For the first time, this year’s Knight News Challenge will be requesting entries in three specific categories: mobile, revenue models, and reputation/credibility. The contest judges won’t be seeking a certain quota of finalists in each category: “It’s much more of a signal to the population at large: These are the areas that need your attention,” Knight consultant Jennifer 8. Lee said on Monday, at a San Francisco information session sponsored by Hacks/Hackers.

Up to now, Lee said the Knight Foundation’s attitude towards the contest has been “we don’t know what news innovation is — you tell us.” But over the past four years, trends have emerged among the contest entries that mirror the broader development of the news business. 2010 was the year of mapping and data visualization projects, Lee said. In 2011, Knight sees innovations in credibility determination, mobile technology, and revenue model generation as key areas of development.

[Update: Lee has clarified some elements of the new News Challenge in a comment here — check it out for more details. Also, since this post was published, the News Challenge has officially announced the details for this year’s contest, which includes an additional category, Community; you can see those here. —Josh]

Credibility in the news business used to be based on the brand reputation of large media outlets. But in a world in which anyone can report, and in which, in Lee’s words, rumors can explode and die within a day on Twitter, there’s a need for new ways to measure and establish credibility. For example, Lee said, “How do you know that this person is more serious reporting out of Tehran, or Iran, than that person?” In the world of online media, rumors can gain momentum more quickly and easily than in the traditional media ecosystem. What kinds of tools and filters could be used to combat hoaxes and determine the trustworthiness of online information? That third category is “the one that’s the most vague — and purposefully so,” Lee said.

The mobile and revenue models categories are more straightforward. Last year, the Chicago news site Windy Citizen won $250,000 to develop a software interface to creates “real-time ads” which constantly update with the most recent information from a business’ Twitter feed or Facebook page. Lee said this was a good example of a revenue model project.

The Knight News Challenge is also increasingly open to awarding funding to for-profit companies who want to build open-source projects. Last cycle, one of the grantees was Stamen Design, a top data visualization firm whose founder and employees had a proven commitment to making open source tools in their free time. Knight provided them with $400,000 to dedicate staff hours to projects that they would previously have done on weekends. There are many different ways of making Knight funding viable for for-profit companies, Lee said, so long as the companies can carefully document how the foundation funding is being applied to open-source work. “You can create the open-sourcey version of your project. That part becomes open source, and the other one doesnt,” Lee said.

Last year, out of 2,300 initial applications, the Knight Foundation ultimately made 12 grants totaling about $3 million. After hearing the KNC discussed at the meeting, here are some of the elements I took away as key to building the perfect News Challenge application — and some of the potential pitfalls that could lead to an early rejection.

— A working prototype is great. When the creators of Davis Wiki (which the Lab has been following for a while) applied for grant funding to expand their project, they weren’t just pitching a concept. They could point judges to a thriving local website which collects community insight and serves as an open forum for residents to deal with everything from scam artists to lost kittens.

As LocalWiki’s Philip Neustrom explained, one in seven people in Davis, Calif., have contributed material to Davis Wiki, and in a week “basically half” of the city’s residents visit the site. This June, Davis Wiki made The New York Times when residents used the site to assemble information about a local scam artist, the “Crying Girl.”

Neustrom and Mike Ivanov co-founded Davis Wiki in 2004. So by the time they were applying for a 2010 KNC grant, they already had a mature, well-developed site to demonstrate the viability of what they were planning to do.

— Your project should be sustainable. Knight doesn’t want the projects they fund to wither away as soon as the grant money runs out. In the case of LocalWiki, what may be the best proof of their sustainability was actually made after they won Knight funding. Their recent Kickstarter campaign, which closed last month, raised $26,324 for outreach and education work, and 98 percent of that came from Davis community members, Neustrom said. Davis residents helped raise money by organizing a dance party, a silent auction, and fundraising nights at a bar — evidence that future LocalWiki sites will be able to build grassroots support.

— Your project should be catalytic. As a project reviewer, Lee said she looks for ideas that will catalyze development in a larger area. That means not just having a proven concept, but having one that’s scalable and that brings innovation to an area that needs attention.

Out of 2,300 applicants last year, only 500 were asked to provide a full proposal, and 50 of those became finalists. In the final round, Lee said, there was a lot of consensus between the judges about what projects were ultimately promising. The judges were allowed to apportion their votes between different projects, and 28 of the 50 got no votes, Lee said. Among the common problems with proposals:

— Don’t ask Knight to fund content. Lee said the KNC receives many proposals for, say, money to start a hyperlocal blog in North Carolina. But while the idea of a hyperlocal blog was innovative five or six years ago, Lee said, “at this point, it’s no longer cutting edge. The point of the Knight News Challenge is to encourage innovation, creativity.”

— Don’t apply with projects that don’t fit Knight’s mission. As with any contest, some projects try to shoehorn themselves into an inappropriate category for the sake of funding. A grant to do a project using SMS to provide health information in Africa, for example, would be “too specific to be interesting to the Knight News Challenge,” Lee said.

— Don’t be vague. For example: applying to create “a news aggregator.”

— Avoid generic citizen journalism projects. Say a group wanted to take Flip cams and give them to inner city kids as an experiment in citizen journalism. “We’re not totally into the citizen journalism thing anymore,” Lee said. “It has been given its chance to do its thing and kind of didn’t do its thing that well.”

— Have the credibility to make the project work. An applicant may have a good idea for an innovative project, but he or she also has to have the experience and credibility to actually pull it off. One tip-off that credibility is lacking? If he or she asks for an amount of grant funding that’s disproportional to the realistic needs of the project.

[Disclosure: Both Knight Foundation and Lee have been financial supporters of the Lab.]