September 26, 2013

A recent Pew Research Center/Knight Foundation roundtable conference on the future of nonprofit journalism had the feeling of an annual physical. After three hours of poking and probing, the sector was found to be slowly getting stronger but with some serious lingering issues.

On the good news half of the examination, sites aimed at doing serious journalism, often investigative, are growing in number. Pew counted 174 in a study released this June.  And some potential heavyweight funders, including the Bill and Melinda Gates Foundation and MacArthur Foundation, were represented at the meeting.

Another plus is that many of the nonprofit startups are finding partners in legacy media willing to publish their reports to a wider audience. Many ProPublica stories have a national or regional publishing partner, and the Tampa Bay Times’ recent expose of America’s worst charities was a joint project with the Center for Investigative Reporting and CNN. That can open syndication as a possible revenue stream or at least spread the impact of the work beyond an organization’s own site.

The Pew study, and one in progress by Knight, are amplifying earlier reports that the strongest nonprofits are developing diverse sources of support and typically have some of their staff dedicated to the business and technical sides of the venture. However, while that works well for the bigger sites, like ProPublica or Texas Tribune, or a mid-sized one like MinnPost, it is hard to pull off at a small site with two to five employees.

Typically, nonprofit sites are launched with initial funding from a foundation or benefactor. Then the race is on to find support from other smaller foundations and individual donors, while developing advertising or special events as secondary revenue streams.

Dick Tofel, president of ProPublica, said that when the investigative site started in 2007, 90 percent of funding came from Herb and Marion Sandler. Last year, the Sandler percentage fell to 38, and he hopes to reduce it further to 30 this year. In a similar vein, John Thornton, the venture fund financier who launched Texas Tribune, said he had put in his second $1 million contribution and is done.

While operating as a nonprofit has the obvious advantage of attracting tax free donations, Tofel said, he has come to believe that there is a downside as well.

“Operating losses are economically sound if you are building enterprise value,” he said.  So The Huffington Post (barely profitable if at all) sold to AOL, and Twitter, among others, is preparing an initial public offering to go public. But, Tofel continued, “there is no such thing in a nonprofit; you cannot cash out.”

Another challenge is establishing metrics of success. Foundations are accustomed to getting detailed statistics demonstrating impact. But, as American University’s Chuck Lewis explored in a recent paper, hard-charging investigative reporters are unlikely to slow down to gather that documentation, nor is it clear just what constitutes proof that a site is making good on its goals.

Joel Kramer, founder of MinnPost, was blunt on the state of audience metrics. “Uniques are worse than worthless,” he said, since a high percentage of those look quickly at the site or a headline and never come back. However, Kramer has found that readers who return even four times a month are potential donors.

But the biggest issue for the sector is scale and finding major funding for expanding existing sites and starting new ones. Steven Waldman, lead author of the Federal Communications Commission report on shortfalls in robust accountability journalism in the broadband era, said he is still searching for a breakthrough.

“The winners in the new economy,” like Google, Apple and AT&T, Waldman said, are making tens of millions in profit per quarter. “If they would put just a tiny part of that into this problem,” he said, serious journalism could thrive.

There also appear to be some new challenges. Michael Maness, who heads Knight’s Journalism and Media innovation programs, said he still sees too much legacy thinking both in operational management and in content creation and display. He mentioned NPR’s recent redesign as a model of getting rid of “a newspaper-looking site” in favor of strong display on smartphones and tablets.

But modest nonprofits will find those changes hard to bring off and have no access to the capital that top sites like The Wall Street Journal and New York Times are putting into new technology.

Several at the conference mentioned the potential of establishing shared services, both for fundraising, management and tech development. But full details of how that might be done will wait for another day and another conference.

Meanwhile, it was encouraging to sit next to 20-something Elizabeth Green, who has launched a succession of New York education reform sites, and with 12 employees is now larger than average, according to Pew’s classification. Or to chat with Steve Beatty of The Lens in New Orleans, who is finding his site’s stories picked up by and the competing Advocate, as well as public radio.

But even the growth trajectory comes with a caution. Texas Tribune’s Thornton said there was a surge of launches in 2008 and 2009 when it appeared many newspapers might soon drop dead. But that wave, he said, “fizzled when people realized newspapers were not going away,” (though their newsrooms are still shrinking in 2013).

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Rick Edmonds is media business analyst for the Poynter Institute where he has done research and writing for the last fifteen years. His commentary on…
Rick Edmonds

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