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Thoughts on sustainability

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Thoughts on challenges and approaches to making online news financially sustainable, focusing on nonprofit news organizations.

Thoughts on challenges and approaches to making online news financially sustainable, focusing on nonprofit news organizations.


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  • Love and Guilt
  • -Note that the bulk of costs are now in content creation, put further pressure on traditional news.
  • Transcript

    • 1. Thoughts on SustainabilityKCIC Bootcamp 2011
      Ben Wirz
      Director of Business Consulting
      Knight Foundation
      #kcsustain
      The problem facing American journalism is not fundamentally an audience problem or a credibility problem. It is a revenue problem.
      -Pew Project for Excellence in Journalism
    • 2. About Ben
      Russia/Journalism/Investment Banking
      Private Equity (11 Years)
      Mgmt @ 2 start-up companies
      Business Dvlt, Strategic Planning, Finance
      • Joined KF in 2010, focus on working with grantees on sustainability & growth challenges.
      • 3. Trying to break 200 Twitter followers @bthewirz
      1
    • 4. Unless you push for sustainability, you are not ultimately helping to solve this problem.
      2
      The problem facing American journalism is not fundamentally an audience problem or a credibility problem. It is a revenue problem.
      -Pew Project for Excellence in Journalism
      $180M/yr invested in journalism by foundations 2007-2010
      $1.6B/yr editorial cuts by legacy newspapers.
      Source:”The Information Needs of Communities”, FCC, June 2011
    • 5. Simplified News Business Model
      3
      Content Creation
      Marketing & Distribution
      Audience Engagement
      Mission/Brand
    • 6. 80’s Newspaper Revenue Model
      Revenue
      25% Subscriptions
      75% Advertisement
      Costs
      15% Content Creation
      75% Marketing & Distribution
      • High cost of distribution, natural geographic monopolies, limited audience choice & aggregated bundles of content
      • 7. Mostly one-direction
      4
    • 8. But then along comes…
      …the
      internet
      -Cost of distribution goes to 0
      -Advertising divorces content
      -75% of online ads go to Google & FB
      -Content is unbundled
      5
    • 9. Online News Biz Model 1.0* (Approx.)
      Revenue
      Content Creation
      Marketing & Distribution
      Audience Engagement
      0-10% Subscriptions
      90-100% Advertisement
      Content shared & aggregated
      Social Sharing
      Audience contributes content
      Costs
      60-70% Content Creation
      10-20% Marketing & Distribution
      *eg Salon, HuffPo, Alaska Dispatch, BaristaNet
      6
    • 10. Problems with Online News 1.0
      Ad rates (CPMs) for traditional news are low.
      Source: “Lessons from the Trenches”, Salon Presentation, Nov. 2010
      7
    • 11. Problems with Online News 1.0
      2) Costs of creating news (particularly long form and investigative) are high
      Sample Costs, released by Salon @ 5.5M monthly uniques & 45M PageViews
      Versus RPM of $9
      Source: “Lessons from the Trenches”, Salon Presentation, Nov. 2010
      8
    • 12. In Online 1.0, only Big (10M+) and small (1-4 staff) are economic
      9
      Source: “The Story So Far” 2011, Columbia Journalism School
    • 13. Key Differences in Strategy
      Small Strategy*
      Big Strategy**
      *eg Barista, Batavian, West Seattle Blog
      10
      • Market location, not audience
      • 14. Sell ads on a non-CPM basis ($40-$1500/month)
      • 15. Focus on short form local content
      • 16. Keep staff minimal & productive (1-2 articles/day/staff member)
      • 17. Keep CMS simple
      • 18. Typical revenue of $50-100k
      • 19. Market audience, not location
      • 20. Sell ads on CPM basis
      • 21. Use technology/editorial to optimize content and drive engagement.
      • 22. Minimize costs by aggregating content and soliciting audience, advertiser content.
      • 23. Tie reporter pay to page views.
      • 24. Aggregate niche publications (eg AOL)
      **egHuffPo, Examiner, Demand Media
    • 25. Batavian – Revenue & Cost Strategy
      11
      Key Characteristics:
      • Minimal Cost Structure
      • 26. Basic CMS
      • 27. Non CPM Based Advertising
      • 28. High Penetration
      • 29. Based in Genessee County, NY, population ~60k
      • 30. Founded in 2008, profitable by 2010
      • 31. ~$125k in revenue
      • 32. 50k uniques/month & 500k pageviews
      • 33. 2 person mgmt team + 2 part time staff.
      • 34. 5 pieces of short form content added/day
      • 35. 100 Advertisers
      • 36. Advertisements priced at $40-260/month (effective RPM of $17).
      • 37. All articles placed on home page
      • 38. All 100 advertisers rotated equally across page.
      • 39. Very Simple CMS
      • 40. Daily Deals
      Source: “The Story So Far” 2011, Columbia Journalism School Study
    • 41. Online News Biz Strategies 1.5 (in process)
      12
      Content Creation
      Marketing & Distribution
      Audience Engagement
      Mission/Brand
      Different levels of sustainability requires rethinking each of these components to move beyond ads and subscriptions
    • 42. Most News Non Profits Only Monetize Mission/Brand.
      Mission/Brand
      13
      RULE OF THUMB: Online Donations/Membership = $.30-$.80 per Monthly Unique Visitor (eg 1,000 monthly uniques ~ $500/year)
    • 43. A Few Are Also Monetizing Content
      Mission/Brand
      14
      RULES OF THUMB:
      1: Establish value early (invoice everyone, even if its free)
      2: Syndicate with multiple partners (Reuters, Newscred, Digital Scirocco, AP, Kindle Singles, etc)
      3: The more unique and/or analytical content is, the more valuable.
      4. Aggregate/Share content from other sources to reduce your own costs
    • 44. Some have started to think strategically about audience.
      15
      • Most Loyal visitors are a very small part of the overall audience
      • 45. Fans make up 4% of visitors, but 55% of traffic
      • 46. Fans are 38% more likely to donate than non-fans (per PBS)
      • 47. Fans care about community and content and are looking for ways to participate online
    • Key: Build a Community, Not a Portal
      16
      Note: Technologies to drive engagement are getting cheaper and can be used, increasingly, by smaller sites.
      Check out: Parse.ly, Outbrain, Envolve, Double Recall,
      OnePass, Press+
    • 48. Monetizing Audience is still an open question
      Mission/Brand
      17
      RULE OF THUMB: Pay metering (flexible pay walls) are NOT about making everyone pay for content, they are about identifying and isolating fans and enthusiasts and engaging them around their enthusiasm for the site.
      RULE OF THUMB: Advertising not CPM based “The advertisers on our site are not doing it because they expect click-throughs and new customers; rather, they look at it as being a good civic-minded organization.” –GablesHomePage
    • 49. A handful are looking to leverage marketing/distribution capabilities
      18
      • The Civic Commons
      • 50. St. Louis Beacon
      • 51. Oakland Local (for profit)
      The Civic Commons is more than just an online engagement platform. We work closely with stakeholders in the community to give as many citizens as possible a voice in the process. The Flats project is no different. We are conducting engagement activities at various locations in the Flats and conducting community meetings to engage residents, property owners and organizations in the Flats community.
    • 52. How to Figure It Out (Overview)
      Start by monetizing the aspect of your organization where you think that you create the most value.
      Integrate monetization efforts with the process of content creation, distribution and audience engagement.
      Copy as much as possible from organizations that you think have a model that makes sense for you.
      Practice some strategic “Revenue Promiscuity”
      Think about trying at least one monetization technique from each bucket.
      As much as possible, measure your success/failure in each of your monetization efforts
      19
    • 53. Think of yourself as a startup (or Plato)
      Accept that you don’t know.
      Set out explicitly to figure it out.
      Do not ignore the problem.
      Stay lean.
      20
      A startup is an organization formed to search for a repeatable and scalable business model.
      -Steve Blank.
    • 54. Expect to Solve Challenges through Testing & Iteration (like Aristotle)
      Startups have problems in 3 key areas:
      • Management: Set Priorities, Define Key Metrics
      • 55. Product: Build “Right” Features. Measure, Iterate.
      • 56. Marketing: Distribution, Distribution, Distribution.
      (Search, Social, Mobile)
      SOURCE: DAVE MCCLURE, 500 Startups, Metrics4Pirates Presentation, June 2011
    • 57. Postulate a Value Proposition
      Who is your customer?
      A) The person whose life you’re trying to change
      What are you offering that will make their lives better?
      What minimum viable product will test this value proposition?
      How will you know if customer’s life is better?
      22
    • 58. What is Minimum Viable Product (MVP?
      MVP = F(Customer, Problem, Time or $$$)
      Focus on CUSTOMER
      Qualitative Discovery, Quantitative Validation
      Get to know habits, problems, desires (FUN MATTERS)
      what causes pain?  what causes pleasure?
      Define 1-5 TESTABLE Conversion Metrics of Value
      Attention/Usage (session time, clicks)
      Customer Data (email, connect, profile)
      • Revenue (direct or indirect)
      • 59. Retention (visits over time, cohort behavior)
      • 60. Referral (users evangelize to other users)
      Note: Paid Solutions drive FOCUS (& pay rent) 
      SOURCE: DAVE MCCLURE, 500 Startups, Metrics4Pirates Presentation, June 2011
    • 61. To test MVP, First Make Assumptions Explicit
      24
      How many monthly uniques/page views will you have
      What % of readers will donate?
      What % of registered readers will donate?
      How many registered users will you need?
      Is this realistic?
      What % of target audience does this imply?
      What growth rate will that require in registered users
      What % of non registered readers will donate
      How many non registered readers will you need
      What growth rate will that require
      What will average donation size be
      Registered vs. Unregistered
      Monthly/Annual/One-time
    • 62. Boil down assumptions to 5-7 key Metrics that you can measure
      Seven metrics that matter:
      Acquisition: (rate of gaining new users)
      Engagement: (how deeply are you engaging users)
      Virality: (new customers coming from existing customers)
      Monetization: (% of total users participating in the business)
      Churn: (loss of existing users)
      Lifetime customer value (projected monetization returns by class of customers)
      Program Productive (Yield on promotional activities, both paid and viral)
      Source: Escape Velocity, Geoffrey Moore (2011)
    • 63. Launch early, iterate often
      26
      Today
      Launch
      Current Funding Horizon
      Current Funding Horizon
      2nd Iteration
      etc
      1st Iteration
      Alpha
    • 64. Look for Product/Market Fit
      PMF = F(Customer, Solution, Alternatives*)
      Product / Market Fit occurs when:
      Customers like your stuff better than other options
      Not static, Not optimal – just Local Max 4 F(customers, solution, time)
      make sure you’re moving in optimal direction 2 local max
      Q: what competitive solutions are available?
      … that your customers know about?
      how are you diff/same? 
      in ways that people care about? (will pay for)
      KILL a FEATURE regularly (or rotate 1% tests)
      Q: what is MOST $ cust pay 4 LEAST func MVP relative 2 BEST alt?
      NICHE 2 WIN: RE-define cust + DIFFerentiated features
      SOURCE: DAVE MCCLURE, 500 Startups, Metrics4Pirates Presentation, June 2011
    • 65. Develop a marketing strategy based on what customers are doing
      Q: What channels? Which users? Why?
      A: High Volume (#), Low Cost ($), High Conv (%)
      Design & Test Multiple Marketing Channels + Campaigns
      Select & Focus on Best-Performing Channels & Themes
      Optimize for conversion to target CTAs, not just site/landing page
      Match/Drive channel cost to/below revenue potential
      Low-Hanging Fruit:
      Blogs
      SEO/SEM
      Landing Pages
      Automated Emails
      SOURCE: DAVE MCCLURE, 500 Startups, Metrics4Pirates Presentation, June 2011
    • 66. Outcomes (from Best to Worst)
      29
      Success
      Failure (allows for better resource allocation)
      ??? Not Sure
      Be sure you know what success & failure look like!
      This is more difficult in a nonprofit context.