Thoughts on sustainability

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

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.
Trying to break 200 Twitter followers @bthewirz
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Unless you push for sustainability, you are not ultimately helping to solve this problem.
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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

Simplified News Business Model
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Content Creation
Marketing & Distribution
Audience Engagement
Mission/Brand

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
Mostly one-direction
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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
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Online News Biz Model 1.0* (Approx.)
Revenue
Content Creation
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
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Problems with Online News 1.0
Ad rates (CPMs) for traditional news are low.
Source: “Lessons from the Trenches”, Salon Presentation, Nov. 2010
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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
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In Online 1.0, only Big (10M+) and small (1-4 staff) are economic
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Source: “The Story So Far” 2011, Columbia Journalism School

Key Differences in Strategy
Small Strategy*
Big Strategy**
*eg Barista, Batavian, West Seattle Blog
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Market location, not audience
Sell ads on a non-CPM basis ($40-$1500/month)
Focus on short form local content
Keep staff minimal & productive (1-2 articles/day/staff member)
Keep CMS simple
Typical revenue of $50-100k
Market audience, not location
Sell ads on CPM basis
Use technology/editorial to optimize content and drive engagement.
Minimize costs by aggregating content and soliciting audience, advertiser content.
Tie reporter pay to page views.
Aggregate niche publications (eg AOL)
**egHuffPo, Examiner, Demand Media

Batavian – Revenue & Cost Strategy
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Key Characteristics:
Minimal Cost Structure
Basic CMS
Non CPM Based Advertising
High Penetration
Based in Genessee County, NY, population ~60k
Founded in 2008, profitable by 2010
~$125k in revenue
50k uniques/month & 500k pageviews
2 person mgmt team + 2 part time staff.
5 pieces of short form content added/day
100 Advertisers
Advertisements priced at $40-260/month (effective RPM of $17).
All articles placed on home page
All 100 advertisers rotated equally across page.
Very Simple CMS
Daily Deals
Source: “The Story So Far” 2011, Columbia Journalism School Study

Online News Biz Strategies 1.5 (in process)
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Content Creation
Audience Engagement
Mission/Brand
Different levels of sustainability requires rethinking each of these components to move beyond ads and subscriptions

Most News Non Profits Only Monetize Mission/Brand.
Mission/Brand
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RULE OF THUMB: Online Donations/Membership = $.30-$.80 per Monthly Unique Visitor (eg 1,000 monthly uniques ~ $500/year)

A Few Are Also Monetizing Content
Mission/Brand
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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

Some have started to think strategically about audience.
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Most Loyal visitors are a very small part of the overall audience
Fans make up 4% of visitors, but 55% of traffic
Fans are 38% more likely to donate than non-fans (per PBS)
Fans care about community and content and are looking for ways to participate online

Key: Build a Community, Not a Portal
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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+

Monetizing Audience is still an open question
Mission/Brand
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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

A handful are looking to leverage marketing/distribution capabilities
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The Civic Commons
St. Louis Beacon
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.

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
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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.
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A startup is an organization formed to search for a repeatable and scalable business model.
-Steve Blank.

Expect to Solve Challenges through Testing & Iteration (like Aristotle)
Startups have problems in 3 key areas:
Management: Set Priorities, Define Key Metrics
Product: Build “Right” Features. Measure, Iterate.
Marketing: Distribution, Distribution, Distribution.
(Search, Social, Mobile)
SOURCE: DAVE MCCLURE, 500 Startups, Metrics4Pirates Presentation, June 2011

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?
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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)
Retention (visits over time, cohort behavior)
Referral (users evangelize to other users)
Note: Paid Solutions drive FOCUS (& pay rent)

To test MVP, First Make Assumptions Explicit
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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

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)

Launch early, iterate often
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Today
Launch
Current Funding Horizon
Current Funding Horizon
2nd Iteration
etc
1st Iteration
Alpha

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

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

Outcomes (from Best to Worst)
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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.

Thoughts on sustainability

by Benoit Wirz

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