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Local online news startups: Profits, progress and persistent challenges

by: Michele McLellan |

Amidst the noise about the unraveling of Patch, it’s easy to lose sight of quiet progress in the emerging local news ecosystem. Questions about what might sustain local news organizations are unlikely to find many answers in AOL’s attempt to blanket the country with hundreds of cookie-cutter news bureaus.

Instead, I look to independent, homegrown news startups for at least some of the answers, and a new survey I conducted provides some encouragement.

While most publishers of online local news startups struggle to make money, about one third in the survey reported their operations are turning a profit. Another third said they have developed a steady flow of revenue but are not yet profitable.

While volunteers play a role, the sites rely primarily on professional journalists for their content and, for the most part, they are paying their contributors.

That’s not to say there are not challenges. Two-thirds reported annual revenue of less than $100,000 in 2012. That may be enough to keep a sole proprietor with a few freelancers afloat, but it’s not a formula for revenue development that will be required for sustainability.

Publishers of 53 news startups responded to the survey, which I conducted this spring and summer on my database of independent news organizations. Individual survey responses are published to a profile of each site on the database, www.micheleslist.org.

See highlights of the survey

Dozens of these publishers will be gathering later this week in Chicago for the first LION Summit, to share successes, learning and challenges. The summit is the successor to the Block by Block Community News Summit, which I founded and helped organize for three years. I take it as a significant measure of progress that the publishers themselves have formed an association and organized their own gathering this year.

At this stage, learning and sharing are critical to the field. The survey provides an opportunity to identify sites that are making progress in growing their revenue. (I will focus on for-profits here, because a more in-depth study of nonprofits is under way at the Knight Foundation. Stay tuned.)

As I have watched and talked with publishers who are making progress, one common thread is evident: They embrace their operations as businesses and they bring intense strategic focus to that task.

There is a wide chasm here for many journalists when they start a news site and focus intently on the journalism. It is not just in adopting good business practices such as keeping the books, maintaining a surplus and carefully monitoring cash flow, although those are important. The real chasm is about mindset.

Teresa Wippel, who started My Edmunds News in 2009 and has since acquired two other local sites in Washington, said her attitude has shifted a great deal in four years.

“When I started out I was a journalist wanting to chronicle the community and write all the cool things happening in town and have fun with that and connect with the community,” Wippel said. “Now I feel a greater responsibility as a publisher. It’s a much bigger responsibility. I’ve created something people rely on and I’ve got to figure out how to make it work long term.”

For Wippel, that means spending about half of her time on the business side of the operation and half on editorial. Part-time editors on operate each of her other two sites, Lynnwood Today and MLTNews, and her advertising sales person works on commission. 

Wippel has increased the amount of time she spends developing relationships and building visibility in the community and working closely with the ad sales person. Wippel participated in the Community Journalism Executive Training program and that taught her the importance of making a good hire for sales and setting sales goals and monitoring carefully. 

“It’s 50-50 now. For me, that’s big. It was 70-30, 70 percent content and 30 percent everything else,” Wippel said. “It’s hard to move away from content. It’s just default.”

Wippel is seeing results on the revenue side. She reported less than $50,000 in revenue in 2012. But she said ad sales have increased steadily and hit $10,000 for the month of August, more than triple what it was a year earlier. She said working with Broadstreet Ads has also helped improve ad revenue.

New publishers typically invest heavily in content – on average publishers in the survey were devoting 57 percent of their expenditures to the editorial side compared to 18 percent on revenue development and marketing.

As Wippel noted, cutting back on editorial can be painful for a journalist devoted to community news. At the same time, the journalist’s assumptions about what content will be needed to support and emergent business model may not always be realistic.

Ruffin Prevost, editor of Yellowstone Gate, said he cut back on producing stories, especially longer enterprise pieces, in order to focus on the business side of his operation, and more recently, to help his wife expand her small business. He had found his readers were more interested in short, practical stories about the national park region.

The change was difficult, at least in his mind. In the end, Prevost said, it was like finding you have put on mismatched socks. “You think everyone will notice, but no one does.”

Prevost, who handles both content and sales, says he has increased revenue by 75 percent in the last year and expects to hit $50,000. He supplements ad sales with freelance work.  He has sales help from commission-only sales person at the other side of the park.

Prevost also credits CJET and coach Eleanor Cippel with helping him understand how to effectively manage a sales person.

The other side of the expense coin is investing in revenue development. A choice to put money into revenue development rather than editorial can significantly improve prospects for sustainability. That may sound obvious, but journalist news entrepreneurs pretty consistently underinvest in revenue development and then wonder why they cannot make any money.

Riverhead Local, a Long Island site, faced that choice two years ago. Denise Civiletti runs the editorial side and her husband, Peter Blasi, sells ads. Riverhead Local, launched in 2010, had enough revenue by 2011 to hire part-time help. Blasi wanted to hire editorial help for Civiletti. Civiletti thought it made more sense to hire someone to help Blasi with the ads. 

“You have to recognize that when you have a sales person, particularly a good sales person, the skill set does not include being super organized and really good with follow up,” Civiletti said. She believed that hiring someone to follow up once Blasi has made a sale was the best next step.

Two years later, that has worked out. Riverhead Local has more than doubled revenue from two years ago and expect to be in the $250,000-500,000 range this year. That means there’s enough money to hire a reporter for the site.

Civiletti says her training in the Block by Block Super Camp, the beta of what has become CJET, played a role. “It helped us focus, have a business plan. We’re not shooting from the hip.”

Each of these examples show the value of tending to the business, as well as the benefits of effective business training for journalists. The Patterson and Knight foundations have invested heavily in the CJET program and it is good to see it showing returns. The Patterson Foundation also supported development of my database and the publisher survey.

Still, not everyone is going to make it. Last week, I learned that Sacramento Press, a leading local news start up for several years, has cut back to a single full-time employee and is re-examining its business model. Publisher Ben Ilfeld said his focus on other business ventures undermined attention to the core business.

High-profile failures often obscure real progress. I hope that will not be the case here. Certainly, all start ups have a high failure rate. As often as not, the problem in this arena is not that the core idea - developing a revenue model to support a modest local news operation - won't work. The problem is poor implementation, a lack of expertise, and a lack of focus. Supporting publishers with the tools and knowledge they need to operate sustainable businesses is yielding results.

Michele McLellan

Michele McLellan is a writer, editor and consultant who works on projects that help strengthen the emerging local news ecosystem,
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