Thoughts on challenges and approaches to making online news financially sustainable, focusing on nonprofit news organizations.

1. Thoughts on SustainabilityKCIC Bootcamp 2011 Ben Wirz Director of Business Consulting Knight Foundation #kcsustain The problem facing American journalism is not fundamentally an audience problem or a credibility problem. It is a revenue problem. -Pew Project for Excellence in Journalism

3. Trying to break 200 Twitter followers @bthewirz1

4. Unless you push for sustainability, you are not ultimately helping to solve this problem. 2 The problem facing American journalism is not fundamentally an audience problem or a credibility problem. It is a revenue problem. -Pew Project for Excellence in Journalism $180M/yr invested in journalism by foundations 2007-2010 $1.6B/yr editorial cuts by legacy newspapers. Source:”The Information Needs of Communities”, FCC, June 2011

5. Simplified News Business Model 3 Content Creation Marketing & Distribution Audience Engagement Mission/Brand

7. Mostly one-direction4

8. But then along comes… …the internet -Cost of distribution goes to 0 -Advertising divorces content -75% of online ads go to Google & FB -Content is unbundled 5

9. Online News Biz Model 1.0* (Approx.) Revenue Content Creation Marketing & Distribution Audience Engagement 0-10% Subscriptions 90-100% Advertisement Content shared & aggregated Social Sharing Audience contributes content Costs 60-70% Content Creation 10-20% Marketing & Distribution *eg Salon, HuffPo, Alaska Dispatch, BaristaNet 6

10. Problems with Online News 1.0 Ad rates (CPMs) for traditional news are low. Source: “Lessons from the Trenches”, Salon Presentation, Nov. 2010 7

11. Problems with Online News 1.0 2) Costs of creating news (particularly long form and investigative) are high Sample Costs, released by Salon @ 5.5M monthly uniques & 45M PageViews Versus RPM of $9 Source: “Lessons from the Trenches”, Salon Presentation, Nov. 2010 8

12. In Online 1.0, only Big (10M+) and small (1-4 staff) are economic 9 Source: “The Story So Far” 2011, Columbia Journalism School

14. Sell ads on a non-CPM basis ($40-$1500/month)

15. Focus on short form local content

16. Keep staff minimal & productive (1-2 articles/day/staff member)

17. Keep CMS simple

18. Typical revenue of $50-100k

19. Market audience, not location

20. Sell ads on CPM basis

21. Use technology/editorial to optimize content and drive engagement.

22. Minimize costs by aggregating content and soliciting audience, advertiser content.

23. Tie reporter pay to page views.

24. Aggregate niche publications (eg AOL)**egHuffPo, Examiner, Demand Media

26. Basic CMS

27. Non CPM Based Advertising

28. High Penetration

29. Based in Genessee County, NY, population ~60k

30. Founded in 2008, profitable by 2010

31. ~$125k in revenue

32. 50k uniques/month & 500k pageviews

33. 2 person mgmt team + 2 part time staff.

34. 5 pieces of short form content added/day

35. 100 Advertisers

36. Advertisements priced at $40-260/month (effective RPM of $17).

37. All articles placed on home page

38. All 100 advertisers rotated equally across page.

39. Very Simple CMS

40. Daily Deals Source: “The Story So Far” 2011, Columbia Journalism School Study

41. Online News Biz Strategies 1.5 (in process) 12 Content Creation Marketing & Distribution Audience Engagement Mission/Brand Different levels of sustainability requires rethinking each of these components to move beyond ads and subscriptions

42. Most News Non Profits Only Monetize Mission/Brand. Mission/Brand 13 RULE OF THUMB: Online Donations/Membership = $.30-$.80 per Monthly Unique Visitor (eg 1,000 monthly uniques ~ $500/year)

43. A Few Are Also Monetizing Content Mission/Brand 14 RULES OF THUMB: 1: Establish value early (invoice everyone, even if its free) 2: Syndicate with multiple partners (Reuters, Newscred, Digital Scirocco, AP, Kindle Singles, etc) 3: The more unique and/or analytical content is, the more valuable. 4. Aggregate/Share content from other sources to reduce your own costs

45. Fans make up 4% of visitors, but 55% of traffic

46. Fans are 38% more likely to donate than non-fans (per PBS)

48. Monetizing Audience is still an open question Mission/Brand 17 RULE OF THUMB: Pay metering (flexible pay walls) are NOT about making everyone pay for content, they are about identifying and isolating fans and enthusiasts and engaging them around their enthusiasm for the site. RULE OF THUMB: Advertising not CPM based “The advertisers on our site are not doing it because they expect click-throughs and new customers; rather, they look at it as being a good civic-minded organization.” –GablesHomePage

50. St. Louis Beacon

51. Oakland Local (for profit)The Civic Commons is more than just an online engagement platform. We work closely with stakeholders in the community to give as many citizens as possible a voice in the process. The Flats project is no different. We are conducting engagement activities at various locations in the Flats and conducting community meetings to engage residents, property owners and organizations in the Flats community.

52. How to Figure It Out (Overview) Start by monetizing the aspect of your organization where you think that you create the most value. Integrate monetization efforts with the process of content creation, distribution and audience engagement. Copy as much as possible from organizations that you think have a model that makes sense for you. Practice some strategic “Revenue Promiscuity” Think about trying at least one monetization technique from each bucket. As much as possible, measure your success/failure in each of your monetization efforts 19

53. Think of yourself as a startup (or Plato) Accept that you don’t know. Set out explicitly to figure it out. Do not ignore the problem. Stay lean. 20 A startup is an organization formed to search for a repeatable and scalable business model. -Steve Blank.

55. Product: Build “Right” Features. Measure, Iterate.

56. Marketing: Distribution, Distribution, Distribution.(Search, Social, Mobile) SOURCE: DAVE MCCLURE, 500 Startups, Metrics4Pirates Presentation, June 2011

57. Postulate a Value Proposition Who is your customer? A) The person whose life you’re trying to change What are you offering that will make their lives better? What minimum viable product will test this value proposition? How will you know if customer’s life is better? 22

59. Retention (visits over time, cohort behavior)

60. Referral (users evangelize to other users)Note: Paid Solutions drive FOCUS (& pay rent) SOURCE: DAVE MCCLURE, 500 Startups, Metrics4Pirates Presentation, June 2011

61. To test MVP, First Make Assumptions Explicit 24 How many monthly uniques/page views will you have What % of readers will donate? What % of registered readers will donate? How many registered users will you need? Is this realistic? What % of target audience does this imply? What growth rate will that require in registered users What % of non registered readers will donate How many non registered readers will you need What growth rate will that require What will average donation size be Registered vs. Unregistered Monthly/Annual/One-time

62. Boil down assumptions to 5-7 key Metrics that you can measure Seven metrics that matter: Acquisition: (rate of gaining new users) Engagement: (how deeply are you engaging users) Virality: (new customers coming from existing customers) Monetization: (% of total users participating in the business) Churn: (loss of existing users) Lifetime customer value (projected monetization returns by class of customers) Program Productive (Yield on promotional activities, both paid and viral) Source: Escape Velocity, Geoffrey Moore (2011)

63. Launch early, iterate often 26 Today Launch Current Funding Horizon Current Funding Horizon 2nd Iteration etc 1st Iteration Alpha

64. Look for Product/Market Fit PMF = F(Customer, Solution, Alternatives*) Product / Market Fit occurs when: Customers like your stuff better than other options Not static, Not optimal – just Local Max 4 F(customers, solution, time) make sure you’re moving in optimal direction 2 local max Q: what competitive solutions are available? … that your customers know about? how are you diff/same? in ways that people care about? (will pay for) KILL a FEATURE regularly (or rotate 1% tests) Q: what is MOST $ cust pay 4 LEAST func MVP relative 2 BEST alt? NICHE 2 WIN: RE-define cust + DIFFerentiated features SOURCE: DAVE MCCLURE, 500 Startups, Metrics4Pirates Presentation, June 2011

65. Develop a marketing strategy based on what customers are doing Q: What channels? Which users? Why? A: High Volume (#), Low Cost ($), High Conv (%) Design & Test Multiple Marketing Channels + Campaigns Select & Focus on Best-Performing Channels & Themes Optimize for conversion to target CTAs, not just site/landing page Match/Drive channel cost to/below revenue potential Low-Hanging Fruit: Blogs SEO/SEM Landing Pages Automated Emails SOURCE: DAVE MCCLURE, 500 Startups, Metrics4Pirates Presentation, June 2011

66. Outcomes (from Best to Worst) 29 Success Failure (allows for better resource allocation) ??? Not Sure Be sure you know what success & failure look like! This is more difficult in a nonprofit context.