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April 8, 2015, 9 a.m.
Business Models

In the world of nonprofit news, different paths to sustainability for local and state news sites

A new report from the Knight Foundation finds that nonprofit news organizations are growing audience and diversifying their revenue — but many are still reliant on a small number of foundations to support their journalism.

As the world of nonprofit news matures, the good news is that more news organizations are creating ways to increase their revenue and expand their audience. The bad news: They’re still heavily reliant on grants and philanthropy — leaving outlets at the whim of a few foundations or wealthy individuals.

A new report released this morning from the Knight Foundation found that the revenue produced by the nonprofit news outlets it examined increased by 73 percent on average between 2013 and 2011. They’re also diversifying the way they make money; Knight found that of the organizations they surveyed, 23 percent of revenue came through earned income for the average site in 2013, up from 18 percent in 2011.

But those gains haven’t resulted in greater independent sustainability for most news nonprofits. While a number of sites saw sharp revenue growth, others were flat or saw declines in revenue from 2011 to 2013. According to the report, median revenue was up only 7 percent in 2013 for the nonprofits. And the reliance on wealthy donors — institutional or individual — remained.

The report, “Gaining Ground: How Nonprofit News Ventures Seek Sustainability,” is the latest in an ongoing series from Knight that aim to pull back the curtain on how organizations like MinnPost, The Texas Tribune, The Lens, and the New Haven Independent — most of whom Knight has funded in some way — produce their journalism and operate their business. Knight looked at 20 organizations in total, ranging from local and regional outlets to statewide sites, analyzing budgets, organizational structures, and audience data. (Disclosure: Knight is also a funder of Nieman Lab.)

Overall, the picture is improving: Traffic and audience are up for most. And many are now working to find ways to measure the impact of their reporting in their respective communities, the report says. Between 2011 and 2013, news nonprofits saw their total site visits grow by an average of 75 percent, the report says. Social was the fastest growing referral for nonprofits, increasing by 63 percent on average from 2011 to 2013.

Jon Sotsky, Knight’s director for strategy and assessment, said even with nonprofits developing more earned revenue through events, advertising, and sponsorships, the sector needs to diversify further. “We need to encourage more of that and more long-term thinking, and shift from a survive to a thrive mentality,” he said.


On the question of funding stability, the report shows a gap forming between local news nonprofits and sites with a regional or statewide focus. State or regional organizations saw revenue increase by 55 percent in 2013 compared to 2011. For locals average revenue growth was only 12 percent. (Interestingly, that figure for regional/state sites drops to 45 percent when you take out The Texas Tribune, by most measures the top performer in the space.)

News nonprofits still largely rely on foundation dollars to fund their journalism, but the overall picture is shifting. Foundation funding dropped to 58 percent of nonprofit revenue in 2013, down from 63 percent in 2011. 40 percent of the outlets said foundations provide at least three quarters of their overall revenue.

What’s interesting is how those various types of outlets make the rest of their money. For state and regional sites, foundation funding was 63 percent of revenue in 2013; for local sites, foundations made up 52 percent of revenue. The average in foundation funding for the organizations in the survey was $424,030 in 2013. Knight reported that state and regional outlets had higher growth in foundation support in 2013, growing by 98 percent on average. Locals saw a decline of 8 percent.

But locals have a different advantage. Places like Oakland Local, Voice San Diego, or Charlottesville Tomorrow, are much better at soliciting money from individual donors, according to the report. In 2013, donations and memberships were 26 percent of revenue for the local sites surveyed, compared to only 13 percent for nonprofits with a state or regional focus.

The median local news nonprofit pulled in almost $104,000 in donations and memberships in 2013, with 7 in 10 receiving more than $70,000. State and regional sites median donations were only $29,000, and only 4 in 10 went over $70,000. The good news overall is that the average number of donors is increasing: The average number of donors in 2013 was 757, up from 498 in 2011, which Knight attributes to an increase in donations less than $1,000.

“The difference stems from a stronger donor base of the locals,” Sotsky said. “There’s a more tangible feel to the sites — people use them on a daily basis.”


The world of nonprofit news is not immune to the broader trends in the media, and organizations like the The Texas Tribune and Voice of San Diego have experimented with native advertising. VOSD launched Partner Voices, a section of the site with stories on local nonprofits that are paid for by the local groups themselves or a corporate partner. According to the report, the site made $127,000 in revenue from its community partners program in 2014, which includes the native ad program.

Scott Lewis, CEO of Voice of San Diego, said with Partner Voices they’re able to show the work of San Diego nonprofits and attract money from corporations that want to support those groups. Lewis said the program has been successful because the 10-year-old site has an established presence and reputation in the community. Having that experience also means they know which areas they should focus on to develop new revenue, he said.

“I don’t think we’re going to come up with any new mechanism or product that is a whole new category. But we are really obsessed with creating new products or things in membership or the events space,” he said.

As news nonprofits get older and grow, their organizational structure and budgets can also change. According to the report, editorial functions still receive the most attention at 55 percent of expenses in 2013, up from 51 percent in 2011. Not surprisingly, the larger a nonprofit news site is, the more likely they are to allocate resources outside of editorial; once you’ve got room, and money, to grow, you expand your operations. According to Knight, organizations with budgets exceeding $500,000 dedicated more money to IT and marketing departments than smaller nonprofits did.

“It might be the infancy of the field — you work on your bread and butter, which is editorial, but it shifts over time,” Sotsky said.

One of the report’s recommendations is for organizations to set better business goals, which will give them a better idea where they need to hire and how much leeway they have for experiments in generating revenue or telling stories. The overall goal of the report is to share that information among the nonprofits, but not be prescriptive and have every organization follow the same plan, Sotsky said.

“The issue is not so much to look at these things as McDonald’s franchises — can we build another and copy the exact model in another community?” Sotsky said.

Perhaps no nonprofit news organization has faced that question of replication more often than The Texas Tribune. The Austin-based outlet has had success in raising revenue through events and unique sponsorship packages as well as in cultivating an audience. In conjunction with its nonprofit study, Knight also released a report by Southern Methodist University journalism professor Jake Batsell that examines the strategies that have put the Tribune on stable ground.

While the Tribune has used similar strategies as other nonprofits, Batsell calls the site “aggressively entrepreneurial” in its pursuit of revenue diversity. But the report finds that many of the factors that contributed to the nonprofit’s success may be specific to Texas, a state that boasts many large corporations as well as wealthy residents who occupy a spot on the Forbes 400 list.

Batsell writes that what makes the Tribune unique is a universal understanding from the staff about the need for sustainability:

But perhaps more than any other nonprofit news startup, the Tribune aggressively and unapologetically operates at all levels as a mission-driven business. News, art and tech staffers are mindful that their livelihoods depend on successful events and membership drives, so they actively promote the Tribune in person and on social media.

Batsell said there are many lessons the Tribune offers to other news nonprofits about identifying your audience and investing heavily in the business side of the organization. The work, Batsell said, is figuring out how to execute what’s worked in other organizations within the context of your own.

“It doesn’t add up to a rigid recipe,” Batsell said. “It’s not ‘Texas Tribune in a box.'”

Photo of money cut into pieces by Tax Credits used under a Creative Commons license.

POSTED     April 8, 2015, 9 a.m.
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