How journalism startups are making money around the world

For the last two years I have had an opportunity to participate in an ambitious global research project: how journalistic startups are making money in the United States, Japan, the United Kingdom, France and five other countries.

The project is called Sustainable Business Models for Journalism. What did we find? First, bad news: there’s no single, easy solution or amazing new business model that solves all the problems that traditional publishing models have.

But looking through some of the very grassroots operations around the globe, you find some similarities among the sites. Probably the most comforting lesson from these young and old entrepreneurs is the fact that there’s probably no need for an amazing new business model. Journalism is just going through a transformative period from a monopolistic, high-revenue and low competition model to a highly competitive global marketplace. And the ideas and advice we got from these entrepreneurs was not that much different from the advice you find in traditional business literature, startup manuals or even biographies of successful companies.

Here are some general conclusions from the 69 startups we interviewed.

Find your niche. Whatever you do, don’t do the same things as the others do. Or if you do, make sure you do it better in one way or another. Be faster. Or broader. Or more in-depth. Slower. Whatever you do, do it somehow differently than the others. As Ken Fisher from says, don’t try to be 30 seconds faster with the same bloggy content that’s going to be on five other sites in 10 minutes.

Be passionate. Running a website is hard work and you can’t do it with a 9-to-5 attitude. If you truly love what you do, it makes the long hours more tolerable and gives you a competitive edge: you’re willing to work an extra hour. My personal guess is that the readers can smell the passion as well. Especially in France and, surprisingly, in Japan, the divide between “us” — the free journalists — and “them” — the established media — seems to be a strong driver.

Keep it small and agile. The old model of publishing was to design a publication and then hire people to do it. The new model is to have one or two people and see what kind of publication they are able to create.

You are the brain of your own business. Many of the journalists interviewed for our study said they hoped that someone else would do the business side of things for them: contacting possible advertisers, selling the ads and doing all the planning and calculation. David Boraks from said it well: if you are starting a small business and you have a vision how to do it, you can’t turn it over to somebody else and expect it to happen the way you want it to.

Ask for support (aka money). If you know you’re doing a good thing, don’t be afraid to ask for support. Advertisers, especially local or niche ones, might actually like what you do. If they are passionate about candles and think your site about candles is worth reading, they are probably more willing to advertise on your site. If your readers can’t live another day without your passionate and unique candle reviews, they probably are willing to somehow give you money. “People are just looking for a way to support you,” says Doug McLennan from

These are just a few notes from our complete report, which you can read or download here. The website has all the case studies.

Pekka Pekkala is a visiting scholar at USC Annenberg. He is working on a book titled “How to Keep Journalism Profitable” with a two-year grant from the Helsingin Sanomat Foundation. Folow him on Twitter at @pekkapekkala.

Paying for information versus *access* to information: A key distinction for news publishers

You can’t find the right answer if you’re asking the wrong question. If you (or your bosses) aren’t finding a solution for making money from news online, maybe you need to ask yourself some fresh questions about the real nature of your business.

Start by reading a post Dave Winer put up last month called Paywalls are backward-looking. In the piece, Winer focuses on the heart of the news business model over the past century, and shows why traditional thinking about the news business won’t help it survive in the Internet era.

“Before the Internet, news orgs had a natural paywall, the distribution system. If you wanted to read the paper you had to buy the paper. And the ink, and the gasoline it took to get it to where you are. In fact, everything that determined the structure of the news activity, that made it a business, was organized around the distribution system.

“But that’s been over now for quite some time. And paywalls express a desperate wish to go back to a time when there was a reason to pay. Now news, if it wants to continue, must find a new reason.”

Let me back up a moment before advancing Winer’s point. Many beginning news publishers cripple their business by failing to recognize who their customers are. A customer is whoever writes you a check (or gives you a credit card number). Too many publishers naively believe that their customers are their readers, when the customers actually are the advertisers or foundations that are paying the bills to keep the publication running.

In a similar way, many news publishers – rookie and veteran – mistake the benefits that they provide these customers in exchange for that financial support. This is the brilliance of Winer’s post. It illustrates the real value, the real benefit, that news publishers once provided to the market: the ability for information to flow more easily. Customers paid for access to that information distribution system – readers paid for home delivery or newsstand access to the information included in the day’s paper, and advertisers paid for access to those readers.

The Internet, of course, allows information to flow even more efficiently than even newspapers ever could. Which is why the Internet – once widely adopted – meant the inevitable doom for the newspaper business model. Newspapers, with printing presses to pay off and circulations departments to pay, never could hope to deliver information as inexpensively as could publishers on the Internet.

Have you ever heard newspaper publishers lament their failure to install paywalls in the early days of the World Wide Web? “If only we’d started charging upfront,” they say, “our information wouldn’t have been devalued and we wouldn’t be in this financial mess.”

It’s like listening to a four-year-old talk about the Easter Bunny. It’s so naive I actually find it kind of cute, in a completely nihilistic way.

It’s naive because comments such as that betray a belief that what newspapers grew rich selling in the 20th Century was information itself instead of the access to information, as Winer describes. The information that the newspapers were providing (and continue to provide) access to is almost never unique to the news organization reporting it. It’s commodity information – available to anyone on the scene or with access to the source reporting it.

The market opportunity for news publishers was the fact that the average reader isn’t on the scene or doesn’t have access to those sources. So getting access to that information becomes valuable to that reader. That is what the reader was paying for when he or she bought a newspaper – the access to that information.

By making access to the world of information ubiquitous with direct connection to sources, eyewitness accounts, and publishers with cheaper overhead, the Internet has forced news publishers into the marketplace that so many publishers naively believed that they were in before. Now, news publishers really are selling just information, instead of the access to it. And they’re running into trouble because the market’s telling them just how worthless much of that commodity information is to them.

But there is a way out for newspapers – and that’s to embrace the change the Internet has forced and move into the segment of the information business that books – and to a lesser extent, magazines – long have occupied. Newspapers should reinvest in producing and selling information that is unique to their publication, and not readily available to anyone who was on the scene where news occurred.

So what unique information can a news publication provide? Investigations. Perspective. Analysis. And don’t overlook the uniqueness of a specific community of engaged readers, contributing to the publication’s information with their own unique perspectives, reports, and analysis. When well-cultivated by engaged leadership, that community itself can become a publication’s greatest unique asset.

But to produce that information at a low enough cost to compete with the uncounted number of competitors and potential competitors online, a news publication has to eliminate everything else it pays for that doesn’t advance the cause of creating unique information assets. That means ditching everything in the organization that obtains or reproduces commodity content – the stuff people can get elsewhere online. Drop the wire services, the syndicated features, and all the editors and designers who work on them. Eliminate the division between “news” and opinion, and demand reporters who have the expertise to draw informed conclusions from the evidence they report. (And the experience to know – and then report – when they can’t.)

Drop the division between newsroom and online production, and charge your reporters with the responsibility for cultivating a community of readers talking about that beat. Don’t leave investigations for a dedicated team of newsroom hotshots. Make investigation every reporter’s responsibility, and then reach out to other organizations – J-schools, nonprofits, readers and even competitors – who can help you uncover fresh, unique information that your readers will want.

Yeah, it’s a lot of work, but the best independent publishers out there are doing that work, under very low overhead, and if you can’t compete with them, you’ll soon be done in this business.

Then don’t forget that building an audience is only part of building and maintaing a business. You need those customers, too.

Let’s step back and remember why advertisers have been supporting news publishers in the past. Without in-media advertising, business owners had very limited media through which they could deliver information to potential customers. A storekeeper could put up signs around town or hire people to go up and down the street passing out flyers. But media advertising allowed business owners to reach people inside their homes, by interjecting the businesses’ messages into a newspaper, television show, or radio broadcast to which the consumer already had chosen to pay attention. And that’s what advertisers were paying for – access to that information flow.

Again, the Internet tore down barriers separating advertisers from consumers. With email lists, Facebook pages, and Twitter feeds, the Internet allows businesses more media through which to connect directly with their customers. Business owners don’t need advertising as much any more. Yet I believe that some demand for advertising will remain, as businesses look to connect with and acquire new potential customers. But news media hoping to attract that advertising income will have to be able to offer those advertisers sharply defined audiences who are well-qualified as potential customers for that business.

It’s the era of the niche – whether topical or geographic. And if your reporters aren’t producing that targeted, informed, uniquely valuable niche information, you’re not building an audience that any advertiser will pay to reach.

Think non-profit is your salvation? Think again. As we’ve written before, non-profit isn’t a business plan. It’s a tax status. And the foundations that support non-profit journalism are looking to reach desired audiences just as much as advertisers are. Again, if you’re working in the non-profit world, you still have to be delivering unique information to a targeted audience. Otherwise, you’re just not delivering the value your foundation customers demand.

If you’re going to be a success in business, you must at least be able to recognize just what business you’re in. Winer has told us the way toward building a viable news business online. The challenges for news publishers are to put aside their assumptions and to hear him.

Want to cover local? Then you'd better BE local!

Allow me to suggest one more mistake that the newspaper industry made that we shouldn’t allow the slip down the memory hole. It was a practice that I am sure struck many newsroom managers as a smart one… at the time. But it ultimately helped sever ties between publications and their communities, leading to less informed, less engaging coverage that left readers – and advertisers – with fewer reasons to support their local paper.

What was this practice? It was conducting national job searches to fill local reporting positions.

When I began my journalism career, J-school advisers told us to expect to start out at a smaller paper in a national chain, then try to work our way up to larger newsrooms, bigger cities, and more desirable places to live. You had to “pay your dues” in some small town before you could move up to a major metro.

The model was that of an assembly line, where you started by proving yourself on low-risk tasks that weren’t particularly critical to the overall operation, before moving up to higher-speed, higher-pressure jobs with national visibility. (By broadening the candidate pool for every local reporting job, this helped chains keep labor costs down, too.)

But while the smallest papers in a chain might be next to invisible to the suits in corporate HR, they were real, and important, to the people living in the communities they served. Most of those readers weren’t trying to “move up” to some bigger city. They were home, and happy there.

The old newsroom hiring model saw the nation’s communities as interchangeable rungs on a corporate ladder. But, despite the billion-dollar efforts of companies such as Walmart, Target, McDonald’s, and Applebee’s, people in those cities and towns continue to resist their commoditization. Sure, they shop at Walmart and eat at Applebee’s, but only because they’re cheaper than alternatives. (Which often were run out of business by big-chain outlets operating at a loss until they killed off that competition.) Cookie-cutter newspapers could hold onto their local customers only so long as they offered the cheapest way to get information, too.

When online competitors such as Craigslist and Yahoo! News gave readers a cheaper alternative for classified ads and national news headlines, they bailed. And understandably so. It’s hard to appeal to readers’ sense of loyalty to local voices when those voices are recent college grads who’ve only lived in the community for a couple years and who flee the state whenever they get three or more consecutive days off. Those new hires didn’t grow up in the community. They barely know anyone outside the newsroom and the official sources they encounter on their beats. And frankly, they don’t care, either. They’re looking to “move up,” and get out of town.

If you’re a local, you might as well get your local news from a discussion board. At least the people posting there actually know the town, send their kids to school there, and are planning to stick around a while.

My first full-time job in the news industry was in Omaha, Nebraska – a community I’d never stepped foot in before my job interview at the paper. To my surprise, the paper offered me a gig, and with my first student loan payment looming, I took it. I had no business writing for anyone in Omaha, or the states of Nebraska or Iowa. Hey, I tried my best, but I didn’t know the names, the places, the people or the unique issues that mattered to anyone who’d grown up in that state. So I took the hint when the paper tried to run me out of town and eventually rented a truck to move to a city my wife and I knew and loved – her hometown, Denver.

(I worked there for nearly four years until I got recruited to a job in my hometown, Los Angeles, where I continue to live today.)

So as we look for new companies to emerge and redefine the journalism industry online, let’s hope those new leaders won’t make this same mistake, too. Readers deserve writers who are as invested in the community as they are.

And if that expression of idealism does nothing for you as a cold-hearted capitalist, allow me to frame the issue another way: You can’t collect a premium price for a bargain-basement product.

If you’re producing product in the cheapest way possible, you’ll only hold your market share so long as you offer the lowest price available. (Walmart’s learning this the hard way as its bargain-hunting customer base begins to abandon it for dollar stores.) Trust me, even if you think that the cheapest way to run a newsroom is with fresh college grads desperate for a job, they’re still more expensive than outsourcing to writers in Bangalore watching Web cams. Or script kiddies in Eastern Europe writing scraper algorithms. If you want to publish using actual live, local journalists writing your publication, you’ll never be able to operate at lower costs than your online competition. To survive as a business, you’ll need the higher income that only a premium product can command.

So your local writers better really be local writers, people are from – and of – that community. This goes for niche topic sites, too, and not just for geographically focused publications. Writers for niche sites must be insiders of the community they cover, as well – individuals with passion for and personal experience in the topic they cover.

What does this mean? If you’re a manager at a national news chain, it’s time to zero out the relocation budget, if you haven’t already. Make local publications hire exclusively from candidates in their local markets. It’s time to reconnect with those communities. Promote from within at your titles, too. If “outsiders” really want to work at one of your publications, insist that they move to that community on their own, first.

For journalists, it’s time to make an investment in your future by relocating to the community where you want to live and work, if you’re not there already. Then start blogging as soon as you arrive. Build the audience that you will leverage into either your own publishing business or a job at an established local publication.

For journalism students, do the same. Start your career right by going to the best J-school you can get into in the city (or state) where you want to live and work. If your goal is to work in niche-topic publications, rather than covering a geographic community, go ahead and look at big national J-schools. But select the one that also has the best available program in the field you want to cover, too. Either way, immerse yourself in the community you’ll be covering. Only by being in and of the community you want to cover can you make yourself an attractive candidate to the smart publishers who recognize the need to remain connected to their communities.

The market is speaking to us. It wants the era of clueless, disconnected, outsider coverage in journalism to be over. And thank goodness for that. Let’s make it happen.