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How Community News is Faring

By Michael Remez of the Pew Research Center

In 2011, the landscape of community news websites reached a new level of maturity. Some seed grants ran out, there were more startups, some highly publicized closures and a clearer sense of what is needed to succeed.

Some of the larger and better-established sites – such as The Texas Tribune and MinnPost – continued to build on early successes. Others struggled to gain stability, including The Bay Citizen, which has announced plans to merge with the Berkeley-based Center for Investigative Reporting and its California Watch site. Some didn’t make it. NewWest.net, once a highly praised regional site that covered the Rocky Mountain states, shut down, and the Chicago News Cooperative, which had a partnership with The New York Times, announced early this year that it was suspending operations.

The emerging world of community online news, less than a decade old, can be difficult to assess. It is diffuse and varied. There are well-known sites in large cities partnering with major news organizations and one-person operations in small towns.

To get a sense of what transpired in the last year, we interviewed five experts who watch the industry closely, examined the newest research and talked to several operators in the field. A number of common themes emerged.

Last year, Jon Funabiki, executive director of the Renaissance Journalism Center at San Francisco State University, conducted a survey of community news editors and publishers to get a better sense of the challenges they face on the business side. He concluded that at this point many sites “need expertise and assistance in developing diverse revenue streams because they can no longer rely solely on grants from foundations.”

“We are starting to see evidence that a shakeout is coming,’’ Funabiki said. “There was this rush of entrepreneurship as mostly journalists, many laid off, looked to reinvent themselves.”

At the same time, as traditional news outlets continue to shrink, the new community news sites are also becoming a more critical source of news. For now, their audiences remain small, but time suggests that will change, both through the growing number of partnerships with larger news operations and through demographics. According to a survey by PEJ and the Pew Internet and American Life Project last year, 24% of internet users go to local community news websites at least several times a month now.

Revenue Streams

Some of the shakeout Funabki forsaw has begun. Among the larger sites, the closure of New West and the suspension of the Chicago News Cooperative are two examples. Among smaller startups, there has always been a significant amount of churn. Publishers may choose to shut down for a multitude of reasons, ranging from the viability of the business to the driving person behind it landing a more secure full-time job.

The most successful (and therefore sustainable), sites are those with a range of revenue streams, which can include local foundations, advertising, subscriptions, special events and membership campaigns, for example. The more varied the sources of revenue, the better, said Eric Newton, senior adviser to the president of the John S. and James L. Knight Foundation.

The Knight Foundation helped shepherd many sites with startup grants, but Newton said they must be able to stand on their own. “Local media must have local support to survive,’’ Newton said. He said that Knight works to encourage community foundations to support local startups with a matching grant program. “If you establish a relationship with the community, that is ultimately the most powerful economic engine,” he added.

MinnPost in Minnesota is one example of a site with varied revenue streams that is faring better than most. A nonprofit, MinnPost’s annual report for 2011 shows strong growth in visits to the site and in memberships, and a 19% increase in revenue to $1.5 million. About a quarter of the revenue came from advertising and sponsorships, another 25% came from individual and corporate memberships, 21% came from foundation grants, 20% from a capital campaign and 9% from special events.

Texas Tribune is another successful example of the multiple-revenue source model. Started in 2009, the site has focused on covering the state government in Austin and has specialized in providing data to readers on state salaries and campaign contributions. Its founders have done well in raising money from a range of sources – including foundations, philanthropies, memberships and large conferences that also help bring attention to the site’s work.

Another well-known site, the Voice of San Diego, also has diverse funding sources, though its year was more complicated. The site has enjoyed significant growth in recent years, but it laid off four staffers – including three in its newsroom – at the end of 2011. In a letter to readers, managers said that the site was projecting a slight decrease in revenue for 2012 as it reduces its reliance on grants from national foundations.

Scott Lewis, chief executive of the Voice of San Diego, said, “We had to give ourselves breathing space with payroll.”

But it continues to do well, Lewis said, because its revenue, too, comes from a range of sources: small individual donors, major donors, local community foundations, advertising and media partners – such as the relationship with the local NBC station. In their news coverage, editors try to limit the scope of what they provide both to meet community needs and play to their strengths. The site emphasizes investigative reports and news about local government, education, the arts and quality of life.

Lewis argues that online-only community operations have one distinct advantage over legacy news organizations, such as newspapers that have a hard time escaping costs for printing and distribution. “These operations are not that expensive,” Lewis said. His nonprofit, nonpartisan site, started in 2004, now has a budget of about $1 million and a full-time staff of 10.

Eric Newton of the Knight Foundation said these operations also must diversify how they deploy their resources.  While spending on news is critical, he said, publishers must make sure not to ignore the technology, business and community engagement sides of the equation, factors that all will help bring sustainability.

“The more diverse the pies are the better,’’ Newton said, referring to both revenue and expenses.

Learning New Skills

Many of the online news sites launched in recent years were started by journalists, often people with little business training. To survive now, most experts told us, these operations must either develop business skills or bring in people with that expertise. That is true for both the larger statewide or regional sites and the hyperlocal ones.

“I am convinced that the revenue is there in most communities,’’ said Michele McLellan, a journalist and consultant who developed a program to help these startups when she was a fellow with the Donald W. Reynolds Journalism Institute. “It is the lack of business focus and expertise that is holding them back.”

The Block by Block program she started offers business training and coaching for site publishers, as well as opportunities to share experiences and ideas at annual conferences, the first held in 2010. Universities also are looking at how to how to help these journalists get the needed skills. Jan Schaffer, who runs the J-Lab, which is at American University, said the school is planning to launch a new master’s degree in media entrepreneurship this fall. The program will be a part-time one in partnership between the school of communications and the business school and aimed at working professionals. “Our preference is get people in with a vision for a project,’’ she said, so they can work on specific strategies while earning the degree.

The critical need to bring both journalistic and business skills to the table is a common refrain from those watching this new business model. When the Chicago News Cooperative announced it would suspend operations this February, several analysts noted that its top managers had focused on the journalism – including producing regular copy for The New York Times – but had not made real progress on creating a sustainable business.

A Part of the Community

At the hyperlocal level, some now see greater benefits in going the for-profit route rather than the nonprofit.

McLellan, who co-wrote a report last year for the Knight Foundation entitled “Getting Local: How Nonprofit News Ventures Seek Sustainability,” said she sees a viable business model for smaller, hyperlocal sites that rely heavily on local advertising – if publishers bring the right skills to the task.

One example of this is DavidsonNews.net in Davidson, N.C.  With an intensely local approach to news, the site’s owners started a companion site in nearby Cornelius last year and hope to be able to launch more in the years ahead. Founder David Boraks said the dynamics of his small community, a college town not far from Charlotte, required a different economic calculus than the nonprofit approach adopted by some regional sites. He felt he needed to look at his startup as a small business reaching out to people and other businesses in the community.

“My research convinced me for-profit was the only way to go,’’ Boraks said. He sees nonprofit status as more advantageous in areas where a site owner can tap into community foundation money and a larger potential base of paying members. “In a small town like Davidson with 10,000 people, that won’t work,” he said. “At the very local level, that kind of money is hard to come by.”

But he found he could make his business model work by keeping expenses low – he works out of his home, by selling local advertising, soliciting contributions from readers, holding fund-raisers and offering extra services such as web design. With strong local ties to the community, the site is growing. Boraks used his own money to open the second site last year. He hopes he will be better able to borrow money to start additional sites as the business grows.

Another development is that to make up for limited resources these small sites are organizing to share information. Some 45 sites, including DavidsonNews, Baristanet in New Jersey and NoozHawk in California, banded together in May 2011 to start Authentically Local, a trade association that promotes the virtues of local ownership.

The group’s founders also launched a branding campaign emphasizing that member sites are locally produced and financed, and stressing that the best local journalism emerges from people deeply engaged in their communities.

One key motivation for the organization is to fend off competition from Patch, the hyperlocal news operation run by AOL.  The Patch model was designed to match the best of hyperlocal news — content produced at the neighborhood level — with a national sales force that would leverage that local content for national advertisers. So far, most Patch sites are not turning a profit, despite some optimistic projections in 2011, but the company says it expects revenue to grow substantially in 2012.

More Niche Sites

Those watching this landscape seem to agree that there may be opportunity in specialization — or focusing on a single topic. In a sense, hyperlocal is another form of that. “You will see people picking slivers of the ecosystem that they think are important,’’ Newton said.

Funabiki agreed, saying that it is likely to be easier to raise the needed revenue when promoting coverage of specific issues and beats – such as the statehouse, schools, the environment or investigative reporting – than a general news site. “I think you can really start to narrow your operation,” he said. “The public is often very interested in specific issues and funders are often interested in specific issues.”

Schaffer said niche sites are coming on strong, offering a list of examples, including thenotebook.org, which focuses on public education in Philadelphia, Health News Florida and Oregon Arts Watch. Health News Florida focuses on health issues and policy in the state and is a member of the Investigative News Network, a national consortium of nonprofit news sites started in 2009. Oregon Arts Watch started in 2011 with 11 arts organizations in the Portland area as partners.

Another area of growth is sites covering state governments, McLellan said, citing NJ Spotlight as an example. The site, which is focused on New Jersey state government, won an award for general excellence last year from the Online News Association.

Student Journalism

The industry watchers also see an increase in news operations – both hyperlocal and those with a broader focus – affiliated with colleges and universities. Journalism students at schools such as the University of California at Berkeley, the University of Wisconsin, the University of Miami and the University of Southern California all provide news to nearby communities as part of training for student journalists.

In Florida, Miami students produce Grand Avenue, a site that focuses on community news for Coconut Grove. In Los Angeles, U.S.C. students tackle local news for the diverse communities of South Los Angeles with their Intersections site. At the U.C. Berkeley Graduate School of Journalism, students have created websites to cover two underserved communities. And the list is growing.

Professors at U.S.C.’s Annenberg School for Communication & Journalism thought their students could get real-world experience in an under-covered community not far from their campus. Started in 2009, the site has been funded by the university and grants.

But there are challenges to these university models as well. The funding equation is not easy, said Willa Seidenberg, the Annenberg professor who directs the site. Making matters more difficult, broadband access in the community is limited, forcing website managers to consider other ways of reaching readers – whether through mobile devices such as smartphones or possibly a print quarterly to showcase the students best work.

“We are kind of at a crossroads,’’ Seidenberg said, “trying to think about what we can and what we should do.’’

Partnerships and Social Media

Finally, two other trends appear to be growing in importance: partnership and gravitating to new technology, particularly social media.

“In the old days, we talked about convergence: the same information on different platforms,’’ said Schaffer. “Now we are talking more about networks – repurposing content or giving content a bigger megaphone.”

One of the challenges for new community online operations is how to develop a sufficient audience to help finance the site, whatever the revenue source. An increasingly effective method is to get the content out in front of people in ways other than the website. Partnerships with existing and more established outlets — including local television, public radio and newspapers — are becoming a more accepted path. These sites need content. The new operations need audience.

This is the path that helped make ProPublica among the most successful of the nonprofit news operations in the country. ProPublica, which does investigative reporting, generally partners with a traditional news organization to produce and disseminate the work.

In the community news realm, partnerships are becoming routine. The Voice of San Diego’s relationship with the NBC station in San Diego is a source of revenue for the site, but it also gets its work in front of more people who then might come to the website or become supporters.  One newspaper, The Seattle Times, links to a range of hyperlocal news sites, both community and ethnic, on its website. Many local site owners also are providing insight about community news on local public radio stations.

The other element of expanding dissemination is new technology, particularly given the low cost of social media.

Joaquin Alvarado, until recently the senior vice president for digital innovation for American Public Media, talks more specifically about the importance of using the new technologies to grab the attention of younger adults, who often do not track news closely. “How do we get Millennials invested in news in a way that is important and relevant?” Alvarado asked.

Part of that involves making the best use of new technologies as people increasingly get information on their mobile devices or through social media. It also involves finding ways to make newsgathering more of a two-way street. For example, American Public Media encourages listeners to serve as sources for its journalists through its Public Insight Network.

Many local sites are already using these tools to engage their audiences, encouraging community involvement and feedback. Sites like the Voice of San Diego send out daily e-mails to subscribers highlighting new and breaking stories.   Oakland Local has gained a reputation for using its Facebook page well and even offers social media training as a way to bring in additional revenue.

McLellan said the sites need a variety of ways of interacting with their communities.

“One of the biggest challenges for these sites, especially the smaller ones, is how do you get visible?” she said. “How do you establish yourself? Some of that today is through social media.” From McLellan’s perspective, site publishers and editors must consider every tool available. “The big challenge isn’t starting a site,” she said. “The big challenge is making it sustainable.”

That push for sustainability is highly variable from market to market. Still, the industry watchers expect many of the trends of 2011 to continue in 2012 – new sites will open, others will shut down, the lines will become increasingly blurred between different media sources, social media will play a growing role and publishers will look for promising niches to fill.

J-Lab’s Schaffer said the successful sites continue to take an entrepreneurial approach, despite the tricky business environment.

“You figure out the job that needs to be done and you do it,” Schaffer said. “You can have a business out of that. I think there is no doubt the evolution is ongoing and I think there is no question there is good journalism being produced.”