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Independent local online news publishers flock to sponsored content

by: Michele McLellan |

My new survey of independent online local news publishers indicates they are making progress in increasing their revenue and diversifying the sources of revenue, including a big jump in sales of sponsored content. 

Most increased their revenue in 2015 while some experimented with new sources of revenue in addition to traditional display ads, including native advertising, video advertising, events and business services. About two-thirds said they were planning to develop a new revenue stream in the coming year.

Perhaps the biggest headline is the growth of sponsored content as a revenue source. About half the publishers in the 2016 survey said they are selling sponsored content or native advertising compared to 20 percent a year earlier.

The March-April survey of 93 publishers representing 103 publications was conducted on Michele’s List, a database of independent sites that is produced in collaboration with the Tow-Knight Center for Entrepreneurial Journalism. A full summary of the results and the dataset is available on the Tow-Knight website.

Fifty-seven percent said their 2015 revenue was $100,000 or less, compared to 66 percent who said that a year earlier. Seventy-eight percent reported their revenue increased compared to 70 percent the year before.

Nearly half said they turned a profit in 2015 while another 24 percent said they had developed a steady flow of revenue but were not yet profitable. These are about the same percentages as in the last survey.

The publishers continue to rely heavily on advertising – in most cases display advertising – for their revenue. Twenty percent said advertising was their only source of revenue, compared to a third who said that a year earlier.

In the survey, publishers reflected on their challenges on the revenue side.

Lean or one-person startups often find it difficult to make time for sales or to hire and adequately compensate a sales person.

"We've really struggled to secure sponsorships for online content. This is likely thanks to the fact that we've not hired anyone with a specific focus on this effort," said Michael Kanin of the Austin Monitor, a nonprofit site that launched in 2013 that operates mainly on large donations and subscriptions.

"Insufficient time to devote to ad sales personally, but not enough revenue stream to be able to compensate an ad sales rep adequately," said Bill Smith, who launched Evanston Now in 2006 in a suburban city north of Chicago. The site derives a lion's share of its revenue from local advertising.

Many of the sites are too small and local to appeal to large brands, meaning their potential advertisers are often small, cash-strapped local businesses.

In this environment, it is difficult for many publishers to look beyond display advertising, which itself remains a challenging sell to many mroe traditional advertisers.

"The 'mom and pop' businesses are very "old school," not internet savvy and rarely have ever considered the idea of advertising, much less have an ad budget.  Also, this is not an area where 'big box,' national chains reign," said Traven Rice, who founded The Lo-Down in New York City's Lower East Side in 2009 with her husband Ed Litvak. The primary revenue source is local advertising.

With these challenges, it is easy to see why the smaller sites struggle to find capacity to diversify their revenue streams.

However, among the for-profit sites, the significant increase in the number offering sponsored content and a small but growing number are offering video advertising suggests the publishers are finally seeing the limits of traditional display advertising.

But questions remain whether they can adapt their revenue model as more and more news consumption shifts off their websites and onto mobile and social platforms such as Facebook’s Instant Articles.

Next - 6 nonprofit sites achieve revenue diversity

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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