Why Small Local Sites *Must* Have Multiple Revenue Streams

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money tunnelJake Batsell covers the digital community news space from multiple angles. He writes the NewsBiz blog, teaches journalism at Southern Methodist University — except right now when he is a fellow at the Texas Tribune in Austin — and is writing a book to be called “Engaged News: Rethinking Journalism in an Era of Digitally Empowered Audiences.” He’s also a former reporter for the Dallas Morning News and the Seattle Times.

I  caught up with the fast-moving Batsell the other day to put these questions to him about what community news sites need to do to make it through 2014, and beyond.

There ‘s a lot of talk about finding the right “model” for community news. Is there such a model, and, if so, what are its essential ingredients, regardless of such circumstances as community location and demographics? Or, alternatively, is there more than one model?
There isn’t a universal recipe. What works for a neighborhood site in Seattle might not work for a small newsroom covering state politics in Vermont, and vice-versa. That said, many news organizations I’ve visited are tapping into a common set of promising revenue streams: corporate sponsorships and/or advertising; face-to-face events; memberships and/or subscriptions; and supplementary revenue streams including services, training, syndication, crowdsourcing and other initiatives. And among nonprofits, of course, foundations and major donors remain a critically important part of the mix.

So, if there is a “model” for community news, it’s finding the right mix of diverse revenue streams that are best suited to the particular conditions of a news organization’s local market and journalistic mission. But that diversity of revenue is critical, because news outlets depending on a single stream of income are leaving themselves vulnerable.

Can even small publications have multiple revenue streams?
Small publications not only *can* have multiple revenue streams — they *must* have multiple revenue streams if they want to survive. The graveyard of digital news startups already is full of failed ventures whose founders realized too late that they could no longer rely on the good graces of donors and foundations, or a single syndication client, or an overpriced subscription model that lacked the value proposition to justify it.

On the other hand, there are plenty of encouraging examples with respect to particular revenue streams. In just two years, VTDigger went from zero dollars in corporate sponsorships to almost $200,000 — nearly half of its revenue base for the current year. In Seattle, GeekWire earns roughly 40 percent of its revenue from events (and has a lot of fun throwing them). And My Edmonds News makes a nice chunk of change by livestreaming high school sports. The list goes on.

Patch, one of the biggest experiments in hyperlocal journalism, is being downsized and possibly sold off. Do you think it will be salvaged in a way that will be good for community journalism in the digital era?
The saga of Patch seems to have taught us that, at least for now, hyperlocal journalism doesn’t scale at a national level. I wouldn’t be surprised to see some of the Patch sites live on in some form, whether through regional partnerships or individual spinoff sites in local markets. Building an audience from scratch is hard, and every community needs trusted sources of news and information, so the Patch sites that best serve their audiences may well survive, whether under AOL’s ownership or someone else’s. Meanwhile, in communities where Patch shuts down, locally owned community sites may see an uptick in advertising.

Have you seen any publication — legacy or pure play, for-profit or nonprofit — that, so far, appears to have developed a successful news model?
Actually, it has been heartening to see that quite a few startup news organizations are making progress toward financial sustainability. A strong majority of the 18 nonprofit news organizations profiled in the Knight Foundation’s “Finding a Foothold” report ended 2012 with a surplus, and the LION group of local independent news sites has grown to more than 100 members. Plenty of news start-ups have failed, too, but more have survived than I would have expected a few years ago.

Again, there’s no one-size-fits-all model. But whether a news startup is nonprofit or for-profit, its financial success often boils down to finding creative ways to attract an engaged, loyal audience that advertisers and sponsors want to reach, both online and in person. And sites that directly charge for content must fill a need that subscribers can’t find anywhere else.

The diligent news reporter is often portrayed as attending public hearings that go on for hours, and writing away in his/her notebook. But can’t that practice be very inefficient, when you divide all the events and issues by that one reporter scribbling away at one long meeting?
It really depends on the mission and scope of the news organization. Subscribers to a niche news service like Politico Pro might expect a reporter to sit through every minute of that public hearing and blast out nuggets of information in real time (although she would likely be typing email updates and text alerts on her laptop or mobile phone, not scribbling in her notebook). Meanwhile, a reporter at a community site like the New Haven Independent might skip a routine zoning hearing to cover something else important to his community, then follow up the next day with sources at City Hall to find out what happened at the hearing.

I diligently sat through some of those interminable public hearings myself as a newspaper reporter, but my salary was subsidized by classified ads and Sunday double-trucks ads, so I didn’t have to worry about how many people would actually read my story on page B5 of the Metro section. Today’s journalists have to demonstrate relevance to their audience much more directly than I ever did.

As I’ve written on my fellowship blog, NewsBiz, a key consideration for any modern news organization is deciding what not to cover.

Texas Tribune has innovated in re-purposing data as news, and interactively with users. Can other publications — especially small ones — do the same thing?
You bet they can. Many journalism groups offer introductory workshops and even online courses about how to visualize data by using services like Google Fusion Tables and Tableau. Axis Philly and the Denton (Tex.) Record-Chronicle  are two smaller news organizations that have caught my eye recently with their data efforts.

Journalists who are new to data reporting often ask how they can possibly balance data projects with their regular output of stories. Well, here’s an answer: Data visualizations are stories, too! At least that’s the mindset I’ve encountered at the Texas Tribune — the Tribune’s newsroom considers its data applications to be stories in and of themselves, not merely accessories to stories. In some cases, the written story might only be a couple of paragraphs that explain the data sets and invite readers to explore away.

Do you think the challenge of sustainability is so great that the answer might have to include government support?
No. The best thing the government can do to support nonprofit news is help foster a more cooperative relationship with the IRS to eliminate confusion and delays during the 501(c)(3) approval process. Direct government funding (beyond the existing funds distributed by the Corporation for Public Broadcasting) would be a bureaucratic hassle and slippery slope.

Community news sites can better control their financial destiny by relentlessly focusing on expanding “earned” revenue — that is, by creating more of their own revenue streams.

There’s talk about community sites benefiting from new trends in “programmatic” advertising where businesses seek engaged users (right down to the census-tract level) and not just big numbers. Should community sites exploit this trend in any way — or should they stick to attracting merchants and other businesses within their community?
In theory, I’m all for it. If a community news site attracts a valuable, engaged, local audience that advertisers want to reach in a more targeted way, why shouldn’t that site capture more of the value it has created? And if national advertisers’ products are relevant to local readers’ lives, why shouldn’t they reach a more engaged audience by using more efficient technology?

Ultimately, though, it’s a judgment call. If a brand-new TGI Fridays opens in the neighborhood and dangles a census-targeted $500 ad that would upset the local restaurants who have been loyal advertisers since the beginning, I understand why a news site might think twice about publishing the ad.

Based on your experience touring newsrooms and talking with journalists from both legacy and pure-play publications, what’s your take on how well community journalists are adapting to the challenges of the digital space? Are they in a sheer survival mood, or are they figuring out how to successfully exploit their new challenges?
I think most journalists are keenly aware of the challenges their industry faces, but some are still struggling to change their work habits in a way that reflects the demands of an increasingly digital and mobile audience. And some remain hesitant to embrace a closer relationship with the business side of their news organization, not realizing that it ultimately is in their best interests to do so.

I’ve become a big believer in Raju Narisetti’s mantra that the modern definition of a journalist’s job must include “getting more people to consume more of my journalism” (slide 6 of his show “Journalism Matters but Experiencing That Journalism Will Matter Even More”). And all the news organizations I’ve mentioned (as well as those I’ve mentioned on NewsBiz) are, in one form or another, responding to those economic challenges.

Tom GrubisichTom Grubisich (@TomGrubisich) writes “The New News” column for Street Fight. He is editorial director of the in-development hyperlocal news network Local America that will rate communities on their performance across a broad spectrum of livability. He will present the site’s new demo on Charleston, S.C., at the DIG SOUTH 2014 interactive festival in Charleston on April 9-13, 2014.