Survey of ‘Indie’ Hyperlocals Finds Mixed Bag When It Comes to Revenue

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smalltownThere are hundreds of independent community news sites in the U.S. — thousands if you count blogs — but only 131 of them meet the standards of “Michele’s List.” The list was assembled and is periodically updated by journalist/researcher/consultant Michele McLellan, who was the principal founder of Block by Block, a network that inspired (and goaded) “indie” community editors and publishers to focus, and stay focused, on achieving sustainability in the brave new world of digital journalism. Block by Block did that by sponsoring “tough-love” workshops covering everything from how to tell stories to how to raise revenue, blogging about promising new publishing practices and convening three “Community News Summits” from 2010 to 2012.

It was out of the 2011 summit that a core group of editors and publishers formed the Local Independent Online News Publishers (LION) industry association. Block by Block, with its pioneering work done, has turned over most of its mission to LION. But McLellan, who still compiles her “list,” talks here about what her new survey revealed.

Let’s begin with revenue. Of the 53 publishers who responded to your recent survey, 52% said they grossed $50,000 or less annually. Is that worrisome?
I wish we were seeing more sites break the $50k threshold because they need that at a minimum if they are going to build revenue development capacity. But I think it’s fair to say that some sites stay below that threshold despite their age for any number of reasons — lack of consistent focus on the business is one, the fact that there is trial and error involved is another, having a day job is a third. Also, this year, a lot of sites in the Northeast are rebounding from Sandy, which hurt them as well as other small businesses in their communities. Anecdotally, I know that publishers who focus on the business are getting results. Among the respondents, 18% reported revenue of $101,000 to $250,000 and 14% more than $250,000.

With only 7% of respondents saying revenue is the area where they have had the most success, do you think the model for community news needs to be revamped in a basic, structural way so sites have a better shot at achieving sustainability?
I think models for community news are being created and recreated. I say models because I don’t think there is going to be a template that works in every community. I think the issue now is how can these organizations grow their capacity and their expertise, especially on the business side. Most of the founders are journalists — the business and sales pieces don’t typically come to them naturally. That is why I have been such a proponent of business training for independent community publishers, which the Patterson Foundation and Knight Foundation are now supporting. (Patterson, by the way, has also supported my research and the building of the site database.)

Most of the for-profit sites are highly dependent on advertising revenue. Many of them are just learning to sell effectively or to manage salespeople effectively. So that’s job number one. But revenue diversification is critical for the long term.

Michele’s List numbers 131 community news sites nationwide. Meanwhile, J-Lab, at American U. in Washington, D.C., counts more than a thousand — why so many fewer on your list?
I am not attempting to catalog all local sites. I have three criteria: 1.) Content that observes journalistic standards, 2.) community visibility and engagement (broadly defined) and 3.) a serious effort to develop revenue. My emphasis is on revenue development and trying to understand what’s working. When I first developed the list in 2009, we looked at more than 1,400 sites, mostly from other lists, including J-Lab’s. We ended up with about 100 sites that met the criteria.

I do hope and expect the list will grow. I welcome suggestions for sites to review. That’s the most difficult part of the effort and I can use all the help I can get. As more founders focus on revenue and sustainability, I think we’ll see larger numbers meeting the criteria and becoming stable organizations.

How long has the average site on Michele’s List been in existence?
About two-thirds of the sites launched in 2008 or later. The oldest is Catalyst Chicago, which launched in 1997 (although online publication came later). The youngest is Yellowstone Gate, which launched in 2011. Taking Catalyst Chicago out of the mix (because it skews the data), the average age is five years.

Are there any innovations at individual sites – whether in editorial content, engagement, ad revenue or technology – that you would single out as especially promising for becoming best practices in community news?
I would point back to those who are increasing their revenue by devoting enough resources to developing revenue and developing content strategies that support that. That may mean doing a bit less on the content side than is desirable. The culture of journalism has not adapted to the idea of “just good enough.”

It appears that 87% of respondents are generating enough revenue or getting enough grants to be profitable or at least hopeful that they’ll do so. Were some editors and publishers in the survey looking through rose-colored glasses?
I think most are very optimistic in spite of their challenges. Pew found the same in its study of nonprofit news organizations earlier this year. I think they are optimistic because they are passionate and committed. Many are willing to bootstrap and forgo big paychecks; most are at the stage where additional revenue is used to increase the capacity of the organization. That said, it is clear that a significant number will not be able to find sustainability, just as a significant number will. Those that do last probably will be operating as local small businesses, not as corporate entities that are looking for higher profit margins.

I would put the number making progress at about two-thirds in this survey — those who are reporting profits and those who report steady revenue but not yet profitable. I would not judge those that are highly dependent on grant funding on the same level — that is simply not a sustainable source of revenue. The leading nonprofit news sites are steadily decreasing their reliance on foundation funding and growing other sources, including memberships, sponsorships and syndication, because they know that foundations are unlikely to fund their operations indefinitely.

What do the coach-led Community Journalism Executive Training workshops do that’s most valuable to start-ups?
Revenue development and strategic planning. The CJET program, which we beta’d as part of Block by Block, has now trained a total of 65 publishers and another round for 20 more is under discussion. The program was developed by Rusty Coats of Coats2Coats. It is administered by the Investigative News Network and is open to nonprofit and for-profit publishers. The third CJET class of 20 publishers was held last month and they will receive follow-up coaching.

Looking down the road, say, five years, where do you see independent community news sites – in reach, editorial quality, community engagement and sustainability?
I think independent community journalism will grow as one force for providing local news in a very fractured landscape. As the publishers develop effective practices and share them, this sector will become stronger. That’s why I think CJET is so important and why I am very pleased about the formation of LION, which is committed to fostering that sharing of best practices.

Tom Grubisich authors The New News column for Street Fight. He is editorial director of LocalAmerica, which is partnering with InstantAtlas to develop sites that will present how communities rate in livability. Local America is featured on the Reynolds Journalism Institute’s Pivot Point site.