The Survey Results
Posted on 17. Sep, 2009 by Matthew Sollars.
The foundation of the business models we built this summer was data culled from an online survey we conducted of web entrepreneurs. We asked online startups from across the country to give us a confidential glimpse at the nuts and bolts of their businesses.
We sent invitations to hundreds of online news organizations, from hyperlocal blogs serving small communities to outfits that cover major American cities. In all, we received responses from 111 websites (81 for-profit, 30 not-for-profit). The entire interim report presented at the Aspen Institute last month is available here. (The New Business Models for News Project has been funded by the Knight Foundation.)
As expected, many of the for-profit ventures are bootstrapping their businesses with 20 employing 2 or fewer full-time editorial staffers (out of 27 businesses that answered the question). Meanwhile, 14 do not have any full-time workers on the business side. (Part-time staff levels at most sites are similarly low.) A majority of the sites, 58%, reported bringing in less than $500 per month in advertising–that won’t pay for a newsroom expansion anytime soon. However, we found plenty of room for optimism, too. A dozen respondents, or 14%, make more than $5,000 per month in advertising revenues alone.
Most of the folks running these sites are journalists with little business experience, so it is not surprising that many of the responses to the question ‘what are your biggest challenges’ revolved around getting help selling advertising and developing the business. Here is a sample of the comments:
Getting local businesses to understand the value of advertising on the internet. This problem is HUGE. Even with our large amount of traffic, it’s hard to get local businesses to take us seriously because we don’t have a print product.
***
Sales, sales, sales. And pricing. I think I have a service I can sell here. But I need to sell it and then handle the invoicing and record-keeping. Since this is something I’m doing on the side, I let the sales efforts lag while I spend most of my effort creating the content.
***
As the owner/editor/publisher, I have trouble balancing the news and administrative aspects of the job. I’m really a journalist at heart, so given a choice, I’d rather write a news story than work on a spreadsheet or a web page coding problem. I am actively seeking a publisher to join me, perhaps as a partner, to help guide the business side.
Here are the survey results from the for-profit news outlets. Click here to download.
New Business Models for News survey results — For-profit
The survey results suggest that the not-for-profit model has been more successful at building a larger staff, at least at the beginning. Roughly half of the not-for-profits, 12 of 30, reported having more than three full-time editorial staffers. Employment on the business side also trends higher.
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NewBizNews in the Guardian
Posted on 13. Sep, 2009 by Jeff Jarvis.
In addition to the podcast (below), the New Business Models for News Project is the subject of my column in the Guardian’s media section. Here’s the full text:
There is a future for news – a sustainable and once-again profitable future with the prospect of expanding and improving journalism by taking it deeper into our communities with increased relevance, engagement, accountability and efficiency.
A team of business analysts and journalists in the City University of New York Graduate School of Journalism’s New Business Models for News Project (funded by the Knight Foundation), which I direct, tried to answer the hard questions that have been asked since news organisations began suffering business challenges – and more recently, bankruptcy. Namely: what happens to journalism in a city when its last daily newspaper dies?
Or to put it another way: will there be a market demand for journalism? Can the market meet this demand? And who will pay for the journalism we need? These are business questions and so we sought business answers in research with a wide range of news companies.
The most startling and hopeful number we found is this: some hyperlocal bloggers, serving markets of about 50,000 people, are bringing in up to $200,000 a year in advertising. These are sustainable businesses and we believe they are critical elements of the future of local news – a future no longer controlled by a single newspaper but instead by an ecosystem made up of many players with varying motives, means and models, working collaboratively in networks.
We see the faint beginnings of this ecosystem today in the 10,000 hyperlocal bloggers who operate in the US, according to the hyperlocal network outside.in. They are being joined, almost daily it seems, by unemployed professional journalists intent on continuing to report and eating while doing so – for example the New Jersey Newsroom, the Ann Arbor Chronicle, and My Football Writer in Norwich. At CUNY, we surveyed more than 100 of these local-site proprietors and some are becoming profitable.
Keep in mind that few, if any, of these bloggers and journalists have experience in business, advertising or sales. So in our project, we suggest that there are many ways to optimise their businesses. Start by improving the products and services they offer to local traders. Then add the potential of regional advertising that will need outlets when the metro paper dies, as well as smaller networks made up of a few towns or built around interests such as parenting or sports. We even see potential for e-commerce revenue, following the example of the Telegraph, which sells hangers and hats, and now Utah’s Salt Lake Tribune, which has begun selling homes.
Bottom line: after three years, we project that a blogger could hire editorial staff and advertising help – citizen salespeople who help support the citizen journalists – and net $148,000 out of $332,000 revenue. That’s a conservative estimate when you consider that a community weekly paper in such a town probably earns between $2m-$5m.
We still see a role for a news organisation – the successor to the newspaper newsroom – that covers city-wide stories, provides the best reporting that will remain the lifeblood of local journalism, and works collaboratively with many in the community. It is the largest member of the ecosystem but with a staff of 100 instead of 1,000 – and without the cost of printing and distribution – it is much smaller than the old newspaper and that is what makes it profitable. In the US, we have seen not-for-profit versions of this new news organisation rise in San Diego, Minneapolis and New Haven.
There are more contributors to the metro news ecosystem: technology and sales support organisations that enable these players to operate as part of ad and content networks; publicly supported and not-for-profit entities (public media, an individual reporter supported by pledges using services such as spot.us, or a foundation-supported organisation); transparency of government actions and information (which we believe is critical to enabling any citizen to become a watchdog); national networks and the immeasurable but invaluable force of volunteers who contribute to public knowledge, because they care.
Adding this all together, our models projected editorial staff of 277, equivalent to a current newsroom in our hypothetical city of 5 million but now highly distributed among many new entities. We forecast total revenue totalling 10%-15% of that of the newspaper – which is about what most papers earn online today. At that level, we see sustainable journalism of scale but we also see great potential for growth, especially if journalists learn to take advantage of the social engagement the internet enables.
Ours is only one optimistic vision. There is no way to tell if we are right until journalists, business people, advertisers, technologists and citizens invest in the future instead of merely trying to protect their past. The incumbents are talking about building pay walls. Google has just offered its Checkout payment system to enable micropayments – which may be less of a rescue for papers than for the rare unpopular Google feature. Meanwhile, the entrepreneurs we interviewed are building new news companies for the new ecosystem.
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NewBizNews on the Guardian MediaTalkUSA podcast
Posted on 13. Sep, 2009 by Jeff Jarvis.
The latest edition of the Guardian MediaTalkUSA podcast, which I present, features the work of CUNY’s New Business Models for News Project and discussion with two folks who know hyperlocal: Deb Galant, founder of Baristanet, whom I crowned the queen of hyperlocal; and Jim Willse, editor of the Star-Ledger (who begins the podcast confessing that he began his day reading papers … online).
What’s fascinating is that Galant and Willse extend the idea of local networks.
* Galant wished for a local associated press that would enable news organizations and local blogs to share content and distribute each other.
* Galant at first resisted the idea of ad networks because, to date, they devalue sites and she’s already getting national and regional ads – but then, when asked whether she’d want a piece of advertising that would be up for grabs if a metro paper dies, she relented. The problem is that we need a new word and reputation for networks.
* Willse proposed a co-op apartment model in which the members of the ecosystem/network (call it what you will) engage others – a super – to perform mutual tasks (that’s the role of the framework in our NewBizNews models; it’s what Mark Potts’ Growthspur hopes to provide as a service).
* Galant and Willse also liked the idea of collaborating on journalism, doing more as a group than any of its members could do alone. That’ll be the subject of their next lunch.
It is gratifying to see these people who work in the heart of local adopting and extending some of the ideas we discussed at the Aspen Institute. (The New Business Models for News Project has been funded by the Knight Foundation.)
By the way, we will hold another meeting in New York to discuss the models, sometime in early November (as soon as I’m sure I’ll be back in full fettle). In the meantime, please take a listen:
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Chi-Town Daily News Aims to Profit
Posted on 11. Sep, 2009 by Matthew Sollars.
The Chi-Town Daily News, the not-for-profit out of Chicago that launched four years ago, announced today that it will become a for-profit venture. Editor Geoff Dougherty announced the move in a post on the site, which has received funding from the Knight Foundation and a host of other supporters.
Dougherty explains the move:
We’ve concluded that, as a nonprofit, we cannot raise the money we need to build a truly robust local news organization that provides comprehensive local coverage.
The Daily News needs $1 million to $2 million per year to do a great job of covering a city as sprawling and complex as Chicago. And despite hundreds of phone calls and letters to foundations, corporations and individual donors over the past four years, we’ve never come close to that.
Last year, we raised about $300,000. This year, due to the economic downturn, it was unclear whether we would be able to maintain that level of revenue, let alone move quickly to expand our coverage.
Jim Barnett, former Washington correspondent at The Oregonian who is now studying not-for-profit journalism models at George Washington University, thinks other news start-ups may follow the Chi-Town Daily News example and use not-for-profit status to prove an editorial concept before launching a for-profit venture.
“I do think more will follow this path, but not this quickly, and, I think, out of strength rather than necessity,” says Barnett, who blogs his research here and at the Nieman Journalism Lab. “I think other nonprofits with ambitious revenue goals will consider hybrid strategies — perhaps launching for-profit operations that help supplement their resources, much as Minnesota Public Radio did before spinning them off. But the strength of the nonprofit model would remain — that is, it puts the needs of the newsroom ahead of the investor.”
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Paid Content, E-commerce and Turning the Knobs Down on Ads
Posted on 11. Sep, 2009 by Matthew Sollars.
New plans for paid content platforms, from players as varied as I.B.M., Google and NewsCorp, earned plenty of attention earlier this week. Some have boiled the story down to a potential battle for publisher-clients between Google and Journalism Online, the start up from Steven Brill, Gordon Crovitz and Leo Hindery which has been at the center of the paid content story all summer.
In that potential dust-up, it’s notable that the Journalism Online plan calls for taking a 20% commission on subscription revenues (plus a 3% commission on credit card transactions), while Google says it would charge 30% for clients using its revamped Checkout platform. 
The plans were a response to a request for proposals from the Newspaper Association of America that published them in a report to its members this week.
Here are a two items that have been largely overlooked in the coverage so far:
First, the Journalism Online e-commerce model (available at the Nieman Lab) will let publishers change variables like the price of subscriptions or micropayments to fit their own markets. Publishers will also be able to turn the knob on advertising, apparently, changing settings so that “paid subscribers see fewer, different or no advertisements.”
Could this finally lead to the ad-free news that some consumers have sought for so long? The Journalism Online model does not aim to replace advertising revenue with subscriptions. Instead, the model says advertising revenue lost to the pay wall (and subsequent decline of unique visitors) by commanding a 30% cpm premium on the subscriber base that remains. Clearly, a no-ad product would come at a premium, but how much would publishers have to charge subscribers who want to turn that knob all the way down?
Second, Brill et al. say their platform will let publishers sell products against content. The 15th and last item on a list of product capabilities is the “ability to sell related goods via participating retailers (such as books within book reviews).” As we noted earlier, the UK’s Telegraph has developed an e-commerce platform that now accounts for roughly 30% of all revenues. They sell everything from home gardening products to panama hats. And, instead of erecting paywalls around general news content, they have subscriptions and micropayments for secondary products like fantasy soccer and puzzles.
Sadly, the Journalism Online plan does not provide an estimate of how much money news sites could make by selling products through a contextual e-commerce platform. But, if the Telegraph’s experience is any guide, what seems to be an afterthought here could become a significant revenue stream for the group that can pull it off.
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Local business help from Google
Posted on 05. Sep, 2009 by Jeff Jarvis.
Google just started a newsletter to help local businesses make better use of Google ads and tools. The first issue.
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NewBizNews on the BBC
Posted on 04. Sep, 2009 by Jeff Jarvis.
Peter Day, one of the best radio interviewers I know and the very best in business coverage, talks about media mayhem this week and I got a chance to discuss the New Business Models for News Project with him. (The New Business Models for News Project has been funded by the Knight Foundation.) Take a listen here.
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Membership has its meaning
Posted on 04. Sep, 2009 by Jeff Jarvis.
In newspapers’ game of revenue roulette, there’s a lot of talk lately about their trying to create membership plans. The New York Times and the Guardian, to name two, reportedly have visions of tote bags, mugs, and events in their heads. And I think that’s a fine idea. No salvation. But a fine idea. I’ll wear a Guardian hat proudly. I’ll go watch Nick Kristof present a slide show of what he did on summer vacation. (Other papers are merely using the m-word to cloak a pay wall; you know what I think about that.)
What the Times and Guardian seem to be considering is membership in the NPR mold – give us money and get a T-shirt to brag about it. That works at NPR because the network is a charity and supporting it is a political statement. The same might be true of the Guardian, which operates on a mission (“the world’s leading liberal voice”) and is owned by a trust. But the Times, as the product of a profit-making company with shareholders? I’m not sure. We’ll see.
In any case, the membership bar has moved up. It’s not enough to let people give you money and promote you. Now you have to invite them to have a real and meaningful role in what you do, even a sense – if not a stake – of ownership and, consequently, control.
Take Wikipedia. At the Aspen Institute two weeks ago, Wikimedia Foundation head Sue Gardner said they calculated the value of the work people put into editing entries. They could measure only the time that went into edits and updates, not the time writers may have spent elsewhere researching and writing. Even so, the value of time spent added up to hundreds of millions of dollars. That is how this incredible asset was built: minutes at a time. Note well that Wikipedia did not become valuable because it extracted money from the market and its users pockets. It became a great asset by enabling people to make it, to take control of it, to have a sense of ownership in it. It thus requires very little resource to run – and it gets the money for that from these users. Now that’s membership.
Note that Wikipedia is trying to figure out what value it needs to add back to its community’s product, not as a controller but as a contributing member itself. That’s part of the secret to successful networks: everyone’s a member, no one is king.
Now take craigslist. Craig Newmark was also at Aspen, befuddling the media machers, as he always does. But he shouldn’t. They are the ones who created his model. Newspapers created value by becoming the marketplaces in their communities for home, merchandise, and job transactions. Craig created the successor marketplace the best way he could: by being free. He extracts minimal value to grow to maximum size; those are the confounding network economics I describe in What Would Google Do?. The point is that Craig did not create a marketplace he would control, as newspapers did; he created a marketplace the community built and he supports that with customer service. He serves the community as a member.
When I was last in London, Guardian editor Alan Rusbridger was contemplating membership and he told me about the Barcelona Football Club, which is owned by its fans and in which members have the privilege to vote on leadership and more. Can a newspaper be owned by its community?
This morning, I recorded the next Guardian Media Talk USA podcast with Baristanet founder Deb Galant and Star-Ledger editor Jim Willse and we discussed the CUNY New Business Models for News recommendations, which center on creating collaborative networks among the new players in the next news ecosystem. Willse riffed on the idea of creating co-ops, like New York apartments, where the community sets its rules and hires the super to make sure the heat is on. All benefit, all have a stake in the success of the community.
Add all this together: contribution to a community to build it as an asset; ownership of the community by the community; members having a mutual stake in the community; members exercising control over the whole. That is membership. Not tote bags.
How far would and should news organizations be willing to go with this extended vision of membership? I can see newspapers as they have existed being quite uncomfortable with the idea of handing over control and even membership to the community. I can hear their fears of being co-opted or gamed. But that comes from still thinking of news as the property of a single company. Those days are soon over.
When you think of news instead as the province of an ecosystem that is distributed and owned at the edges by many players operating under many means, motives, and models, then the notion of contribution, ownership, and control changes. People own their own stakes but they benefit by joining together cooperatively. They create a tide upon which all their ships rise. That’s a network, not a company. Everyone contributes, everyone gains value and so does the whole: Everyone cooperates in systems of enlightened self-interest. Thus greater value is created (see: Wikipedia v. World Book) because more people contribute value but it is not owned centrally and benefit moves to the edge.
In the new post-industrial economy, I argue that there are three opportunities for growth and value: building platforms, building value atop those platforms (as entrepreneurs), and building networks to help these entities optimize their value. That is how news and many industries will be rebuilt, I believe.
In this vision, then, the basis of news is the platform, not the newspaper company. The value is built by owner-members, more than staff. The infrastructure for the network is a service to it, not a barrier to entry.
Yesterday, I was down visiting Vivian Schiller and her management team at NPR – who, by the way, are clearly having great fun (unlike other folks I know in the business). We talked about the New Business Models for News Project and NPR’s role in this new ecosystem. I think NPR and its stations can provide a platform and network services to many players in local markets and take a key role in the future of the news ecosystem. And NPR understands the beginnings of what it means to have members, so long as they move past tote bags.
So, yes, news organizations, please think about membership. But don’t think if it as merely a revenue opportunity. That is doomed. It is insulting. It brings to value to its members. It’s only a new price tag for a new product: a mug instead of news. No, instead use this opportunity to think about opening up as an enabler and member of a new network, a new club, and don’t think of yourselves as the owners of this club but instead as just another member. (The New Business Models for News Project has been funded by the Knight Foundation.)
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What crisis?
Posted on 04. Sep, 2009 by Jeff Jarvis.
At the Aspen Institute FOCAS event, where we presented our CUNY New Business Models for News, there came to be an unspoken debate – that is, an idea thrown out but never really engaged – about whether there is a crisis in news and journalism.
I now say that there isn’t a crisis. That’s not what I used to say. Indeed, one of my mistakes in this debate has been accepting the assumption that there was one and allowing the debate to start there: “How are you going to save journalism from the scourge of your damned internet?”
Instead, the discussion should start here: “Look at all the new opportunities there are to gather and share news in new ways, to expand and improve it, to change journalism’s relationship with its public and make it collaborative, to find new efficiencies and lower costs and thus to return to profitability and sustainability.”
One’s view on the question determines one’s response and its level of desperation or optimism.
To generalize unfairly, those who say there is a crisis – most often, those whose legacy institutions are fading – are often known to react by:
* Looking for others to blame for the purported problem – Google, bloggers, aggregators, craigslist, et al (which is to say, not taking responsibility for their own role in it);
* Trying to preserve their past (expecting newsrooms to be supported, unchanged, by some manna from the market – paid content being only the latest prayer);
* Seeking protection from government (antitrust exemptions) or the law (copyright extensions);
* Demanding tribute (saying they are entitled to get paid because what they do is worth so much);
* Giving up (talking about abandoning growth by building walls or shifting to not-for-profit and begging for charitable support).
Those who say there is not a crisis (for- and not-for-profit entrepreneurs, inventors, and investors) instead tend to:
* Look to innovation (collaboration, algorithms, data, streams) to create new ways to make news;
* Look to entrepreneurship to sustain journalism (in blogs and networks);
* Be open to new ways to define journalism;
* Irritate the legacy people by not seeing the crisis they see.
So if we’re looking for an original sin in this saga, I’ll confess that mine has been viewing news from the perspective of the old controllers rather than from that of the community (the people formerly known as the audience), the inventors, and the entrepreneurs. At Aspen, it was Sue Gardner, head of the Wikimedia Foundation, who made me see this as she talked about the wonders that have been done with news on Wikipedia, which no one could have predicted. Being open to such new possibilities is key to building news’ new future.
There are so many reasons to be optimistic about the future of news:
* The audience for news is only growing online.
* The audience isn’t an audience anymore. News is becoming more and more collaborative as witnesses share what they see and communities join together to create news.
* Those who make news are more accountable to their publics.
* News is opening up to more diverse voices and perspectives.
* News is becoming far more specialized and targeted, which is to say that it can give deeper service to more communities.
* New technology – and freedom from the limits of the old means of production and distribution – allow the reinvention of the form of news, organized around streams, topics, ideas, and concepts still being imagined.
* News is more efficient thanks to the link – do what you do best and link to the rest – and specialization. That is what makes it more sustainable.
Some – but not nearly enough – of this optimism is inherent in the future we imagined in the New Business Models for News Project, funded by the Knight Foundation. We used the financial lingua franca and assumptions of the present world – CPM advertising, page views per user, even the concept of a page and a site – because that made it easier to describe what can follow and made our vision of sustainable news more credible. We were criticized for being too optimistic about audience penetration and ad rates.
But I think we were not nearly optimistic enough. We have to leap past the idea that news is a collection of pages worth 12 views per user per month (or, quoting Martin Langeveld, 0.5% of time spent online). News shouldn’t be a site we force people to come to but, as Google’s Marissa Mayer said at Aspen, we have to find ways to insinuate news and its value into anyone’s – her words – hyperpersonal news stream. We shouldn’t create sites but instead create platforms that enable communities to share what they know and need to know, with journalists contributing value – reporting, editing, aggregation, curation – to their ecosystem. We should build and assume much greater engagement and define engagement not as consumption but as creation. We must value that creation (and not consider it merely a reaction to what we do). We should forecast much greater relevance and thus value for both the market and the marketer.
We should set the bar way higher. And that is the real problem with letting the discussion start with the pessimism, depression, and desperation of the perceived crisis among the past’s players, who aren’t inventing the future. It limits the possibilities.
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Original sin
Posted on 04. Sep, 2009 by Jeff Jarvis.
[Crossposted from Buzzmachine]
Like priests looking for someone to sacrifice, Alan Mutter, Steve Buttry, Howard Owens, and Steve Yelvington have been on the lookout for the sin that led newspapers astray. For Mutter, it’s not charging; for Buttry, it’s not innovating; for Owens, it’s tying online dingies to print Titanics (my poetic license); for Yelvington, it’s inaction.
But I think Owens hit on it when he wrote this: “I realized I needed to flip the expense/revenue picture upside down. Instead of thinking about how to generate more cash, I needed to figure out how to create a news operation that could exist profitably based on a reasonable expectation for local online revenue.”
Right. In other words, the sin was not running a business. It was not creating a sustainable P&L.
Newspapers have been too busy trying to protect specific budget lines that protected specific interests – the size of the newsroom, the ego expressed in gross revenue that yields stock performance and salary bonuses, the size of unionized staffs (up or down), the rules that governed advertising relationships even as they disappeared. They made preservation their mission.
What they should have done instead is rethink the bottom line: How is journalism going to be sustainable in new business realities?
Said Owens: “In a market where the newspaper newsroom might cost $10 million, I knew how to make $1 million online, or even $2 million, but I didn’t know — and still don’t — how to make $10 million. So if I can make a million online, why do I need operate a $10 million newsroom, especially given the greater efficiencies of online publishing?”
He built a realistic budget based on new business realities. Now picture news executives across the country hitting themselves on the head saying, “Damn, why didn’t we think of that?” They should have. But to do so would have required them to completely tear apart their businesses. Witness Detroit, banking, retail, advertising, insurance, and every other industry undergoing upheaval – nobody wants to do that.
Just as the bloggers linked above took their share of blame, so will I. Owens suggests that the problem with tying old and new operations together. At Advance, where I worked for a dozen years, we created separate online companies, which had some benefits: enabling the sites to build what was right for online (that is, interactivity), creating real value for advertising (rather than throwing in online as value-added), creating smaller and differently skilled staffs. But it also created problems: sites that were dependent on newspaper content, rivalries that killed collaboration and limited the responsibility anyone would take for the future. In the end, everyone needed to rethink what they were creating and what value it had, how they were creating it, how they related to their communities, and how the business could be run. But I didn’t see that happening anywhere in the industry. Everywhere, I saw people looking for someone to blame and somewhere to hide. I don’t put all the blame on the individuals because that’s how companies and industries operate.
Individuals who want to succeed in this upheaval become entrepreneurs. That’s what Owens – and many others – are doing. That, I’ve come to see, is the basis of the future of news.
In our New Business Models for News Project at CUNY, we threw out the old business assumptions with the old business. That’s why we tried to answer the tough question people were asking: What happens to journalism if the paper disappears? (their implied answer was that journalism does, too). What we came up with was one entity being replaced by well more than 100 entities – 1,000 entities, perhaps – each run according to new opportunities and needs, each smaller, each contributing real value, each sustainable (some very profitable; some choosing no profit). Everyone in this ecosystem has to think about running a business rather than preserving one.
Someone else looking for sinners is James Murdoch, whose MacTaggart Lecture at the Edinburgh Television Festival excoriated the BBC for bigfooting the news market in the UK and the government for enabling it and for regulating everybody else. I agree with him to an extent, this extent: that profit, in his words, will make journalism sustainable, independent, and innovative.
Except I doubt that this sustainable, independent, and innovative journalism will necessarily come from Mr. Murdoch’s father’s business and its cohorts because they are the ones that even today are trying to maintain the scale and models for their old businesses rather than inventing new ones. Look, instead, to the entrepreneurs who are starting over and rethinking the business from the bottom up, as Owens is.
