Seed money and angel investment in online journalism exist, but when news startups underestimate the importance of business development, they set themselves up for long term frustration and possible failure.
Many news startups go into business with a noble mission: to do high quality journalism. Yet failure to monetize traffic online and explore multiple revenue streams can put this worthy goal out of reach in the long term. Investing time and money into business development upfront isn’t very exciting, and it may delay some of that hard-hitting investigation and reporting, but it helps ensure the news organization survives.
Adding to the startup publisher’s difficulty is that the next generation business model for journalism hasn’t really taken shape yet as the shift to digital and mobile news continues. Successful news gathering operations diversify revenue streams with advertising, sponsorships, job boards, and other online monetization strategies. There are many reasons why news startups need to develop their business strategies from the outset. Here are four reasons you need business development to monetize traffic.
1. Because the Old Business Model Is Obsolete
Advertising-supported journalism is extremely difficult in the digital age, particularly for smaller news organizations. While advertising is still a way to monetize traffic on the web, the idea of advertising supporting a thriving news operation is out of date. What’s the new business model? No one has really locked that down yet, because news delivery didn’t have time to settle into a web delivery model before mobile devices became ubiquitous. Sure, some news organizations are able to survive through advertising supplemented by subscriptions, but today these are the exceptions rather than the rule.
2. Because Seed Grants Aren’t ”Perennial”
Seed grants are wonderful, but they have their problems. A Pew Research study of nonprofit news organizations found that having seed money without having a solid business plan puts news organizations in peril. Many grants that are intended to last more than one year have to be booked in their entirety in the year they’re received, and this can lead to a sense of complacency. Furthermore, many such grants are not renewed when their term is up, and organizations have to scramble to replace this funding if they don’t have a good business plan and use seed money wisely. Many journalists are overly enthusiastic about the journalistic process and fail to appreciate the importance of a business plan to support their journalism until it’s too late.
3. Because Even the Smallest Businesses Are Complex
Small news startups are simpler than huge news gathering operations, but they’re still not simple. Too much idealism can lead to dependence on benefactors, who are under no obligation to continue funding journalistic enterprises. In fact, the Pew study found that the news organizations most likely to have continuing support from a foundation are often not straight news operations, but editorial operations that have to toe the line of the foundation’s political leanings or risk losing funding. Even a two-person news operation needs a business development plan that includes a profit and loss statement and a clear understanding of the cost of goods and services.
4. Because Diversifying Revenue Assures a Brighter, More Flexible Future
Many organizations with multiple revenue streams nevertheless depend heavily on one source for most of their funding. Typical revenue streams include grants, donors, advertisers, events, and media partnerships. Often the bulk of revenue comes from foundation grants, which are not guaranteed to renew. This can lead to a chronic need to replenish grants and chase other funding sources. It’s critical that before grants run out that the organization has the expertise to broaden the base of funding.
The nonprofit news organizations in the Pew survey generally realize the need for business, marketing, and fundraising expertise on top of editorial staffing, and most found ”finding the time to focus on the business side of the operation” to be a major challenge. They also found the increased competition for grant money to be a major challenge.
Though Pew only surveyed nonprofit news organizations, the information applies to any type of news gathering operation. To succeed in news today, organizations have to monetize traffic through online advertising, job boards, sponsorships, training programs, and ecommerce. While grants and seed money are welcome, organizations have to prepare to wean themselves from these funding sources for long term revenue development, because grants and seed capital won’t be there forever.