With five years under its belt, Minnesota- and Twin Cities-centric local site MinnPost has a non-profit model that seems to be working well. The site combines advertising, donations and sponsorships to support its journalism, and it ended 2011 with a slight budget surplus for the second year in a row.
Veteran newsman Joel Kramer, the site’s CEO and editor who was previously at the helm of the Minneapolis Star-Tribune spoke with Street Fight recently about the importance of not relying on just one revenue model, and about how to treat local news sites like the businesses they are — matching ambitions with the available potential revenue in a given market.
What was the initial thinking behind making MinnPost a non-profit?
We decided to launch it in 2007 to respond to the beginning of a significant decline in the number of journalists available to cultivate stories because of what was happening to the business model. At the time, I was open to both a for-profit and a non-profit model… The reason we adopted the non-profit model is that basically we decided that there was no way to make any money doing [“serious" journalism]. In fact, many people that donated to get MinnPost started told me they would’ve given me more money if we went as a for-profit. But I concluded that I can’t do that with a straight face because I don’t see anyway to make a profit doing this kind of work.
One of the keys to even breaking even was that you needed to find a way to make money from things other than advertising… But back in ’07, my view, which was the prevailing view, was that it was going to be hard to charge the reader. So the advantage of a non-profit model was that you could ask the reader to donate money and then build a significant revenue stream by asking for donations.
A lot of local publications still rely solely on just advertising. Do you think a hybrid model like MinnPost has — with donors, sponsors and advertisements — is needed? Can publications survive on advertising alone?
It totally depends on your local circumstances and your model. My judgement was, for what we wanted to do here in the Twin Cities, we did not believe there was any chance we could survive on advertising. In fact, five years later, we’re running a budget of about $1.5 million a year and about 25 percent of it is covered by the advertising. Could we be an advertising-only enterprise? Yes, but we would have a budget of only $400,000 instead of $1.5 million.
When you rely on donations, there’s also risk involved in becoming too dependent on grant or foundation money, though. No?
Yes, there is a big risk of that if you’re mostly dependent on foundations… Most of our money comes from individual donors and that is much lower of a risk because you build them up over time, you cultivate them, you sustain your relationship with them, and we have thousands of donors. This is a model similar to public radio or public television, to have a broad base of individual donors. Yes, many non-profits in our field right now are sustained 80 percent or more by foundations and there is definitely a real risk that that type of support won’t last.
One of the issues with local is that whether you’re running on advertisements or donations, there are only so many people in the community to contribute. What do you think local publications can do to build a sustainable monetization or revenue plan within a limited market?
There is no single answer because it’s a combination of your revenue sources with your expense plan or model. What does it cost to fulfill your ambition? For MinnPost, we have a fairly ambitious mission, and we’re spending about a million and a half dollars right now trying to do a good job on our mission… If you were covering a really small community, and you thought you could do the whole job on a budget of $250,000, you might find there is enough money in that small community to do that.
It’s finding the right model for the size of market you’re dealing with. If you can’t match up your ambitions with the market potential to generate revenue, then you can’t succeed. The reason there is no one answer is every market is different and every ambition is different. The main lesson though, which is basically a business lesson, is that you have to have a plan that matches up your goals and ambitions with a plan for how to get that amount of money and that has to be realistically related to the market you’re serving.
MinnPost uses a sponsorship model, where you have specific local businesses sponsor projects on the site, could you talk about that model a bit?
The sponsorship we do is somewhat like underwriting on public radio or public television. You can be the major sponsor of a section of the site. So like health reporting or we have people that sponsor poverty reporting, that sort of thing. There, you ask the sponsor to give you money on a regular basis, say $20,000 a year or something like that in exchange for getting their name listed as, “this coverage is brought to you, thanks to the support of such and such organization.” It’s different from advertising and it’s more about showing your support for what we do. Sponsorship is in the middle ground between pure philanthropy and advertising. It’s really about them showing support for what we do and it’s good for their business, or their non-profit organization to show support [for a local publication].
Do you think on a scale where you’re dealing with smaller or location-based publications, that the sponsorship model might be more reliable, especially in the long-term?
Sponsorship is good because it’s usually a long-term deal. You can sell sponsorships by the year, that’s what we do, and it’s great if you can get them. The main message I would say… is that this is a tough business and supporting high quality journalism is very expensive. Probably your best approach is to go after every stream of revenue that you can think of and develop multiple sources of revenue.
How crucial is that hybrid model for publications even smaller then yours,?
I think the model can work, but the reservation is that if you’re small, you don’t have the resources to go after all these different revenue streams and that would be where I would say you may have to choose. In any size market you could have advertising, you could have sponsorship, you could have memberships — but if you’re one-person, you might say: “I can’t do all these things, I have to pick one or two that I think are the most promising.”
Isa Jones is an editorial assistant at Street Fight. This interview has been edited for length and clarity.