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July 23, 2015, 10 a.m.
Business Models
LINK: towknight.org  ➚   |   Posted by: Laura Hazard Owen   |   July 23, 2015

A new report from the Tow-Knight Center for Entrepreneurial Journalism, out Thursday, interviewed 22 digital publishers, most of which launched in the last 10 years, to determine best practices for “building ad revenue at local news and niche topic media organizations.”

The report was written by Michele McLellan, founder of Michele’s List, a database of local news startups.

Of the publishers McLellan surveyed, six had 2014 revenues of $100,000 or less; eight made between $100,000 and $500,000; and four had revenue between $500,000 and $1 million. The last two publishers made more: SheFinds had “revenue well over $1 million” and Third Door Media, the parent company of marketing site Search Engine Land, had revenue “in the range of $8 to $10 million.”

Advertising is “the primary or only source of revenue for most” of the publishers surveyed. According to the report:

We found little evidence that organizations are responding to recommendations by experts that they develop multiple revenue streams, including sources other than advertising. On average, ad sales accounted for nearly 80 percent of total 2014 revenue. Six sites reported that 100 percent of their revenue came from advertising; six others said it accounted for 90 percent or more of their revenue.

It’s easy to launch a news startup, but hard to sustain it. For most of the companies surveyed, the founders were “journalists with no experience in sales or running a business.” Little guys suffer in other ways too: They “may be less equipped than their larger, better financed counterparts to tap into surging revenue from mobile advertising,” and it’s harder for them to “develop a range of ad products or to diversify their revenue streams with non-advertising sources such as events, social media or web marketing services, or membership.”

Some of the findings and ideas from the report:

— These companies need “professional advertising operations,” and well-paid “experienced sales professionals.” The payment part is hard: “Smaller sites have more difficulty paying a salary; a high commission is an alternative. At Uptown Messenger in New Orleans, for example, a full-time sales rep makes 30 percent commission up to a monthly sales goal and then commission jumps to 70 percent.”

— Paying these people is worth it. The report offers a case study of Long Island’s Riverhead Local, whose founders “debated whether to add a reporter or a sales assistant. They hired a sales assistant, and more than doubled revenue. With the additional revenue, the site then hired more editorial help. Revenue continued to increase significantly in 2014, when the organization launched a second site. Earnings were in the $200,000-$500,000 range in 2014.”

— Local news sites rely primarily on advertising from local businesses; niche sites can target other advertisers. One way they can do that is by identifying “potential advertisers from companies that send news for editorial consideration and by checking competitive sites for leads,” the way Search Engine Land does. As Third Door Media CEO Chris Elwell said:

“If somebody’s bothering to go through a PR effort to try to influence our editors they have already acknowledged that they are interested in reaching our audience. So going back to them and saying look, ‘whatever happens on the editorial side happens. We have nothing to do with that. But we do have ways to help you reach this audience.'”

The full report is here.

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