brilliant people, and the costs are lower.

Generally, they compile the information, post it to the site, and show it to us to make sure it reads properly. On top of that, if there’s an SEC filing that comes out, as I’m scouring an 8-K or 10-k, I pull the information I want them to summarize for me. I understand what’s newsworthy, I just don’t have time as I’m compiling 20 news stories everyday to actually do all of that work.

Your business is completely based on advertising and you sell some that advertising yourself. How do you feel about selling advertising as a journalist?
I was associate publisher and general manager of a real estate publishing group in Chicago and I think if you were to interview my former editorial team they will tell you that I’ve skated that line as well as any body they’d ever worked with.

Coming from journalism school, I understand the journalism side. But I also understand that companies need to make a profit. I’m fine with it because I’m an entrepreneur trying to create a business. I’m okay with it, but that’s just me. I think other people would not be comfortable with it.

Do you think journalists should work on becoming more comfortable with selling ads?
I think that sales people and journalists are two completely different personalities. Most of the journalists I’ve worked with would never ever want to be on the sales side, it’s just not in their personality. Whereas on the sales side most of these guys wouldn’t know how to write a sentence, but they’re great communicators, they love to go out and schmooze with people. There’s just not a whole lot of people that can do both sides.

How many markets do you plan to get into? What comes next?
We’d like to be in 10 markets by the end of the year. It would require that we get a little bit of VC funding. The staff would come through. We’d like to hire a managing editor and an outside sales person. Those would be our next two positions, but we would need a little bit of funding in order to get up to the next steps.

How do you identify those markets? Is it based more on advertising or editorial?
A lot of it is synergy based on locations we currently serve. It’s both advertising and editorial. For advertising, there’s a historical theater that’s being auctioned. The client, a local development corporation, is advertising in Philadelphia, D.C. and Baltimore. There’s a reason for them to be advertising in multiple markets.

Editorially, for instance, today I had a story about a new retailer coming on to the market in Prince Georges County in Maryland. That’s an interesting story to both the Baltimore and D.C. markets.

We broke the story this morning, before most other media markets had it, that Smith & Hawken was shutting its stores. The SEC filing came across last night. That ran in every single market because its pertinent in all of them, so that story got re-purposed. With a business-to-business crowd there’s some interesting things you can do.

What do you see as an obstacle to the growth of your company?
The primary thing is revenue, and it should be that way with anyone you talk to. Let’s say the Chicago Tribune went down. There are still 150 to 200 blog sites out there that get a pretty good audience. So, why couldn’t the Tribune be a central source of information from all of those blog sites? Then you could establish a sales force to represent those sites—it would have to be some sort of revenue sharing model.

I would think that an outsourced sales staff that someone launching a site like ours could turn to would certainly create an opportunity for people like Edwin and I to grow more quickly.

What happens if the daily newspapers start going out of business, what does that mean for Gothamist?
Newspapers like The New York Times have really been financed by wasting an enormous amount of other people’s money and it’s hard to feel good about what they’re doing.

If the Times goes out of business because they’ve made poor business decisions, then so be it. They haven’t been that innovative, they tend to copy other people’s ideas, and they’ve made some poor decisions by investing in declining assets. And that same argument applies to pretty much every paper.

It’s businesses like Gothamist that will replace the Times or other dailies. It might not be Gothamist per se, because this business is very competitive, but it will be somebody like us.

Things are going to get much smaller, but that’s what happens when a monopoly dies. That doesn’t sound like a horrible thing to me. In fact it sounds like a pretty exciting thing. I don’t know why we should root for the 500-lb gorilla.

Gothamist relies on the reporting in those papers for a certain percentage of its coverage, will Gothamist increase its editorial staffing to fill the void?
We only aggregate 30 percent of our content from the Times, the Post or the News. Some of that news will come from independent media. There are something like 500 or 600 independent news sources in New York, and they will not disappear. Some of the rest we will report ourselves. So, we’d still have sources for the news, we might have to work a bit harder at it. If the Times went out of business, we’d get a bit of that advertising and be able to pay for more writers.

I’m sick of this idea that we’re just parasites. We break 5 or 10 stories a week. We broke the pug story last week- where the lady with a sick dog was arrested after an altercation with a Hasidic cop on the subway. That story ended up in the Post and The Daily News the next day. We broke the story about the Vox Pop Statue of Liberty being tortured. That made it into the Post.

We definitely aggregate more stuff from the dailies than they take from us, but given their budget is 300 times as large that’s not surprising.

Most of your advertisers are national, are they generally buying into the entire Gothamist network? Do you use sales reps?
Most of our advertisers are national, but they generally prefer specific cities. They’re national brand advertisers who have a preference to buy cities per campaign.

We’ll still do most of the sales ourselves. I’ve hired a couple of people over the years to help in reaching out to specific brands. But, mostly it’s a lot of people coming to us. Hopefully we please them and hopefully they come back—maybe they tell their friends or other media partners about us.

Do you have a local sales operation?
Only to the extent that we have a list of targeted local advertisers—30 or 40 in each of our big cities—that we talk to. They’re advertisers like museums, show venues, large stores, people who organize events in those cities. They are the same kinds of advertisers that you’d see in an alt-weekly.

What needs to happen on the business side of the online news space, in your view?
The one thing I’d like to see that would be helpful to smaller guys is some kind of real self-service model that works and is targeted at smaller local advertisers.

All of the alt weeklies collaborate in a clearinghouse to sell national accounts. Each of them owns a portion of the company, and gets a share of the profits. We need something like that, but it first requires a tech solution for local self-service and I haven’t seen it yet. Maybe it’s that they’ve tried and it hasn’t worked.

Without it, if you’re trying to run a neighborhood blog it’s going to be hard to do if you’re not doing direct sales. I believe in sales, but hearing it isn’t going to make you do it.

Brandon Minor Logo

What got you into sports blogging?
In college I had written for the school’s satire newspaper, their version of The Onion, and I had been looking for a job where I could keep writing after I left. I tried a few things that never panned out, and then it occurred to me that I spent a lot of my time following the Michigan football team. Whenever anybody ever asked me, I would rattle on for about 15 minutes, usually until their eyes glazed over. So, I figured there might be a better spot for that kind of knowledge other the disinterested ears of my friends. From there I started my blog and went about feeling my way.

What was your level of business and sales experience at that point?
Zero. And it’s pretty much stayed that way. Luckily I’m in a nice position, since MGoBlog is probably the number one college football blog in terms of traffic. When you’re in that position, the ad networks that want to get you in the fold will offer you certain CPM minimum guarantees — shares of the advertising dollars they make, as long as your site gets enough traffic. So, I’ve stayed with Yardbarker for the past couple of years, and that’s really helped me out. At this point, they’re still in the venture phase and don’t mind spending money to keep me.

And I’m able to supplement that with other revenue sources. One of the nice things about being a sports blogger is that there are ticket and betting companies that will pay you just to put text links up. I’ve also been selling t-shirts through the site, which have done very well. And then there are donations from fans, which bring in a couple of thousand dollars a year.

Have you ever thought about hiring a sales person to help expand your advertising reach?
Yes, I have, and I’ve thought about adding some freelance coders to help out as well. But it’s hard to tell if that would be worthwhile at this point. Before I get there my biggest priority is to expand the amount of traffic I’m getting. One day the site might hit a saturation point, and stop growing as quickly as it has been over the past few years. If that happens, then getting more mileage out of my traffic will probably become more important.

So, how do you keep Michigan sports fans coming to your site?
There’s a lot of advice out there. It’s always like write this or do this, and I kind of defy it. My signature post is something called Upon Further Review, which is a play-by-play break down of every play in every Michigan football game, which usually runs about 10,000 words per game. And I split that up into offense and defense. My strategy has always been to just kill a category. If you want analysis of a Michigan football game there’s nowhere else you can go.

A lot of newspaper sports writing strives for objectivity, and it holds itself a little bit aloof. And then when it tries to talk to about the intense emotions inspired by a game, it kind of falls flat. To the readers it’s like asking a virgin for his opinion on what an orgasm feels like.

The Ann Arbor News recently reported that it will become an online-only news source this month. What impact will that likely have on MGoBlog.com?
I don’t know how much of an impact it will actually have, because the kind of people who are still subscribing to The Ann Arbor News aren’t my core demographic. My core demographic is very male, very young, highly educated, and I would assume, highly internet-oriented. The kind of people who are affected by The Ann Arbor News becoming annarbor.com are generally less hardcore about their sports coverage.

But with the transition to the web, they are promising to link out a lot, so having more of a two-way relationship with the local news sites would help, probably just in terms of Google ranking and maybe some traffic. Right now I link to them and The Free Press fairly often, and I don’t think I’ve ever received a link from any of those sources. That seems a little unbalanced.

Click below to hear an audio clip from our interview with Brian Cook.