The state of independent local online news, part 5: Outsourcing as a path to profitability?

[Editor’s note: This is day five of OJR’s a week-long look at the state of independent local online news start-ups. Each day’s report will include a feature article, as well as a Q&A with one or more of the day’s sources. If you missed the first four installments, here they are:
Part 1: Sites on the rise; business models remain elusive
Part 2: Experience makes MinnPost a top online new startup
Part 3: No paper? No problem! News companies use the Web to enter new markets
Part 4: Seeking consistency from grassroots reporting]

James Macpherson learned a lesson last year when kicked up a journalism fuss over plans to outsource reporting on his Pasadena website to journalists in India.

“Never get talked out of your instincts,” he told me in a phone interview. When he forgot that adage, he said, “I got in the hole really fast.”

Macpherson, who’s run the news website “Pasadena Now” for the last four years, was so shaken by the criticism he received over his outsourcing plan that he immediately hired four reporters in what he said was an attempt to prove his journalism bona fides.

Macpherson said he almost immediately began losing money. “We did a great job. But it cost $5,000 a week… There was no way I could pay for it.”

So Macpherson got rid of the reporters and went back to his outsourcing plan, which he says is working. (He told an anecdote of how his workers in India delivered him a transcript of a 20-minute press conference at CityHall, about 90 minutes after the event. The cost? $1.70 or $1.80, he said.)

About five reporters in India contribute to the site, mainly by watching webcasts or listening to audio of government meetings and then writing stories.

Macpherson’s for-profit site, rich in community events, arts and culture, is now basically a two-person operation, with lots of help from citizen volunteers – though he doesn’t believe in citizen journalism per se.

Macpherson figures there’s a great future ahead for Pasadena Now. He’s experimenting with Pasadena Hoy, a Spanish language site – he can get translation done for 59 cents per 100 words. And he figures he can make some money on Internet advertising, though not directly.

“My approach is not to sell online advertising,” he said. “It’s to sell the Internet to our clients. We’ll help them develop e-commerce at their own sites. I don’t think newspapers can be in the business of just selling online business on their sites. That’s not a proposition that will keep anyone alive.”


Interview with James Macpherson, who runs the Pasadena Now Website in Pasadena, Calif.

Q. What’s become of your outsourcing experiment?

A. I’ve reverted to, refined, and expanded upon people who do not live in Pasadena to create content. At one time I had 4 full-time reporters and, in my opinion, we were doing a great job. But it was financially unsustainable. I did that because I was stung by the criticism about outsourcing.

Q. Can you be more specific?

A. Technology today permits a reporter to virtually experience an event, regardless of where the reporter is located geographically. This reporter can experience an event in real time, and can therefore report with great authority what’s happening. I’m developing long-distance techniques for reporters who aren’t physically present.

I primarily work with Indians. Many of them can produce very well-written AP style stories. Many of them have gone to American universities. The person I’m working with the most now spent 12 years in New York. With Skype and high-speed and new Web applications, they’ve enabled me to do amazing things. There was a press conference Monday. I get transcriptions produced very cheaply. About 90 minutes later I had a transcript of the 20-minute press conference. I think it cost me $1.70 or $1.80.

We’re now experimenting with Pasadena Hoy, a Spanish language site. Translation costs me 59 cents per 100 words. I can afford that. And the community needs it.

Q. What do you consider the heart and soul of Pasadena Now?

A. The heartbeat of what we do has turned out to be coverage of community events – events that people sometimes might consider hokey. Award dinners, benefits, that kind of thing. These are events that typically don’t get covered. We have a huge events calendar, which is the second part of what we do. And we are working slowly to returning to a provider of hard news. That’s a money-losing proposition right now, but we’ll get back to it.

Q. How will you do that?

A. We’re going to do it with the community’s help, through establishing a Twitter force and salting the community with more observers and neighborhood associations. I don’t mean citizen journalism. What we are now is not where we want to be.

Q. How do you distinguish citizen journalism from community observers?

A. I like the pro-am model where the amateur people provide the raw information, the raw data. The point is for citizens to Twitter information they have observed. We want their raw information. But we will vet their observation in the way journalists do.
There’s too much inaccuracy and naiveté in a lot of citizen journalism I’m seeing.

Q. Tell me about your metrics – site traffic, profitability and so on.

A. We get about 63,000 unique readers a month. We also have an e-mailed newsletter that goes out every Thursday and we have 19,976 subscribers – mainly an arts and entertainment e-mail. The company is a for-profit company. And someday, just like General Motors, we too might make a profit. Most Pasadena merchants seem to be antediluvian in their attitudes. The Internet is something that they just don’t comprehend. But I don’t give up easily.

Q. What’s your take on the future of community-wide, general-interest news sites such as yours? Can they be successful?

A. I hope they can be. Pasadena is a city of real contrasts. We have billionaires living here. We have 15,000 out of 20,000 students who need subsidized lunches. We all need to live here. We all need to know more about each other. We all need to draw together.
I would like to be one place everyone goes to. We don’t take editorial positions. We try to be totally open to all these groups.

Q. What’s you staff look like?

A. Just Candice (Merrill, assistant editor) and me. When I hired those four reporters we had education, government/city hall, an all-purpose general reporter, a breaking news reporter. We did a great job. But it cost $5,000 a week. I couldn’t do it. Our readership went up. It was great. But there was no way I could pay for it. Never get talked out of your instincts. I got in the hole really fast.

In practice now, with the number of technological advances so prevalent, we now have people in India who are questioning the mayor by cell phone. And a senior citizen volunteer for us is arranging for the conversation, and has a video cam to record it.

Q. What else should we know about Pasadena Now?

A. There’s such potential now. I would love to have community publications syndicated, where something that’s happening in Pasadena we could provide that information to local television and the LA Times with video, audio, transcripts and so on. We should be doing partnering with the local Pasadena paper (Pasadena Star-News). There’s real room here for information sharing.

Q. Advertising?

A. We have no sales staff. One of our best advertisers was Pasadena Ford, which shut down a month-and-a-half ago. My approach is not to sell online advertising; it’s to sell the Internet to our clients. We’ll help them develop e-commerce, their own site. I don’t think newspapers can be in the business of just selling online business on their sites. That’s not a proposition that will keep anyone alive.

David Westphal is executive in residence at the USC Annenberg School for Communication. He is affiliated with Annenberg’s Center for Communication Leadership and the Knight Digital Media Center.

Monday: A conversation with Gary Kebbel of the Knight Foundation, and a wrap-up.

About David Westphal

After almost four decades in newspapering, I've made the jump to academia at USC's Annenberg Journalism School in Los Angeles. I hope to use my recent experience as head of McClatchy's Washington Bureau to write about the revolution that's taking place in journalism -- and in particular to study new-media business models. I'm a senior fellow at Annenberg's Center on Communication Leadership and Policy, and also affiliated with the Knight Digital Media Center.