Knowledge Bridge

//Kevin Anderson /January 25 / 2013

Lessons on sustainability from global study of news start-ups

At the end of last year, the Sustainable Business Models for Journalism project released a report and an online database looking at business models that were profitable “or soon to be profitable” amongst 69 journalism start-ups in the US, Japan and eight European countries.

The report focused on start-ups that were sustainable, ones that were either profitable or on their way to profitably. The report is well worth reading in full and can be downloaded here (PDF). While acknowledging the differences in these 10 markets, from a business standpoint, the report did find some common themes, all of which are worthy of further examination:

• Small, low-cost and lean organisations
• Organisations that provide editorial services rather than content
• Editorial specialists rather than generalists
• Ads dominate but a mix of revenues key to success
• Lack of business skill an obstacle

The authors of the study readily admitted that the lessons drawn from these start-ups might be difficult for traditional media companies to adopt. But the most pressing problems for traditional news groups are around developing digital journalism services to sell and mixing revenue streams to achieve digital media profitability, and here there is a lot to learn for traditional news groups making the digital transition.

Lean and mean

Journalism start-ups, especially the hyperlocal sites, often survive by keeping costs low. In the US, sites like TheBatavian.com and WestSeattleBlog were run almost entirely by husband and wife teams. BargainPage.com, a site created to share tips with people on how to save money, has only one employee, founder Julie Scott.

These small lean sites were profitable, but many of the founders, especially of the hyperlocal sites, found themselves tempted away from their start-up by employers who valued the skills they had developed in running their sites.

As we noted recently, hyperlocal has been one of the most popular, and hyped, trends in digital journalism. In the US, the American University’s J-Lab has compiled a list of 1,200 community media projects. However, due to the inherent instability of a single-person business, only about 50 percent of the projects are ongoing, according to J-Lab executive director Jan Schaffer, adding:

The appetite for starting up independent news and information websites seems to be as keen as ever and the ideas for new projects are quite creative… Most often, sites fold as a result of their founders’ life circumstances – new jobs, new responsibilities – rather than failed business plans.

These lean and mean sites show, however, just how much can be achieved by a small but committed team. Creating a new editorial proposition does not necessarily mean lots of staff and long development cycles, but can be done perhaps more effectively by a small nimble team who can adapt the offering to suit the market as their understanding of it develops.

Services rather than content

Several of the start-ups didn’t create original content but instead sold services or a platform. This was especially true in the UK, where the start-ups were selling their services to traditional journalism players. A good example of such a project is Tweetminster which does social media aggregation and analysis, and is well known for tracking and analysing the tweets of members of the British Parliament. Tweetminster provides the analysis of political tweets for free, but it charges for analysis of other tweets around subjects from “Formula 1 to Middle East”, according to founder Alberto Nardelli.

When established media organisations think about creating new products, they automatically think about content creation, but start-ups like Tweetminster show that there is value in services like analysis and aggregation. The re-contextualisation of archival content and the refocusing of analytical talent on new services is a potential growth areas for traditional media businesses.

Specialists not generalists

Of the start-ups that do create content, many do not look like traditional general interest news organisations. For instance, MedCityMedia and Patient Power focus on health content and get funding either from medical centres or creating content for content partners. ArsTechnica covers technology and was acquired by publishing giant Condé Nast in 2008.

In fact, the study says that all of the start-ups are niche in some way, adding:

All have a very specific area that they are covering: either geographically or in a certain topic, service or product.

Ken Fisher of ArsTechnica says that to stand out you need to do market research and be clear about what makes your publication special.

Focusing on niches, especially if a segment of your readership is currently under-served doesn’t just mean focusing your content, but also providing a well-defined readership or audience to specialist advertisers who are themselves often under-served. Chosen well, niche content can bring together audience and advertiser in a way that simply isn’t possible on generalist news sites.

Ads dominate but a mix helps reach sustainability

The study found that ads still dominate revenue streams, and the authors of the report were disappointed at the lack of variation in business models. However, most of the 69 start-ups did have more than one income source, including events, consulting and training, selling data and, of course, paid content. The project database allows you to explore the start-ups based on their revenue models and is worth exploring.

We recently explored the wide range of revenue streams that digital businesses are developing. When developing a new editorial product, it is worth keeping in mind all of these revenue opportunities and how they might fit with the audience that you are targeting with that product.

Lack of business experience an obstacle

One lesson that really stood out was how some of these start-ups struggled due to lack of business experience. The report says:

Journalists enter their new path as publishers with a content-first strategy, because they are content professionals and able to create competent sites and stories: editorial is their trade of choice. But when it comes to creating revenue streams, making cold calls and creating a sustainable business, journalists tend to struggle. Developing business acumen is thwarting success and preventing profitability in many cases. It is this lack of economic know-how that is proving to be one of the greatest skill shortfalls.

As journalists, we’re all passionate about the mission, but as Kunda Dixit said at MDLF’s Media Forum 2012, “Media can only be truly independent if its financially viable.” Without business experience or skilled business staff, many of these start-ups seemed small and doomed to remain so. They simply did not have the skills or business focus to grow beyond their modest roots.

When creating new products, it’s essential to have one eye on the business model that will underpin it, but the challenge for many established news organisations it to understand how to align that business model with the editorial mission. Too often, the business side of news is perceived as being antithetical to the editorial mission of independent journalism, but instead of viewing making money as a necessary evil, align your business model with your mission.

While the Sustainable Business Models for Journalism report holds many lessons for traditional news companies,  its authors admit that some of the successful strategies that these start-ups employ might be hard to adopt for incumbent news organisations. At Nieman Lab journalism site, Vehkoo and Pekkala said:

In our opinion, it looks like there are numerous possibilities for constructing a profitable business. But most might be difficult for traditional media companies to adopt; the newcomers are small, lean, and nimble, and they use both technology and their audience to create greater efficiency in their operations.

But a company doesn’t need to be small to be nimble. Many news organisations are learning to adapt and use technology better to take advantage of digital efficiencies. As digital media adoption reaches a tipping point in your country, it is worth developing the technical and digital business skills necessary to adapt to the changes that will come. You may not be a start-up but it is worth learning how to think and work like one.

Article by Kevin Anderson