INN members may look similar in their nonprofit public interest journalism charge, but they differ in their approaches to finding and building their audiences and funding their operations. Four things we heard over and over again from members:
- “You shouldn’t start one of these if you are just a journalist looking for a job.”
- “It’s easy to fall in love with an idea or product, but please test it first.”
- “Had I known what I was getting into, I don’t know if I would have done it.”
- “What we are doing today doesn’t look anything like we thought it would.”
The basis of a market view lays in an understanding of stakeholder needs and motivations. The group as a whole represents the people, groups, and organizations that make up the commercial market and form the foundation of our civic life, the ultimate customers of investigative journalism: “… the ones who care to have it, even if they care only a little bit, only some of the time.”
What are Your Mission and Value Proposition to Your Audience?
It’s not in the scope of this report to chronicle in any depth the broader pillars of sustainability, including funding strategies and diversification, legal and tax issues, and the specifics of program development outside journalism (events, membership, etc.). But it is useful to take a quick look at the high level question of motive before venturing into the weeds of how you approach audience development and distribution.
In consulting with journalists looking to build new news organizations, we often try to pull back the lens, coax out the distractions of important stories and product features, and instead focus on the broader mission of the journalism they do and its desired impact.
We generally workshop ideas related to an organization’s mission aggressively before jumping into the tactical checklists of “I want a website.” “I need to file my nonprofit papers.” “How do I register a URL?” “Which content management system should I use?”
In our experience, we find that all too often journalists confuse their mission and strategy with their operational tactics. Executing a strategy is really just thoughtful tradeoff between a set of available options.
Driving from mission can create clarity, and bring discipline to your thinking. It can also help you sort your ideas, and do a bit of a reality check before embarking on complex planning, grant writing, and other necessary tasks.
We have framed this relationship as four quadrants with dependencies between the mission axis (journalism and impact) with the product axis (distribution and audience). The simple questions we ask can provide powerful clarification for how to move a forward into the market.
- Journalism: What kind of work will you do, produced how frequently and grounded in what traditions and principles?
- Impact: What kind of impact do you expect your brand of journalism to have? The desired impact helps further define the mission and goals of the effort.
- Audience: What audience do you need to reach – can you get specific, targeted?
- Distribution: Through what channel and with what package will you best reach that audi-
The biggest challenge upfront is getting journalists to pull back from a production mindset and hone down a sea of ideas to those that:
- Support your mission
- Are flexible
- Pass a basic feasibility test
Tom O’Malia, professor of clinical entrepreneurship at the USC Marshall School of Business, says of the journalists he meets at Knight Center entrepreneurial training, that they typically “have not yet recognized the difference between what they do (the product), and the value—the benefit—of what they do.”
O’Malia favors a three-part framework for narrowing down a sea of ideas that is driven by more traditional product marketing:
- Who is the customer?
- What channel can you reach him or her on?
- What is the benefit to him or her?
Whatever your approach, there’s no substitute for upfront thinking, and a good old reality check on how clearly you can articulate a mission and value to a customer.
Feasibility: Mitigating Risk and Optimizing Your Market Position
We recommend delving deeper into the hardest questions. Carrying forward O’Malia’s three-part analysis above, there are two quick frameworks that can be helpful for assessing the feasibility of your idea.
The first is the well-known “Strengths, Weakness, Opportunities and Threat,” or SWOT, analysis. Usually workshopped using a two-by-two grid similar to this and forcing the following questions for the project team:
nother lesser-known framework, called “Porter’s Six Forces Structural Analysis of a Non-profit Industry,” expands upon traditional competitive assessments by providing a more comprehensive perspective of all of the actors impacting a marketplace.
The framework addresses critical marketplace components including: competitors, funders, audi- ence, suppliers/journalists, barriers to entry, and possible substitutes.
As a tool, the framework is very easy to use and can facilitate a level of specificity that can focus the best of plans.
Try talking through your product and its operations from the perspective of each of these catego- ries, starting from top to bottom, then left to right.
Existing Organizations: Are there few or many in this space? Can you name each of them and begin to think about how your product will exist in the marketplace with them? Will you compete or collaborate?
Barriers to Entry: How hard is it to do what you are doing and what will stop others from entering the market and competing with you? What can you do to raise the barriers to entry and make your product more competitive?
Substitutes: Are there other products that are reasonable substitutes for your product? Is other media doing this work “well enough?” Could another media company invest in its investigative unit and quickly supplant your product?
Audience/Customers: Is your audience concentrated or fragmented? Will it be easy or hard to reach, and how will its concentration impact your product and marketing requirements?
Funders: For nonprofits this framework has regularly been adjusted to address the availability of funding. Are funding sources abundant or scarce for your effort? Have you analyzed your topic and community to understand what funding could be available and sought to expand the pool of possible funders?
Suppliers/Journalists: This input generally addresses your labor pool and whether it is exclusive or non-exclusive. For many investigative journalism shops this is where the market gets made. The number of journalists with the skills to do meaningful investigative work is limited; therefore a “lockup” on suppliers can create additional opportunities in the market.
What Kind of Organization Will You Build?
Nonprofit news organizations come in different shapes and sizes, and INN members are no exception. Based on a variety of factors including market need, staff expertise, founding mission, and age – among others – INN members produce different kinds of journalism products, and serve differing audiences using a variety of distribution channels.
Based on information gathered through our interviews, we grouped INN members into four primary “archetypes.” While each INN member is confronted with unique challenges and can leverage unique opportunities, we believe there is tremendous value in these groupings. INN members within the same archetype can look to analogous organizations for the following:
- Identifying which business models are a good fit.
- Understanding how to prioritize limited resources.
- Learning from the successes and failures of others’ experiments.
- Benchmarking pricing of products and services.
- Using success stories of similar organizations in fundraising.
Especially in the world of online nonprofit news, where revenue streams are uncertain and in flux, being able to look to similar organizations is incredibly useful. For the purpose of this report, the archetypes allow us to bring structure and simplicity to our analysis and recommendations. Throughout this report, we’ve tried to make it easy for individual INN members to quickly identify the sections that apply most directly to them.
We grouped INN members based on patterns we found along the following attributes:
- People: Who is working at these organizations? What are their jobs, levels of experience, and specializations?
- Process: What kind of tasks are the organization focused on?
- Product: What types of products and services are being produced, and how are they being
- Distribution: Through which channels are the journalism products being distributed? What is the distribution strategy?
- Performance: What are the key metrics of success?
While there are variations in tactics and levels of maturity between INN members in the same archetype, we found that members’ strategy for each of the attributes are similar within categories.
The Four INN Archetypes
(Please note that we are aware that these are simplified archetypes drawn from a rich array of some 60 INN members. They are meant to be guides, not definitive models.)
The startup shop is a relatively new organization providing accountability journalism for local/
People: Small team; individuals playing multiple roles within the organization.
Process: Balance between production and packaging of content, distribution deal making, and trainers/educators.
Product: Unique, investigative, accountability journalism; published weekly to monthly. Distribution: Story-by-story, or through annual distribution deals. Channels include local news-
papers, TV stations, and radio.
Performance Metric: Amplification of story impact across the community served.
The topic specialist focuses on a particular beat. It can be national or regional in focus.
People: Small team; reporters with subject matter expertise.
Process: Daily aggregation of news along with original, deep reporting. Some deal making and marketing.
Product: Blog, regular email newsletter with aggregated and original content; original content on a weekly to monthly basis.
Distribution: Story-by-story, through email newsletter and website.
Performance Metric: Narrower impact metric from a set of very interested parties.
The community-driven news organization builds a local/regional audience, serving as both a reli-
able news source and civic engagement organization.
People: Teams of 10 or more; specialized roles, including dedicated audience-development staff.
Process: Focus on building traffic on site, through constant flow of journalism and audience development efforts
Product: Daily news production and aggregation of relevant local content.
Distribution: Primarily distribution on owned channels (website, social media, email); secondary
distribution on complementary channels (radio, TV).
Performance Metric: Audience size and engagement level.
$1 million+ organizations have sophisticated newsrooms that receive significant support from
foundations and donors. They often to serve a national audience.
People: Teams of 15 or more; specialized roles including dedicated business staff and producers.
Process: Multiple projects at once with daily site updates. Management of distributors and staff support.
Product: Large breadth of original investigative reporting; sophisticated packaging including multimedia/data features.
Distribution: Major regional and national news organizations with large audiences. Performance Metric: Wide amplification of stories at a national level.
How Will You Fund Your Organization?
In the pages that follow we will be exploring earned revenue more closely from both an audience- development and distribution perspective. Each of the archetypes above will have its own optimal approach to a revenue mix, and within each archetype there will have to be a great deal of customization and fine tuning of the more general model to address the unique nature of each enterprise.
But before we begin, we wanted to quash some common myths we saw in our research. The two most common were:
- Nonprofit news leaders mistakenly assumed that foundations would stick with them for the long haul.
- They also incorrectly thought business models for commercially viable media could apply 1:1 in nonprofit public interest media.
Clay Shirky made the solid point that “…the viability of commercial media has been for too long confused with accountability journalism. The two travelled together in such a consistent bundle that people forgot they were separate. The Chinese wall was so effective that people on the news side didn’t realize what business they were in. But now they are separate and you have to solve the problems of each [commercial viability and accountability journalism] in different ways,” (interview, September 8, 2011).
Solving the problem of sustainability for accountability journalism requires trial and error, and borrowing lessons from other nonprofit industries. Andy Hall, Executive Director of the Wisconsin Center for Investigative Journalism, feels that his group has struck a nice balance between audience development and distribution models: “We’ve developed a lean and efficient system for our own site development and distribution,” (interview, September 14, 2011). Hall’s organization distributes content for free, but it is also increasing revenue by producing commissioned reports and serving as a production house for other journalism organizations. Hall is careful to ensure that these projects mesh with his organization’s mission, “to improve the quality and increase the amount of investigative journalism in Wisconsin.”
Although Hall’s organization is succeeding in growing earned income, he is clear about the ongoing need for support: “Funders need to see this landscape for what it is, not as hope but rather as fact. Many organizations will find ways to sustain, but philanthropy will continue to be a crucial part for the reasonable future.”
The data we gathered demonstrated that INN members are finding other, more reliable ways to generate earned revenue. Across the models we explored, we saw programs ranging from content syndication to membership programs. We’ve catalogued many of them in this report and hope that they offer a menu of options from which members can select.
There’s a Grant for That!
The appropriate role of foundation support in the lifecycle of nonprofit news sites is not yet clear. In the course of our research, we interviewed half a dozen foundations deeply committed to the sustainability of watchdog journalism that are doing extraordinary work to address sustainability.
While they all share a commitment to journalism, they are idiosyncratic to their charters and criteria for funding, measures of success and priority initiatives.
Foundations focused on local and community issues seem to see many of the news organiza- tions they support like small businesses. They feel that earned revenue and local and community support would offset the need for national foundation funding on a faster timetable than those foundations funding specific investigative journalism projects. The latter believe these nonprofits are special cases, that although it is nice that they can bring in some revenues, they in no way could fully support their important work by earned income.
While it goes beyond the scope of this work to inventory the array of organizations and their particularities, there are a few points that INN members should keep in mind:
Know What We Fund and What We Don’t Fund: We asked each foundation what they would like grantees to know before they apply. The answer was somewhat obvious but unanimously clear and important to reiterate. “We would love them to know what we fund and what we don’t fund. Many people come to us with hope and passion, but for us it’s a matter of matching our published grant guidelines with the organization’s proposal,” said Elspeth Revere, Vice President of Media, Culture, and Special Initiatives of the John D. & Catherine T. MacArthur Foundation.
Operate Like a Business: Everyone we talked to agreed that these organizations need to operate like businesses, and learn from best practices and share innovations. Janet Coats from the Patterson Foundation, funders of the very successful Block by Block conference, said it best, “People are in love with a model of journalism, but they have to figure out if the model is sustain- able. You need to balance your content creations with your financial reality and realize you are running a small business and learn how to do that.” For most INN members this could mean us- ing precious staffing dollars for seasoned nonprofit management professionals.
Diversify Funding Sources: Funding is competitive, and will only get more competitive as need increases. Several foundations reported rising applicant pools, leading to smaller and smaller percentages of successful grantees. “Most of our investments in nonprofit news organizations are viewed as start-up funding,” said McCormick Foundation Journalism Program Director Clark Bell. “Going forward, these grantees are expected to look for additional support from other foun- dations, donors and subscribers. They need to demonstrate some traction in each of these areas to gain continued support from McCormick,” (interview, October 27, 2011).
Get Local and Build Community: National foundations have played a significant role in raising awareness of various journalism initiatives, and in providing seed funding, training and support for some of the most successful INN members. However many of these newsrooms are local or topic based and need to find long-term funding from the communities they serve. The Knight Foundation’s Eric Newton, a pioneer and champion of nonprofit funding for journalism reminds us that strong local ties are critical to the success of the movement, “The primary relationship is between a news organization and the community it services. If there is no relation between the organization and the community, no amount of money will sustain them and there will be no impact,” (interview, October 26, 2011).
Collaborate and Perhaps Consolidate: Patterson foundation advisor Rusty Coats cautioned about the overall trend in funding: “The funding model is changing and will shift more dramatically over the next decade to the local and state level. More nonprofits will have to do what busi- ness have done – merge or collaborate. But it will be difficult to survive on their own,” (interview, November 7, 2011).
Five-year Revenue Diversification Simulations
To give the new organization some broad diversification goals, we have modeled revenue diversification for each of the four archetypes over a five-year period. These are not models of specific INN members, but rather extrapolations based on our interviews and research. The revenue estimates are our own determination of what is possible and the percentage are a guide. Neither should be taken as set in stone.
To generalize the models, each graph begins with 100% foundation support and shows how alternative revenue streams could expand as a percentage of operating expenses over the course of five years. The common revenue streams used in each simulation include:
- Distribution deals – Including freelance, syndication, and packaged deals.
- Donations – Small and large donations outside of specific membership programs.
- Paid membership programs – Tiered memberships with special features for paying members.
- Education programs – Planned programs for students, either related to journalism, or spe- cific content verticals.
- Advertising/underwriting – Corporate underwriting of a website, specific website sections, or events. (Note: advertising may not be consistent with 501(c)3 rules. Consult a tax attorney before proceeding.)
Effectively prioritizing which revenue sources to pursue, based on which archetype your organization fits, is one of the key elements of good leadership.
INN “Start-up Shops” consist of small teams producing journalism that primarily reaches their audiences through other publishers. As these teams build more sophisticated distribution packages and develop long-term relationships with publishers, distribution deals can become significant sources of non-foundation revenue. In most cases, these deals cannot cover operating costs alone, but when combined with donations and other programs (such as education programs), we estimate that foundation reliance can be reduced to less than half of the entire budget.
Topic Specialists function much like Start-up Shops. However, in some cases they may be able to leverage their focused specialization to build revenue streams from a small subset of custom- ers who are willing to pay a premium for subject-specific information. The graph above models a topic specialist who, five years into the operation, is able to generate nearly 50% of the organization’s operating budget. For an organization with a $300,000 annual budget, this could be achieved by finding 2,500 premium users willing to pay $60 a year for privileged access to important, subject-specific news and information.
$1 Million Plus
Some of the larger nonprofit investigative news organizations find themselves with different economics than their smaller counterparts. These organizations are able to use their scale and brand to attract foundation funding, but will also find it particularly hard to shift proportionately significant shares of their revenue away from these same foundations. They need to focus on bringing increasing value to their distribution deals, as well as cultivating wealthy donors for support. Still, as the graph highlights, in a five-year timespan they may be able to reduce foundation dependence by 40%.
Community-driven News organizations are uniquely situated to seek contributions from consumers, in the form of large donations from wealthy donors and smaller donations from a broad community base. Because these organizations are focused on direct consumer engagement, they may have the capacity to scale membership and donations programs in a way the other organizations do not. In the graph, we show that foundation funding can fall to less than a third of overall operating expenses in five years. Paid memberships and donations would be the key drivers of diversification in this case.
In each model, we predict that some level of foundation funding remains an important source of revenue for these organizations in their first few years.
Community Drives News: Recent Findings from Knight
A recent Knight Foundation report, “Getting Local: How Nonprofit News Ventures Seek Sustain- ability,” provided excellent insight into how some of the most successful local news non profits, including The Bay Citizen, MinnPost and St. Louis Beacon, are working their numbers. The report provided invaluable breakdowns of their revenue and resource allocation for 2010 and is a must-read for anyone in community-driven news.
Consistent with our observations, the report summarizes several sites’ performance: “As a group, the sites are heavily reliant on philanthropic or contributed sources, such as foundation grants and donations and gifts from individuals, for their revenue. In 2010, the seven sites obtained more than 90% of their revenue from contributed sources. Nearly $10.8 million, or 57% of their revenue, came from foundations and another $6.44 million, or 34%, from donations by individuals. Only 8.7% of their revenue came from earned-income sources, such as corporate advertising, sponsorships, content sales and events.
Be Flexible, Iterative and Prudent with Precious Resources
Building an organization while simultaneously doing investigative journalism is complex and brings unfamiliar challenges to many of today’s journalism entrepreneurs. As MinnPost’s Joel Kramer told us, “We have always been a professional journalism site and it has always been part of our mission to support professional journalism and pay for it. But how we do so has changed substantially since we launched,” (interview, June 28, 2011). For instance, at first they had a heavier editorial slant to the team, but learned that they had to add staff to help on the business side: a membership director, technology staff, a part-time CFO and an office manager.
When the author of this report, Elizabeth Osder, worked to help launch ProPublica in 2008, the leadership team had a very clear mission around the journalism it was setting out to do and the impact that it wanted to have. That helped uncover the best, most cost-efficient combination of distribution tactics to deliver their journalism to the right audience at launch and to be nimble enough to evolve to wherever the model would take them.
But the ProPublica team was anticipating spending far more money than needed to get the site up and running. Coming from newspapers, the idea that you could change the site easily later on wasn’t a natural. Knowing that needs would change as the team learned from the market, they instead built a very lightweight, cost-effective website that served both as a marketing vehicle and repository for ongoing investigations, and included a blog. They quickly prioritized promoting and building an email list. They began laying out a roadmap and resource plan to help run the site operations, produce and package content for distribution partners, and have the appetite and bandwidth to explore new technologies that could further their journalism rather than just add features to their website.
From the start, they built and budgeted resources to review, tweak, and tune this platform on a quarterly basis. After a year, there was enough information to move forward with a site redesign built around the ongoing coverage of investigations (which was impractical to plan for at launch, before ProPublica had published much of its signature work). It took almost that long to under- stand necessary roles and responsibilities, and grow a production team to work side by side with reporters to build and customize packages for their media partners, which today exceed 80.
ProPublica was well-funded from launch, and, as we have heard, a solid runway of funding for one or two years can make all the difference to the long-term sustainability of a nonprofit newsroom.
Three years later, ProPublica has won two Pulitzers for its journalism and continued to be nimble in its operations.
ProPublica has deliberately straddled both a direct audience development strategy and a partnership strategy. Playing in both spaces can be complex and costly, so for today its focus remains primarily on partnerships; however, it continues to be aggressive about building direct audience (50,000-plus mailing list, 52,000-plus Twitter followers) and planning for the day when perhaps fewer partner outlets are available.
Whatever approach you use – and there are many – what’s important is that you spend time aligning your mission with the right product and operating tactics to deliver the impact that got you in this business in the first place.
If you are planning a new organization, perhaps the best guide for getting off the ground is a piece on The Knight News Network site by Brant Houston and Andy Hall called “Launching a Nonprofit News Site,” there you will find focused how-tos around starting, running and building an organization.