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July 29, 2010, noon

The Newsonomics of membership

[Each week, our friend Ken Doctor — author of Newsonomics and longtime watcher of the business side of digital news — writes about the economics of the news business for the Lab.]

New journalism is hungry for new business models. Beyond millions in foundation start-up support, what will sustain these enterprises?

One answer: membership. The notion is borrowed from NPR (née National Public Radio), which we must remind ourselves is no “experiment.” NPR is now more than 40 years old, trying to fight off its own middle-age doldrums by reinventing itself as public media, as digitally oriented as it is radio-oriented — but that’s a topic for another day.

While the daily press is testing paywalls — some with big holes, some with small, some with rungs, some without — news startups are taking a different route, that NPR model. That divide of how best to get readers to pay may be a decisive one when we look back in five years.

For startups, membership is all the rage these days, as these new companies look to it to provide a vital leg in the new stool supporting new journalism. Texas Tribune CEO Evan Smith says his plan calls for a third of the site’s funding to come from memberships, aiming toward a goal of 10,000 members. The Tribune’s been a fast climber, signing up about 1,700 members at a median price of about $100, since launching in November.

MinnPost, though, claims the lead, having built to more than 2,000 members in its two-and-a-half year history. Within the next several weeks, GlobalPost, now one-and-a-half-years-old, will relaunch its own membership program, Passport. Perhaps significantly, GlobalPost built its new offer on the Journalism Online Press+ platform, and that, too, could serve as a model for others, if successful.  Those who run sites that have tested membership have fielded lots of calls from their news media start-up compatriots inquiring how to make membership work, and we can all expect to hear a lot more about it over the next year.

So let’s look at the very early Newsonomics of membership, talking to the architects about their building in process. In the second part of Newsonomics of membership, we’ll look at some public radio data that helps fill out the emerging online model.

MinnPost borrowed the NPR approach of letting readers determine how much they want to contribute, offering everything from a $10 “student” membership to a $5,000 “media mogul” one. Joel Kramer, CEO and editor, says that the most common gifts are either $50 or $100. In 2009, membership contributed to 30% of the site’s $1.2 million, bringing in about $360,000.

Importantly, Kramer is trying to figure out the metrics of membership, and he may be farther along there than others as well.

As the former Star Tribune publisher and editor has moved online-only, he’s studied the new business. One thing that he knows is missing is consistent, useful audience measurement, and it’s interesting that his comments there parallel those of new Newspaper Association of America incoming chairman Mark Contreras, a senior vice president of Scripps. Apples-to-apples audience measurement is key to building digital businesses, and both Kramer and Contreras will tell you it’s missing today.

So Kramer has figured out his own fledgling metrics to assess how well membership is doing. He uses Quantcast data, and here’s his logic.  It’s those readers who come to MinnPost at least twice a month — 27 percent of MinnPost’s visitors — who are most likely to sign up as members. The rest are fly-bys, referred haphazardly by Google and others. That 27 percent now accounts for about 40,000 visitors a month. So Kramer figures that at the current rate, he can expect that five percent of those more frequent visitors — 2,000 people — will become members. (Remember that five-percent number, when we move to part two on membership and look at NPR’s experience.)

For Kramer, the metric is a snapshot. Double the number of more-frequent visitors, and he would expect a doubling of membership. Maybe, though, five percent is just an early number, and that the percentage itself will increase as the site’s service to readers grows in time. If MinnPost could yield 10 percent of its more-frequent visitors, it could have 4,000 members today. That could mean that membership will pay for 60 percent of the bills, or that MinnPost could expand its staff and site.

MinnPost eschews giving members special perks, the kinds of gifts that often accompany NPR pledge drives. “The only perk a member gets is an invitation to core events,” usually staff-hosted affairs where members can mingle with the journalists. MinnRoast, an annual MinnPost event, brought in another $100,000 last year — so we see in this budding business model the link between membership and events.

Membership may all be about building relationships over time.

GlobalPost CEO Phil Balboni believes in relationship-building as well. GlobalPost’s new Journalism Online (JO) model gives it a third try to tweak the membership model. At launch, it went premium, charging $199 annually, but finding few takers. Then, it moved to a $49.95 price point, and has picked up 500 members.

When it launches with Journalism Online, it will offer two membership prices, $29.95 a year or $1.99 a month. Key JO-powered approach is the ability to pop up membership offers after a half dozen or so “content triggers.” When users hit certain parts of the site, or read a certain number of pages, the voluntary membership offer will pop up. That’s key to Balboni, who estimates that one percent or less of those who see membership offers will act on them. One of the current roadblocks, he believes, is that few people see the Passport membership page; increasing membership offer visibility, he hopes, will multiply membership. Key to the Passport offer: Members get to select some story assignments that GlobalPost will pursue.

A veteran of the news trade, Balboni realizes it’s a long-term build: “This is a five- to 15-year effort to get consumer behavior changed.” Balboni would like to see membership build into funding half the budget.

Texas Tribune’s Evan Smith is aiming to make membership pay a third of the freight by the end of Year 3, which would be fall 2012. He figures the site has so far converted less than one percent of its total unique visitors (compared to a little more than one percent for the older MinnPost) as it has burst out of the gate in Texas with lots of promotion. His end-of-2010 goal is 2,600 members, up from the current 1,700. Members pick their level of giving.

Good or poor current audience metrics, make no mistake that this membership business is a game of metrics. Three stand out for now:

  • What percentage of which part of the readership can news sites expect to contribute?
  • How much of their going-forward budgets — and if and when foundation money dries up — can be made up by readers?
  • What’s the median gift?

Those are three key questions, as news people try to inculcate (or as least borrow from NPR) a membership ethic. In the meantime, those who care about nurturing the new news can do something: Join the favorite new enterprise of their choice. Here are the links: MinnPost, GlobalPost, and Texas Tribune.

Photo by Leo Reynolds used under a Creative Commons license.

POSTED     July 29, 2010, noon
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