By his lights, a not-for-profit like the one we envision (not unlike the real-life MinnPost), could reasonably generate more than $700,000 in membership revenues by year three, compared to the $547,000 we had estimated. Barnett, a journalist who is studying not-for-profit management at The George Washington University, was kind enough to plug his own assumptions into our model. His revision is available as an Excel download here.

Barnett started with a slightly higher number of member-donors in year one, taking the number of MinnPost members in its first 14 months and translating that to cover just 12 months. His calculations include some members not included in MinnPosts’s annual report (which was our source), arriving at a first year membership estimate of $298,000, roughly $25,000 more than our model.

But the real differences start to show up in years two and three as the news organization matures and puts roots deep into the community. Barnett estimates that by year three the not-for-profit should aim for a five-fold increase in the total number of members, to 4,157 from 762.

Barnett, who is studying not-for-profit management at George Washington University, says his assumptions draw on studies of membership efforts at mature not-for-profits. Typically, a robust membership drive will result in a pyramid where the majority of donors are at the lower contribution levels. Rather than extrapolating membership based on a conversion of estimated unique visitors (as in our model), Barnett has drawn a picture of what a healthy membership pyramid for a metropolitan news organization should look like in three years. Even with his more robust assumptions, however, Barnett’s organization still converts just one percent of estimated unique visitors. Indeed, the lowest rung accounts for much of the growth in Barnett’s model while membership at higher levels grows more slowly and actually decreases in the highest.

While there isn’t a defined statistical correlation between the top and bottom of the pyramid, Barnett says there is a relationship.

“It’s a social process, people see what leaders in the community and their peers are giving and say they want to be a part of that,” Barnett says. “People start small and work their way up. Not every body will move up the ladder, not everybody who moves up will go to the top, but the end game as a not-for-profit is to make this a part of people’s lives. When there’s a socialization to it, that’s when you start getting the reinforcing numbers at the lower end.”

More and more journalists, casting about for ways to preserve their livelihood, have been drawn to the not-for-profit model. The Voice of San Diego announced last week that it will provide advice and support to an offshoot in nearby Orange County and Spot.Us has launched a franchise in Los Angeles. But, as Barnett makes clear in a post on ProPublica’s effort to start finding alternatives to foundation grants, launching a not-for-profit cannot be a “tin-cup substitute” for journalists who balk at running a business.

“A lot of these organizations get the grant money but then struggle to make it on their own, he says. “That’s what this is about, how to go from being hatched to going out in the wild to survive.”

Want to add your own assumptions to our models? Go right ahead! And, please, shoot them back to us. (The New Business Models for News Project has been funded by the Knight Foundation.)

In fact, in year three of our NNO model, advertising accounts for 57%, or $11 million, of the $20 million in total revenue. The rest, or $8.6 million, comes from new business opportunities that have been so often neglected by existing media companies (or discounted because they were too expensive to develop in an era when margins on advertising were fat). In most cases, these new opportunities will require news organizations to forge new relationships with their readers and with the advertisers and businesses they serve, and to rethink some of the news content they provide.

We’ve written about a number of e-commerce opportunities already. We spoke with the Telegraph about their efforts to sell products in a contextualized format, taking fees for selling tickets and sports betting (there has even been chatter recently that legalized betting might help save the news industry). We’ve estimated just over $35,000 in annual revenue from ticket sales in our model. As Steve Buttry points out, we can go much further: obituaries are an opportunity to sell flowers and college football games are an opportunity to provide access to restaurant reservations before or after.

We also think that the advertising arm of the business should invest in training and/or consulting local businesses in online advertising and marketing. That service could bring in $480,000. Building a business-to-business marketplace where local entrepreneurs can list sales and post and reply to RFPs, could earn nearly $1.5 million in annual revenues by year three.

Hosting events is another item. Folks like the Voice of San Diego and Brooklyn Based say they view offline events as a new way to present their journalism. But, they can also serve as an important source of revenues, indeed events account for most of Brooklyn Based revenues. Events for readers could generate $330,000 by our estimates, and business-to-business conferences another $1.2 million annually.

Behind all of these ideas is the need for the new news organization to provide services to businesses and readers where they need them. As Steve Buttry pointed out to me today, in most cases, news organizations already collect highly valuable data, so all they need to do is figure out how to maximize that value for customers or businesses. In some areas the content itself might need to be reworked. He explained:

Perhaps the best example of thinking differently is in driving. Our automotive vertical is based on a job (buying a car) that most people do once every few years, so it’s not a routine and we don’t have a regular way that we do it. So it was easy for specialized car sites to steal the business away. But driving is a local job that most of us do every day. So if we develop a service based around driving, people will come to us every day. And that gives us an opportunity to become essential with some businesses that are not as big advertisers for newspapers (tire shops, auto-repair shops, auto insurance, etc.). And if we think beyond selling eyeballs, and think beyond print and start using the tool that most of us always carry in our cars, the model becomes entirely different. We think about being the conduit for text messages from motorists needing repairs today to garages with openings today. Filling that bandwidth has tremendous value to the business and identifying someone who can repair the car has tremendous value to the consumer. Win-win. (And, by the way, if you’re a car dealer and someone in your community develops a service like this, where do you think they will look first when they’re ready to trade up? So you’d better advertise there, too.)

Lastly, it’s important to make a point about the changes we think are coming in advertising. We’ve outlined new advertising units and ways to deliver them, including coupons and deals delivery, and we put them as separate line items in our model. But, it seems clear that advertising on the web will increasingly move towards the deals/coupon model eventually replacing display ads at nearly all levels. Online ads want to be transactional. We’ve already seen this with the launch of AnnArbor.com, which only publishes deals. The role for the news org going forward is to build a platform that serves the right ads to readers (much like it will need to serve the right news content). Also, the org will need to serve its advertisers better by working with them to develop messages and campaigns that work. It’s simple really, if they don’t do this in a pay-for-performance model, the advertisers will go elsewhere.

Not all of these ideas will pan out in all markets, or for all organizations. But it seems high time to give any idea with even a bare chance of succeeding a try. (The New Business Models for News Project has been funded by the Knight Foundation.)

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.