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

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.