The Knight News Challenge has been supporting news media innovation since 2007, funding more than a hundred projects to the tune of $37 million. Some of its winners have developed into successful businesses (though not necessarily doing what they originally planned), while others have sunk without a trace.

The report looks at 28 projects such as FrontlineSMS, iWitness, and Zeega and picks out important lessons that contribute to successful media innovation.

Target users with “a need you can feel”

Successful projects scale because they have identified a core audience and proven need, whereas others fail “because they developed a tool without first identifying target users”.

Get the interface right

“An intuitive user interface is vital for attracting and retaining users.” But don’t underestimate the time and expense involved in developing what appears to be a simple design.

Successful projects may appeal to a different audience than first imagined…

Tools developed to help media outlets with tasks such as visualising data have struggled to get traction in the newsroom but have found success in other industries. “Small budgets in journalism and a lack of technical understanding among journalists can inhibit adoption.”

…Anticipate resistance to innovation

Successful startups realise that their innovation may cause disruption and meet institutional resistance. Successful innovators anticipate resistance and plan ahead for it, for example by identifying a wider potential audience beyond the initial target.

Identify staffing needs early

Many startups rely on a mix of full-time paid staff and a community of users and evangelists to develop and promote services and tools. Identify which parts of your project need paid, full-time staff and those that can be carried out by volunteers, and allocate resources accordingly. The contribution of unpaid supporters can be undermined by insufficient core staffing.

News start-ups covering specific niches such as technology or politics are finding the most commercial success in using events, and general interest news groups are using events build audience and increase audience loyalty, which has also had a positive impact on revenue. In fact, some news groups have even regretted not pursuing events as a possible revenue stream, which was part of a larger lack of business focus at launch, Batsell said.

“A lot of news start-ups tend to come from very idealistic roots, from journalists who haven’t had much business training, and they feel like if they go out and do great watchdog journalist that it will pay for itself,” he said, adding, “That is not always the case.”

His research on events, which has been released in a peer-reviewed paper and will be included in an upcoming book, explores how to decide whether an events strategy is right for you and how to develop that strategy.

In a presentation (see at the end of the article) at the International Symposium of Online Journalism in April, Batsell summarised the best practices he identified in 100 interviews with more than 20 news organisations during his research.

• Designate an event planner.
• Seek out sponsors to make money.
• Networking is a key attraction for attendees.
• Build support in the newsroom.
• Provide memorable experiences.
• Don’t expect a “golden goose”, a huge revenue generator, “but with an authentic approach, events can produce revenue and audience goodwill – preferably both.”

Evaluate the opportunity costs

“I think there is an opportunity in just about any market to put together some kind of event that is going to be meaningful to your community, to assemble your community in a way that only you can as a media outlet,” Batsell said.

Almost every community has key business or cultural groups that can form the basis of an event, and asking the right questions will help you evaluate the opportunity:

• Are there leading business communities in your area, such as agricultural, technology, transportation or the media, that you could create an event to serve?
• Could you provide these groups an opportunity network?
• Do you already have special sections covering these business areas?
• Does your community have key cultural dates during the year that you could create an event around?

Identifying the most promising business or cultural group or demographic will help you identify sponsorship opportunities and estimate potential income.

To be successful with events, Batsell suggests appointing a person who is responsible for the events business.   He said:

Ideally, if you have a director of events, that is great, but not everybody can afford that. If you’re a newsroom who has a social media manager or community relationships manager, that might be a place to go where someone can handle that on part-time basis.

In some instances, a journalist or journalists will be involved, to host and/or cover the event, and Batsell says that key in determining whether or not to pursue and events strategy is to determine the opportunity costs of the staff involved. The opportunity cost is the value of the best opportunity that you have to forego to carry out your event. In other words, does the value, both commercially and editorially, of hosting an event outweigh the staff time spent doing existing responsibilities or another activity?

Build sponsorships

While some event strategies are focused more on building audience numbers, loyalty or both, most events are developed with a specific commercial goal. To be successful commercially with events, sponsorships are essential because the bulk of revenue from events is generated by sponsorships, not ticket sales.

It is essential to identify clear sponsorship opportunities early, at the project evaluation stage. If you can’t locate enough sponsors, or if sponsors aren’t willing to pay enough to help you earn meaningful revenue from the event, you might want to either change the type of event or drop it entirely.

Batsell says that is why it is essential to have a member of staff whose job, either part-time or full-time, it is to develop the events.  He said:

You have to have a point person coordinating these events and seeking sponsorship for these events because that is really where these events make their money. It’s not through ticket sales. It’s through finding a good corporate sponsor who wants to put themselves in front of a demographically desirable audience that a news start-up can assemble.

Build newsroom support

After analysing your market and weighing the opportunity costs, Batsell found that news leaders need to make sure that they solicit the support of journalists and editors. He said:

There are still many journalists who were trained that journalism and business were separate entities that should never be mixed. Of journalists that I encountered at these events, some were very comfortable, more or less serving as emcees at these events and intertwining it with their journalism. Others were not so much. They saw it as a marketing exercise, and that is not what they signed up for when they went to journalism school.

If I were a news manager of newsroom where there were some sceptics, what I would point out to these journalists. “Hey, if this can generate more revenue that can save more jobs and pay for more journalism, aren’t we all for that?” I think some managers are better than others at communicating that goal and underscoring to your staff that being ambassadors for your brand and reaching out to your audience in person is part of the job these days. There may be some resistance to that in the DNA of journalists but you gotta get past that because it can help feed the journalism.

Successful examples

Batsell found the most financially successful examples were those news organisations or news start-ups that targeted a commercially desirable demographic and gave them opportunities to network.

Geekwire

In Seattle, he looked at Geekwire, a site that covers the tech start-up community. In 2012, they held nine events which made up 40 percent of their total revenue, boasting a 20 percent profit margin. The events include their tech start-up awards, which provide not only sponsorship but also a chance to generate coverage for the site. Other events are just for fun and act to bring their audience together socially, such as a ping pong tournament. The events are “designed to bring the local tech community together like no one else does”.

Geekwire was profitable during their first full year, but they fell just short of profitability in 2012. Co-founder Todd Bishop told Batsell the shortfall was partly due to costs they inherited from an event they took over from another organisation, which highlights some of the challenges of events. “Events are not a panacea,” Batsell said.

Texas Tribune

Texas Tribune is a non-profit news organisation in Texas that provides coverage of state government. They have a number of events including a regular series called Trib Live, in which Texas Tribune editors and journalists interview newsmakers in front of a live audience. In addition to streaming the video on the Texas Tribune site, it is also streamed on Facebook.

It is paid for by a small number of corporate sponsors. Batsell said:

It’s free to the public, but it often produces news content. Newsmakers say newsworthy things, and the insiders feel like they have to be there. There are 200 to 250 lobbyists with legislative staff at 730 in the morning at the Austin Club, all there convened by the Texas Tribune.

The Texas Tribune makes about 20 percent of its total revenue through events. As a non-profit, the Texas Tribune has a number of sources of revenue and financial support, including foundation support, member contributions and sponsorship. Last year, their revenues were higher than their costs.

Mount Pleasant Sun

The Sun is a newspaper in Mount Pleasant Michigan, and they held an Art Walk event in conjunction with the local arts council. They set up a satellite newsroom at the event and had staff working there for half the day over several days during the event. They didn’t have corporate sponsors, but they did have a special tabloid advertising section in conjunction with the event.

Batsell said events like this were difficult to analyse in terms of success. While it was good for the community, the commercial outcome was more difficult to assess, and Batsell said that in cases like this, being clear about the opportunity costs were key in helping news organisations decide whether this was the best use of their resources.

WBEZ radio Chicago

WBEZ is a public radio station in Chicago. Public broadcasting in the US is supported through a mix of listener contributions, corporate sponsorships and some public funding. Like most public radio stations in the US, WBEZ broadcasts a mix of news, discussion programmes, music and cultural programmes. They have an eclectic range of events, which they believe appeals to their listener members such as themed movie nights or Chicago chef competitions. WBEZ says that the goal of their events is to create a memorable experience that people associate with WBEZ.

While it was again difficult to quantify the success of these events, WBEZ did have some indication that events were playing a part in maintaining their member support. Over the past five years, the number of contributing members had gone down, but the amount of contribution per member had risen. Public radio stations solicit contributions and new members on-air in what they call pledge drives, and they have been able to reduce the number of pledge drive days by 30 percent despite the lower number of members. “Events are a piece of that, but it’s not the only part,” Batsell said.

While success might be difficult to quantify in every instance, Batsell believes that events can be a key alternative revenue stream for news organisations. He said, “I think that every news organisation needs to explore because the opportunities are there.”

Here is the presentation that Batsell gave at the International Symposium on Online Journalism:

Building the right kind of sensibility means building the right kind of brand that resonates. In a crowded media sector these days, the white space to create anything unique is non-existent, or at best narrow, which is why content-based startups take a longer time to gestate and build up.

Hiring and building a team present peculiar challenges for a media startup compared to any other kind of software or consumer product startup. Cultural fit becomes the driving criteria above almost any other criteria, particularly at the early stage.

Having been a student of media and media startups all my life — and now a year into building my second — I’ve learned a bunch of lessons along the way on building the right kind of teams in lean content-driven environments.

Different stages in a company require different strategies, and for this article I am focusing on the early stage, where the focus is on building editorial, product and distribution. Call it my year-one guide to hiring in a media startup.

General culture and companywide skills:

• Bringing negative energy into the company is not worth any kind of talent. This is true for co-founders, employees and even investors. Because in a daily ideas driven startup, the flow of energy back and forth matters a lot more, any negative people in the company suck up all available energy in the company. This may sound esoteric and hard to quantify, but if you’ve done this long enough, you know this matters.
• The product in a media startup changes every day, unlike any other product startup. The front entrance of your flagship product changes many times a day, and the people you hire need to understand the manic-ness that goes into doing this day in, day out.
• Product thinking: Typically media startups have been stuck in “post thinking,” as in a blog post, a story post, etc. In a multi-platform environment, product-led thinking that continually tweaks to keep the brand fresh in digital becomes the driving force. Iterate, test and build; a thinking in mainstream consumer startups, has to come to media startups as well. Hire people who get it.
• Visual and multi-platform thinking: Anyone you hire — from editor to developer to social media manager to sales to business development — has to understand the visual nature of media these days, especially in a social media-driven, multi-platform world. This is easier said than done, but people with varied and non-traditional career paths tend to get this the most.
• Living in a Google Analytics stream: Or in other words, data thinking. These days, data skills for anyone you hire across any function in the company — from editorial intern to social media manager to founders — is not an optional skill. That’s true for any startup, but for media startups that live and die in Google Analytics (and most use that at early stage, because it is free), it means making sure everyone in the company understands it, uses it, and makes decisions that are informed from it. Baking it in at the hiring stage will ensure you make it pervasive across the company as it scales.

Editorial team:

• The 4 S’s of Content: be Smart, Sharp,Surgical and Strategic. With a small team in the beginning, can the editorial talent you hire be nimble enough to understand this, and execute against it?
• Because part of the talent you will hire will likely have come from existing old-school media companies, one of the things you are looking for is how much can they unlearn what they’ve learned before. Especially if the editorial product and the voice you are trying to create is something the industry has not seen before.
• This is my personal favourite: No journalism circle jerk or moralising media people. Get the basics of reporting right, keep the future of journalism prognosticators out.
• Related to above: Avoid scenesters, above all else. Media tends to attract a lot of those because it comes with the high profile of a byline and public presence. These days with the amplification of social, people love the idea of working in high profile places and would do anything to flatter you. It will take some trial and error, but you’ll learn the necessary skill of avoiding these people.
• Curation thinking: This is another critical hiring and company culture parameter. No media startup can survive doing just original content, it has to be a mix, of original, of curated or aggregated, of licensed if that is an option. It means hiring people who have the ability to mix content types, and not be moral about it. You’ll be surprised at how many journalists look down upon curation. In a small team, curation thinking also means learning to do a lot more with lot less.

Developers:

• This is hard in the best of times, and for media startups that may not seemingly be solving rocket science tech problems, your options of how and what to attract developers with are lower. In most cases media startups are about execution, and that requires a slightly different kind of developer than a software or product company would need.
• Look to the pool of journalists turned developers, or dual majors in journalism and computer science, of which there is an increasing pool. They generally tend to get ignored by other high-profile consumer startups, and present an attractive pool to target for hiring.
• This is especially true if you are trying to create media-derived data products, and there are a lot of cross-dependencies that somebody with the media background would understand better than a regular developer.
• Developers with media background tend to understand presentation of data and information in right formats.

Cross functional agile product manager:

• Agile development, a methodology that came out of the software world, is increasingly being implemented across other parts of companies as well, especially as a buzzword by marketers. For a media startup, agile would translate into building quick, fast and dirty, with few resources, whether it is edit, business, sales, and of course tech development. That means a cross-functional product manager who is almost a junior COO, working with founders to keep everything running and launching on time, amidst the requisite amount of chaos.

Content marketing & partnerships:

• The social media editor is dead, the engagement manager has arrived. Call it whatever you want, beyond the buzzwords it means marketing your content is a full time function, and is multivariate, multi-service and multi-platform. The skills required then becomes a lot more complex than just someone who tweets and “engages” with community. It is a mix of being natively good at social, ability to focus on various social networks in different ways that those platforms require, in different formats of media. It means seeding various sites, forums and platforms beyond social; it also means part traditional business development functions of maintaining and seeding existing content partnerships.

Sales:

• The first sales hire at any media startup is a crucial and scary step. Hiring someone who can just sell banner and boxes, even if lots of them, won’t cut it. The first sales hire has to be strategic enough to think big picture, understand what the nascent brand stands for, and be on top of emerging trends in content market, native advertising and digital branding. And as digital has enabled the rise of early adopters, fanboys and prosumers across various industries, a sales hire should typically have both B2B and B2C experience to understand how companies market to various constituencies in different ways.

Caveat:

This is an early stage template. Beyond year two and beyond seed stage, the hiring guidelines and skill sets needed will evolve as product, business and strategy evolves — even if philosophies and operating principles stay rooted in founders vision.

(I have used the words “news”, “media” and “content” interchangeably here, to cast a wider net. Don’t get tripped up in the semantics of the words, larger lessons apply to any kind of content-driven startup.)

This article originally appeared on LinkedIn, and it has been republished here with the kind permission of the author. 

Email marketing seems so low-tech, but it is enjoying a resurgence because it is inexpensive and, if done well, it works.

In an article on technology news site Wired, highlighting an “email newsletter renaissance”, former Hufftington Post Chief Technical Officer Paul Berry said:

As much as we’re told e-mail isn’t sexy, no one sends more e-mail than Facebook or Twitter, and the reason they do is we’re all on e-mail and it brings you back.

An email marketing success story

Two years ago, the Foundation for New Journalism in Iberoamerica launched a programme to provide technical and commercial skills to the rapidly growing number of news and information start-ups in Latin America. As part of this programme, 10 start-ups were chosen “based on their journalism and ethical standards, and their potential for growth” to take part in an entrepreneurial journalism programme.

The results were impressive leading, on average, to an 80 percent increase in site visits across the start-ups, according to James Breiner, writing for IJNet and News Entrepreneurs.  A Salvadoran sports site was a standout success:

El Salvador FC, a soccer website, increased its total visits by 264 percent to more than 1 million by employing a series of strategies, such as updating news at least 10 times a day, promoting news through email and seeding its news in other blogs and web pages.

Obviously, email was part of a broader strategy of regular updates and a wider social media campaign, for example, successful Facebook campaigns drive about 20 percent of the traffic to the site. But you don’t have to choose between email and social media – an effective digital marketing and engagement campaign can and should use both.

It is also important to point out that simply building audience doesn’t guarantee sustainability; despite its success with increasing traffic, El Salvador FC is not yet profitable. However, as the site works towards the break even point, its email and social media strategy has added audience with low costs, although it is time intensive. El Salvador FC founder and editor Carlos Lopez Vides said:

This type of marketing costs us nothing but does require a big time investment. It recognizes the power of the users to share and recommend the product. We, the editors, have to empower the users to maintain their interest and support.

As Lopez Vides says, email marketing is inexpensive. A study in the UK found that it a fraction of the cost of other marketing methods such as direct mail or telemarketing. It was even cheaper than SMS marketing. The same study found that it also had a higher response rate than direct mail or internet advertising, although lower than direct mail or SMS marketing.

How to create a successful email campaign

Just as with your digital strategy in general, data will be key to the success of your email newsletter marketing efforts, and with the renewed interest in email newsletters as an audience building or marketing tool, we have access to data on best practices even before you start.

Email marketings software company GetResponse analysed 21 m messages sent during the first quarter of 2012 to determine the best open and click through rates and also the highest engagement times. The analysis found (emphasis theirs):

One of the most important conclusions is that sending newsletters during readers’ top engagement times of 8 a.m. – 10 a.m. and 3 p.m. – 4 p.m. can increase their average open rates and CTR by 6%.

However, they also point out that you need to analyse your own data to make sure you understand how your subscribers behave.

Another factor that can affect open rates is the subject line of your email. Another newsletter service provider, MailChimp, analysed 40m subject lines to see which ones worked best. They even have a tool that will give you a rating of words used in your subject line based on historical response rates. They compared the best performing subject lines, email newsletters that were opened by 60 to 87 percent of recipients, versus the worst performing subject lines, those that were only open one to 14 percent, and they found:

On the “best” side, you’ll notice the subject lines are pretty straightforward. They’re not very “salesy” or “pushy” at all. Heck, some people might even say they’re “boring.” On the “worst” side however, notice how the subject lines read like headlines from advertisements you’d see in the Sunday paper. They might look more “creative,” but their open rates are horrible.

That doesn’t mean that you can’t be creative in your subject lines, but their research found that it was all about expectations. “The best subject lines tell what’s inside,” they said.

Fortunately, email newsletter software such as GetReponse and MailChimp has become increasingly sophisticated, allowing you to do A/B testing. This feature allows you to test the performance of subject lines or delivery times, for example, Mailchimp will send the same email using two subject lines to a small percentage of your list, then automatically sends out the email with the best performing subject line once the trial period has ended.

Marketing your paid content offering

Email registration for newsletters has also been used as part of a paid content revenue strategy, allowing those who register to access premium content on your site.

As digital advertising rates dropped, publishers have used email newsletter signups to gain more information about their users, which they use to deliver more targeted advertising and as part of the marketing strategy for their paid content offerings.

British magazine publisher IPC offered email newsletter subscribers access to ‘certain content’ to entice readers to sign up for newsletters or register with sites, says The Media Briefing. Once IPC has an email address, it works to gain even more data about these users so that they can tailor marketing messages about subscriptions and paid content options.  It is a typical funnel marketing strategy.

Email marketing may seem simple, but successful news organisations and media companies are using it in incredibly sophisticated ways as a means to increase their audience and audience engagement and also as the first step in marketing their paid content offerings. The key is to make sure that you’re taking advantage of all of the tools that modern email marketing software delivers so you can get the best results.

In April, more than 20 representatives of Latin American and Spanish online journalism organisations gathered in Austin, USA, for the Iberoamerican Colloquium on Digital Media. The principal question on the table was: what is the path to sustainability?

As if finding the answer isn’t hard enough, the meeting revealed that some online news organizations have a very different understanding of what “sustainability’” means than others.

Many – such as La Nation from Argentina and O Estado from Brazil—  are part of larger legacy news organizations.

With most of their overheads and much of their content production covered by the parent company, relatively few ads cover many of the remaining costs. Additionally, a strong online presence serves as a way to promote the print brand.

But there is also a new generation of start-ups without financial backing from a parent company, outlets inspired by the same motivations that have fueled organizations like US national investigative reporting group ProPublica and the Texas Tribune – namely, a passion for investigative reporting, frustration with the limitations of the existing news media, and excitement over the new possibilities of digital platforms.

The participants in Austin demonstrated an impressive range of content, with strong offerings in human rights reporting, such as La Silla Vacia in Colombia, as well as scientific research such as Spain’s Materia and the arts, such as Argentina’s Revista Anfibia.

Many of the start-ups were fruits of a bold initiative by the Open Society Foundations (OSF) over a decade ago. OSF funded a number of young journalists around the world to create digital alternatives to the traditional news media in their countries, and several have made a mark. Plaza Publica in Guatemala and El Faro in El Salvador have added a range of perspectives that outlets in their societies previously lacked. During the recent controversial trial of former Guatemalan dictator Efrain Rios Montt, Plaza Publica ran a detailed  interview with U.S. investigative journalist Allan Nairn, an eye-witness to war crimes committed in the Rios Montt era.  El Faro has run hard-hitting articles on Salvadoran gangs and drug trafficking.

Over their first decade, Plaza Publica, El Faro, and their counterparts concentrated on building out their reporting capacity and constructing their digital platforms, in the belief that philanthropy would provide their core funding. But now the ground is shifting. With grants for independent media becoming harder to find, the message is clear: philanthropic support may not go away entirely, but it’s an excellent time to seek new sources of revenue. The search for business models is on.

An informal survey of Austin’s field of journalism start-ups (many of them leaders in their markets) confirmed that none cover their operating costs without external sources of support. In the early days, strong hope was placed in digital advertising, but now there is no suggestion that digital advertising alone could support a serious journalism site. Digital advertising pays a minute fraction of print rates, and it is continuing to favour non-journalism web and mobile platforms. Furthermore,  advertisers are often scared off by the investigative content the Latin American initiatives were founded to report.

Many of the digital start-ups get around the limitations of international grants though accessing  other forms of direct and indirect support. Plaza Publica is based at the Universidad Rafael Landivar, a Jesuit institution, which covers most of its overheads. Revista Anfibia has a similar arrangement with the Universidad de San Martin, a state institution in Argentina. Chilean site Ciper was launched with the support of the national media conglomerate Copesa. The shared experiences of the group suggested that if a start-up wishes to launch as and remain a news-only operation, it may have to seek supplements to philanthropic support and partnerships with local institutions.

All of these, of course, may come with strings attached.  But the broader discussion in the news industry is coming to the conclusion that the era of news as a “commodity” business is waning. The old models of charging for content, through paywalls plus advertising, appears to be working for some institutions, but these tend to serve affluent audiences who will pay a premium for content and offer an attractive demographic for luxury brands. This approach has little to do with the mission or the audiences of the Latin American start-ups.

The services model for sustainability

So what’s the alternative to the “commodity” model?  There is mounting evidence that independent online news will be evolving into a service industry, to market digital skills and training and to help to organize communities. The Austin group reported that they were involved in a range of experiments to develop new revenue streams, many of them promising.  With the help of Kevin Davis from Investigative News Network, these approaches were categorized as:

• direct, which markets online content in various ways;
• indirect, which generates revenue through advertising and philanthropic support;  and
• ancillary, which produces income through training, events, merchandising, and services.

So far, it appears that no single approach can be identified as a magic solution; once again, it appears to be a question of an evolving mix, heavily influenced by local factors such as political environment, market conditions and competition.

The new marketplace will press online platforms to find their audiences, listen to their needs and attend to them as a community.  With luck, they may find that they can support their news production through fine-tuning an array of services in combination with (or in place of) advertising.

In Chile, Mi Voz has benefited from the creation of study centres to teach digital skills, while Brazil’s Observatorio da Imprensa has implemented journalism training programs.

Mexican start-up seeks revenue in the ‘mix’

Only one organisation in Austin was described as a free-standing digital organisation, and – not coincidentally – it was the only one that expects to turn a profit in the foreseeable future.  This was Mexico’s Animal Politico.

Notably, Animal Politico was launched in 2009 as a for-profit, digital-first project, starting life as a Twitter news service; founder Daniel Eilemberg that he explored the possibility of  philanthropic support, but abandoned the idea. The project has since expanded into a website and an array of services, including marketing digital advertising expertise and events.

It does not purport to be a “pure” news site; Animal Politico includes entertainment as well as hard news, and has experimented with many forms of audience engagement. It has emphasised social media since the start, and engages its youthful demographic through talk shows on popular rock stations in Mexico City. It has kept its overheads low and built a growing advertising base by engaging a young urban audience. Animal Politico was early to experiment with mobile platforms and Facebook ads, and, as of June 2013, has 476,000 Facebook “likes”. Animal Politico now receives over a million unique visits a month and expects to go into the black within a year.

Animal Politico has benefited from the restrained nature of its competition in the Mexican media market, in which corruption, government controls and gang violence have stifled traditional reporting. But it has also been shaped by the unrelenting pressure of the market to adjust “the mix”. For those who question the advantages to entering the field as a “digital-first”, market-driven project, Animal Politico is providing a compelling test of the theory.

In the discussion of the digital transition, there are hopes for new opportunities but also fears. Apart from the worry about business disruption, there is also a fear of creating a digital divide between one world of wealthy, well-informed tablet-toting news consumers and another, not only poorer in terms of wealth, but also in terms of information.

At the recent O’Reilly Tools of Change Startup Showcase, Arthur Attwell, founder and CEO of print-on-demand book start-up Paperight, put the challenge this way in the context of South Africa:

I come from Cape Town, South Africa, and my background’s in educational publishing and e-book production. South Africa is like two different countries: about 2 million wealthy people who support the publishing industry (excluding schools publishing, where the state is the largest client by far), and about 48 million people who could never afford an e-reader, don’t have credit cards to buy things online, or can’t afford to physically travel to a bookstore. So to make it possible for most people to read books, we need to totally rethink how we sell books.

While Attwell was very aware of the challenge, he also saw an opportunity. Although technology can create divides, it can also bridge them. He had seen books distributed via Mxit, a mobile social network with 10 m users in South Africa, but he felt that he needed a lower tech solution because 65 percent of South Africans do not have access to the internet, according to recent census data. In the South Africa media and technology site Ventureburn, Attwell said:

African countries have very few bookstores and ebooks are spreading very slowly. Photocopy shops, however, are everywhere, and in most places in Africa, they provide an important social function by photocopying books that people need, but can’t find or can’t afford to buy. Paperight was started to help legalise that process.

Copy shops may not be the sexy end of technology. They are very much 20th Century technology rather than the shiny, cutting edge technology of smartphones, smart TVs and tablets. Instead of trying to convert potential readers to new habits, Attwell decided to tap into existing habits.

The idea also has a hook for publishers. Before Paperight, publishers would see the copy shop activity as piracy and lost sales. Paperight delivered a way for them to convert illegal activity into legal sales. With this compelling case, Paperight has already signed up 40 publishers and offers 1400 titles, including text books, study materials, literary classics, magazines and even sheet music. The start-up first approached copy shop chains to grow their distribution network as quickly as possible. The barrier to become a Paperight outlet is low. Copy shops only need to go to Paperight.com and register their shop. Paperight is now available in 145 outlets in South Africa.

To purchase materials from Paperight, all a customer needs to do is to go to a participating copy shop where they can search Paperight’s catalogue of materials to see if they have the book or other material he or she wants. In addition to the cost of the licence for the material, the copy shop also includes their own costs to download and print it out in the price. The buyer pays the copy shop, and then the shop pays the publisher.

Ubiquitous copy shops are not just a South African phenomenon, and Attwell told Publishers Weekly, “We designed Paperight to be an international business.”

Print and digital delivery for long-form journalism

Paperight was just named a winner at the O’Reilly Tools of Change Startup Showcase, and while the company’s primary focus is to make books legally available via nearly ubiquitous copy shops across South Africa, long-form journalism groups are already seeing opportunities with print-on-demand services like Paperight. For news publishers, the easiest way to think about this is that it is much like news groups selling long-form journalism on Amazon’s Kindle e-reader packaged as Kindle Singles.

South African non-fiction publisher Mampoer Shorts publishes non-fiction pieces for e-readers, tablets and print out. It describes the content as “shorter than a book (but) richer than an article”. It describes its mission as:

We proudly bring long-form journalism to South Africa. Our unique and novel reading experience will change the way your read for ever. Read the best journalism on any device, and see how South African writers and journalists can blow your socks off!

The shorts are available on a number of tablets and e-reading platforms as well as print-out. It shows how multi-platform digital and print delivery can deliver your content to your audiences regardless of how they want to consume it. The key issue here is making the process cost effective for you, but Paperight shows that services are developing to meet this need and allow you to tap into existing consumer behaviour.

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.

If I had a dollar for every time I’ve heard that hyperlocal news start-ups would be the next big thing in journalism, I’d be a rich man. But unfortunately, for many of these sites, dollars, in the form of a sustainable business model, have not materialised. The dream has been that targeted local advertising would flow to focused, local content. The problem has been that “hyper” local content, as opposed to simply local content, has been scale. How do you create content that is targeted enough to be relevant to local readers but still captures a large enough audience to be relevant to advertisers? At the recent Street Fight Summit, a conference dedicated to hyperlocal media, Kira Goldenberg of the Columbia Journalism Review gave this pessimistic summary of a panel of hyperlocal news start-ups:

The panel just before lunch at Tuesday’s Street Fight Summit, a two-day conference dedicated to all things hyperlocal, was on hyperlocal “publishing models that work.” But by “work,” organizers seemed to mean models that “have yet to fail”; none of the sites represented by panelists are making money yet.

The panellists included Daily Voice, DNAInfo and GoLocal24, and all of them said that they were on their way or “on plan” to profitability but still not there yet.

Hard lessons learned

If you want to cut through the hype, it’s worth reading a detailed post by Mike Fourcher, a Chicago-based entrepreneur and publisher of hyperlocal sites in the city. He listed 21 lessons he learned running sites Lakeviewing.com and Center Square Journal, and I’ll highlight just a few here that are relevant to all markets. The post is well worth reading in its entirety because it’s one of those times where someone is highlighting challenges rather than simply promoting success.

The challenges of selling to small- and medium-sized local business – This is one of the advantages that newspapers and other traditional media still hold and must defend: their relationship with local advertisers. For hyperlocal news start-ups, they don’t have these relationships and must build them, a challenge that Fourcher said was much more difficult than building an audience. He pointed out how local small businesses suffer fatigue from being sold to, not only by people wanting to sell advertising but also by their suppliers. He said, “Small business owners are constantly fighting off salespeople with a stick.”

New competitors and challenges in local advertising – In addition to these long-standing challenges in the local ad market, he also said that there were novel challenges that he faced. Chicago was where Groupon was founded, and although it has suffered from competition and trying to scale its own business model, Fourcher said that new Groupon-style businesses are being launched that are signing up advertisers rapidly. Daily deal providers and aggregators are now present in most news markets. He said:

Belly, which is founded by former Grouponers and funded by the Groupon founders’ investment fund, showed up at a local merchant group meeting unannounced. They brought a pile of iPads for businesses that sign up, and  thus signed up everyone in the room in a flash. Now Belly is a major competitor for neighborhood marketing dollars.

Social media giveth. Social media taketh away – As we’ve said frequently here on Knowledge Bridge, news sites have been very successful in building their audiences using social media, but now businesses are turning directly to social media to market to their customers, cutting out intermediary advertisers such as news organisations.

I’ll highlight one more lesson that he learned because I think it’s so crucial in terms of commercial success:

It’s easier to find a good writer than a good sales person. … Lots of people like to write. Very few people like to sell.

Just as editors and publishers know that they need to hire great journalists to create great content to attract audiences, we need to hire great sales staff to attract advertisers. Local journalism is coming under increasing pressure in the digital age, but to maintain sustainability we need to fight for advertisers just as aggressively as we fight for readers and viewers. Fourcher has some important, hard earned, lessons to help you keep winning that fight.

Reuters Institute fellow Rasmus Kleis Nielsen has a great post on the blogs at Reuters warning European journalism start-ups to avoid surviving on advertising alone. This is sound advice for news start-ups in other parts of the world too. Nielsen backs up his warning with some stark examples of start-ups that have failed due to the meagre revenue they were able to earn on ads:

Advertising-supported online news production did not work for Netzeitung in Germany (which in 2009 shut down its newsroom after nine years of consecutive losses), did not work for Rue89 in France (impressive and innovative as it was, the site never broke even and was bought by the weekly newsmagazine Le Nouvel Observateur in 2011), and is not working for Il Post (widely considered one of the most promising start-ups in Italy, the site generated revenues of just 35,000 euros in its first year of operation, resulting in an operating loss of more than 150,000 euros out of a total budget of little more than 200,000 euros). Why should we expect it to work for other start-ups when all these widely praised ventures, and many more besides, failed to succeed?

Nielsen makes the broader point that the journalism start-ups are simply mimicking US models, when the US market is massive both in terms of population and ad spend compared to European markets, but he also makes some excellent points about how a glut of digital content has pushed down ad rates and kept them low. Those low rates aren’t just hitting start-ups but even established players. With ad markets in Africa, Latin America and elsewhere being much smaller than Europe – never mind the US – the dangers of developing a business model that over-relies on ad revenues are even clearer.

Nielsen suggests that journalism start-ups look to how other non-content start-ups are diversifying their money mix by adding “digital subscriptions, donations, consultancy services, live events, event planning and e-commerce”.