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Jan. 15, 2013, 10 a.m.

Across the world, money to support journalism startups comes from a variety of sources

An analysis of 69 journalism startups in 10 countries finds no Holy Grail, but a lot of revenue ideas in action.
Editor’s note: Late last year, a team of researchers put out a usefully comprehensive report on how digital journalism is being financed. The project was called Submojour — sustainable business models for journalism — and it looked at 69 different journalism startups across 10 countries to ask where they were getting revenue and how they were building for the future.

You can download the full report, “Chasing Sustainability On the Net,” which is worth a read, or go through any of the 69 case studies they compiled, browsable by country, business model, organization size, or revenue. But two of the project’s researchers, Johanna Vehkoo and Pekka Pekkala, have written for us a summary of some of their findings.

Many journalists invest their future hopes in the idea of the paywall — the notion of readers paying directly for access to online content sounds tempting for an industry struggling to find revenue. But finding journalistic startups who make a profit by selling original content directly to an audience is a challenge.

Our international research project, Sustainable Business Models for Journalism (submojour.net), built case studies of 69 startups in 10 countries and found only a handful startups where charging for content was a significant part of their business model.1

So if it’s not paywalls, how are the world’s journalistic startups making money online? Our research project looked for answers from three continents. We found that revenue sources differed quite remarkably from country to country — an indication that there are lessons to be learned across boundaries.

Hyperlocal sites still depend on advertising

Both the U.K. and the U.S. have seen a considerable boom in community or ‘hyperlocal’ journalism. Openly Local lists and links to more than 500 of hyperlocal blogs and websites in the U.K. and Ireland, and J-Lab has listed over 1,200 American community news sites in its Community Media Directory. The new group LION aims to be a organizing force for U.S. hyperlocal online publishers.

We interviewed three local websites for our study in the United States. Each sold banner ads at weekly or monthly rates. At DavidsonNews.net in North Carolina, 75 percent of revenues came from banner advertising and classifieds, sold on a monthly basis. David Boraks, the editor-in-chief, noted that some of the stores they work with simply don’t understand the web well enough to grasp alternative advertising sales mechanisms based on clicks or traffic. At The Batavian, operating in upstate New York, most ads are priced per month, some per day. Across the country, West Seattle Blog offers monthly flat-rate display advertising to local businesses.

Typically, these hyperlocals are tiny companies — often so small that ad sales and editorial are handled by the same person. When Howard Owens took over The Batavian, the company had ad reps but it did not work. So he started carrying around media kits, door to door, to almost every business in Genesee County. This is how he describes the sales pitch:

I would just walk in, you know, if they are new. I just walk in and ask if they have heard of the site? They have, great! Talk to them a little bit about it, ask if I am allowed to sit down and say how what we are doing can help promote your business and help get more business for them.

It was almost a disappointment for our research team to find out how strong the old model of display advertising was among many of the websites we studied. But although ad dependency remains strong, some of the sites had found alternative and sometimes innovative ways to monetize their journalism.

Do journalism, sell something else to fund it

In the U.K., we found a few journalistic startups who’ve experiment with business models and have found somewhat unexpected revenue streams — including money made selling something other than their journalism, most often technology. One British example is Tweetminster, which gets its name from a mashup of Twitter and London’s Westminster. Tweetminster automatically curates what experts in U.K. politics and current affairs think is important, based on data and without human intervention. For its clients and partners, however, the company produces analysis of particular industries, topics, or markets — all based on what experts of those fields are paying attention to online. “Everything we do outside of politics we charge for. We sell a license to use our software. It’s an API, so as the clients make more calls, the price goes up,” CEO Alberto Nardelli said.

Blottr is a U.K.-based citizen journalism news service, but its income also comes mainly from its technology. Founder Adam Baker said he realized early on that it would be too difficult to make meaningful revenue on advertising. He said in our interview last year: “We took the view that we’ve got some great technology that powers Blottr. So we’ve engineered that to be able to license it as a white label to other publishers, to enable their users to be contributors as well as consumers. To give you an example, one of our customers is a cosmetic surgery magazine that’s got 12,000 of the world’s best cosmetic surgeons reading their magazine. With our technology powering their site, they’re able to get those users to contribute as well.”

In October, Blottr announced a content syndication division called Newspoint, where Blottr’s breaking news will be made available for professional clients. This pushes Blottr also in the new generation of newswires.

New kinds of news agencies

Another kind of development can be found in Italy, where journalists have founded digital news agencies. The Italian-founded company China Files operates in Beijing, offering in-depth multimedia coverage of China-related news for around 30 Italian and Spanish media outlets. Effecinque focuses its content on media, innovation, and the Internet and serves as a subcontractor for large Italian newspapers and outlets seeking innovative news reporting and visualization products. As the company’s slogan, “Refreshing Journalism”, and its name (it means F5, the refresh key) imply, Effecinque also develops new web-native ways of digital storytelling.

The Irish company Storyful describes itself as the “first news agency of the social media age,” employing more than 20 journalists who discover and verify newsworthy content (like videos from Syria) from the social web and deliver the vetted material to clients, mostly in traditional media. Storyful’s clients have included YouTube, Google, The New York Times, France24, Channel 4, ABC Australia, and The Economist.

The CEO of the U.K.-based Demotix, Turi Munthe, describes his company as “the citizen journalism AP.” Munthe says Demotix has around 5,500 paid contributors around the world. Demotix sells their photographs, videos, and stories to mainstream media, notably The Guardian, The Daily Telegraph, and The Wall Street Journal. The revenue from sales is split 50/50 with the contributors. “We’ve completely ignored the U.S. and are really focused on places like Iran and lots of African countries,” Munthe said. “Our understanding is that AP doesn’t have a staff reporter in 40 percent of the world’s countries, whereas Demotix is in almost every country.” (In November, Demotix was acquired by its main investor, Corbis.)

So have we found the Holy Grail? Nope.

Can journalism thrive as a digital business or is it doomed to merely survive — as the Reuters Institute’s report “Survival is Success” suggests?

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. And unlike their predecessors, these online publications are not generalists but specialists: They do one or two things exceptionally well and leave the rest to others. It remains to be seen if there is still room for traditional media that tries to bundle “all the news that’s fit to print” on a single website, newspaper, or newscast. Based on our research, the new publishers are not finding sustainability with bundles.

Notes
  1. Wondering which companies have managed to bring themselves safely on the black with a paywall? Check out the French Mediapart and two of our Japanese case studies, Videonews and OurPlanet-TV (a rare nonprofit in our study). The Japanese case studies in particular are worth further investigation with their sub-$10/month membership programs and “email magazines” from people’s favorite authors. There’s a paywall model for aggregation as well, coming from Slovakia with Piano Media.
POSTED     Jan. 15, 2013, 10 a.m.
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