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June 1, 2016, 10:51 a.m.
Business Models
LINK: towknight.org  ➚   |   Posted by: Laura Hazard Owen   |   June 1, 2016

Local independent online news publishers are still heavily dependent on advertising as their primary form of revenue, but they’re experimenting with more ad formats, especially sponsored content, according to a new survey of 93 local news publishers.

The survey was conducted in March and April of this year by Michele McLellan of Michele’s List, a database of local news sites run in partnership with CUNY’s Tow-Knight Center for Entrepreneurial Journalism. McLellan has run the survey annually since 2010.

The good news is that 78 percent of respondents said their revenue increased in 2015 (up from 70 percent who reported revenue increases in the previous year’s survey). Plus, 75 percent of the publishers are paying themselves, up from 60 percent in 2015. Among the findings:

More than half (57 percent) reported $100,000 or less in revenue in 2015, including 39 percent with $50,000 or less. In the 2015 survey, more sites reported these low revenue levels — 66 percent made $100,000 or less, including 53 percent that made $50,000 or less.

More than three quarters (78 percent) reported that their revenue increased in 2015, including 13 percent that said their income doubled or more and another 29 percent that said their revenue increased by 50 percent or more. The average among those that reported increases was more than 40 percent. In the 2015 survey, 70 percent reported revenue increases.

Advertising is the primary source of revenue — 84 percent of the sites, nearly all of them for profit ventures, said advertising accounted for 50 percent or more of their revenue. Twenty percent said advertising was their sole source of revenue, compared to nearly a third that said that the year before. Still, others who listed local advertising as the primary source listed only minor revenue flows from other sources such as business services, events, national advertising (contextual such as Adsense), small donations, syndication, subscriptions and merchandise sales.

Among nonprofit sites, about half said foundation grants accounted for 50 percent or more of their annual revenue while others said sponsorships or large donations were the primary source. Six nonprofits said no single source accounted for half or more of their revenue, indicating they have diversified their revenue flows. Each of the six cited a mix of sources that each a percentage of their total revenue: foundations (4 sites), large donations (3 sites), syndication, training, small donations, membership, local advertising and sponsorships (one site each).

Among the sites that sell advertising, nearly all (98 percent) said they sell traditional web display advertising and 95 percent said they sell display advertising directly to local customers. Only 24 percent said they publish network or agency advertising. (Local publishers often say this advertising detracts from the local feel of their sites and may undercut them with local businesses that can advertise on their sites through networks at a lower cost.)

In a major change from a year ago, 51 percent of those that sell advertising said they are now selling native advertising or sponsored content, compared to about 20 percent a year earlier. Twenty percent sell placement on a business directory and only 10 percent produce video advertising.

Some of the changes over last year, McLellan writes, may be due to the fact that this year’s survey drew more responses from nonprofits than last year’s did; nonprofits are “lean operations but tend to be better funded and have more formal structures than the for-profit bootstraps.” And, on the nonprofit side, “it is impressive that six sites have diversified their revenue sources to a point where no one source accounts for 50 percent of the total.”

The full survey results are here.

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