We’re big believers in for-profit, advertising-supported business models for local sites and blogs. Our business at GrowthSpur is based on helping sites with that model. But what happens if you want to go the non-profit route?
Some nascent bloggers seem to think the “non-profit” option for setting up their business is some sort of a magic bullet for financial success. Apparently they figure that non-profit status exempts them not just from taxes, but from many of the seemingly harder parts of running a business—selling advertising, finding investors, having to turn a profit, etc. So they incorporate their new local startup operation with non-profit tax status.
Unfortunately, it’s not that easy. Non-profit status doesn’t remove a basic fact of business life: You still have to break even. You’ve got to find a way to bring in enough money to cover your costs. That simple rule of economics isn’t repealed when you’re a non-profit. (By the way, unless you work hard at making money, you’re likely to be non-profit even without non-profit status. But that’s another story.)
We’re not lawyers, so please don’t take this as definitive advice—but what non-profit status affects is how the IRS views your business (as tax-exempt), how you can raise money (basically, by soliciting donations), what you can do with any money left over after you pay the bills (you have to reinvest it in the business.
It also affects whether you can supplement your funding through other means—like, say, selling advertising. We get asked a lot if non-profit sites can sell advertising, and as it turns out, you’re limited there, too, by non-profit status. Again, we’re not lawyers—but we have friends who are. So we’d like to share an interesting article by some of the best digital-media lawyers around, the folks at Dow Lohnes, in Washington, led by Jon Hart, who’s been active as a leader in the Online News Association and speaks at many ONA events, and has literally written the book on digital media law.
One of Jon’s partners at Dow Lohnes, Corinne Antley, has written a very helpful article called “Intentionally Non-Profit Journalism: A Tax Lawyer’s Perspective” that explores the limitations non-profit sites face in trying to add advertising revenue. The article is available here as a PDF.
If you’re thinking of starting a non-profit site, you should read it (and other resources) and be sure you fully understand what it means to be, as Corinne puts it, “intentionally non-profit.” And, of course, get some firsthand advice from a lawyer before you choose between for-profit and non-profit. Contrary to what many people seem to believe—perhaps influenced by the success of organizations like NPR and PBS—being non-profit doesn’t necessarily make it easier for you to run your new business.
Update: There’s a good read here about the reality of being non-profit, making the key point: It’s a tax status, not a way of operating a business.
Cross-posted from GrowthSpur CEO Mark Potts’ blog, Recovering Journalist:
First, the disclaimers: Jim Brady, president of TBD.com, is a good friend. So are his top editors, Erik Wemple and Steve Buttry. And my company, GrowthSpur, is working with TBD to build local ad-sales networks for bloggers in the Washington area. So I may be a bit biased.
But I think TBD, just launched this week, is an incredibly important development for the future of local news, for many reasons. Let’s tick off a few:
- It’s laser-focused on local news and information, not wasting any resources on non-local content that’s available elsewhere.
- It’s Web-focused, but also smartly incorporates traditional media—in this case, a local TV station and local cable-news station—as key elements. But make no mistake, the Web site is first and foremost, not playing a supporting role.
- It’s aggressively curating and linking to every source of local news in sight (more on that in a bit)—even links to WashingtonPost.com and rival TV stations Web sites have already appeared on its home page. (Linking to competitors! What a concept!)
- It’s taking a smart approach to the all-important mobile space, with apps that don’t paste the Web site onto a phone screen, but offer the kinds of things—traffic, weather, headlines—that people really want and need when they’re on the go.
- It’s doing some very sexy things with geocoding, putting a relevant, hyperlocal face on content in a metropolitan area whose sprawling geographical diversity makes local relevance essential. (I don’t want news and info and listings about a suburb 40 miles away, in another state. I want to read about my neighborhood.)
- Its leadership is convinced that TBD can make money covering local news and information. With $100 billion spent a year on local advertising in the U.S., and more and more of that moving to the Web, that’s a very canny bet. Brady and the TBD gang are focused on making local online advertising work—not on protecting a print product or chasing dreams of subscription revenue. That focus makes a big difference.
All great things. But I think the most important thing about TBD is its approach to covering the Washington area: aggressively and adroitly mixing professional and blogger content. Finally, a well-funded, big-time local effort is taking to heart Jeff Jarvis‘ infamous “do what you do best and link to the rest” maxim.
That allows TBD to look like a big-time news organization with a very small staff. Indeed, it’s got just 12 reporters roaming the vast DC area—a fraction of what The Washington Post deploys locally. But TBD’s secret weapon is that it avidly supplements its staff reporting with content from more than 125 local bloggers (and counting), covering everything from neighborhood politics to food to allergies to parenting to living green.
In doing so, TBD is taking advantage of a powerful phenomenon that also underlies what’s driving GrowthSpur: the enormous explosion in local blogging around the country over the past couple of years. Everywhere you look, every town, every nook and cranny, on all sorts of odd—and not so odd—local subjects, somebody’s blogging, and they’re often doing it passionately and well.
Fed by cheap blogging tools, an increasing perception of the need for micro local coverage, and, frankly, a surplus of underemployed journalists (though not all of these practitioners are journalists, of course) the local blogosphere has turned into a hothouse of coverage–tens of thousands of little local journalism startups.
And that’s what TBD is taking advantage of. I hesitate to even type the words “taking advantage,” because it sounds pejorative, and TBD is doing anything but exploiting its blog partners. Indeed, contrary to a lot of arrogant, not-invented-here journalism organizations (Washington Post, I’m looking at you), TBD is bending over backwards to be a good partner to these blogs, giving them home-page credit, pushing them traffic and providing them with a cut of advertising (and GrowthSpur is helping with the latter, too). TBD is treating its blog partners with respect, and that counts for a lot. They deserve respect—these bloggers are working their butts off to cover things that are important to their community, and TBD is giving them recognition, traffic and revenue. Nice.
What does TBD get in exchange? Breadth and depth. TBD is going to be able to cover a huge percentage of what The Washington Post covers locally with less than one-tenth the staff. Not a bad equation—but the reality is that TBD may wind up covering much more than the Post. That’s because TBD is going to link to Ellie Ashford’s blog covering Annandale, Va., (a suburban town the Post barely knows exists, even though it’s less than a dozen miles from the paper’s newsroom), and to Lisa Rowan’s D.C. vintage clothing blog (not exactly a Post beat), and to Mark Zuckerman’s blog about the Washington Nationals (hands-down better than the Post’s coverage of the team, and one of several Nats baseball blogs in TBD’s stable) and to Jessica Sidman’s blog about ice cream and other frozen treats (not generally part of the Post’s mainstream food coverage). Multiply those examples by 125-plus blogs and you see that TBD is giving its readers one-stop access to a breadth of local content the Post can’t even imagine.
To be sure, TBD is hardly the first site with an aggressive linking strategy and blog network–the “ist” sites (Gothamist, DCist, etc.) do a great job aggregating and expanding on urban blog content in several markets; NBC’s owned and operated stations have quietly built strong (though a bit clumsy–they don’t share credit well) local aggregation sites; Examiner.com is mixing staff (well, “examiner” reporting with aggregation to build city sites) and there are countless smaller local curation and aggregation experiments going on.
In addition, TBD is very much still in its infancy, and working out the kinks—at first blush, I’m not sure its priorities and beat structure are quite right (it seems to be catering too much to hip downtown 20-somethings and too thin on the suburbs), and Brady concedes that many planned innovative features are still sort of TBD themselves. So it will be interesting to see how the site evolves and better serves the Washington market.
But TBD is without doubt the biggest, most ambitious effort yet to create a new paradigm for local news coverage of a major metropolitan area. To paraphrase Cory Bergman on LostRemote, TBD isn’t just talking about a theory of a new kind of coverage—it’s walking the walk. It’s building the future.
As it develops, I think TBD is going to prove a model for other local efforts around the country. It understands something very fundamental, something that once upon a time, a group of us referred to it as the Tom Sawyer strategy: when you’re working with limited resources, use them to the maximum–and turn to the rest of the Web for help with filling in the blanks.
Matt McGee’s HyperlocalBlogger site has another great post up for local bloggers, this one a guest post by Esther Brown, community manager for our friends at Outside.in. Esther’s title says it all: 10 Qualities Great Local Bloggers Have in Common. It’s well worth a read, and while we’re at it, we’ll post a fresh link to GrowthSpur co-founder/CEO Mark Potts’ post about lessons from his early hyperlocal effort, Backfence.com. And this post, from Tim Berry at Planning Startups Stories, has good general tips on blogging.
Don’t worry, there won’t be a quiz. But if you’re blogging about your community, there’s lots of great advice in these posts.
We’re thrilled to announce that GrowthSpur is teaming up with two of the most innovative media companies around, TBD.com and Journal Register, to help them build out local blog networks with GrowthSpur’s ad-sales system and tools.
TBD.com, owned by Allbritton Communications and a corporate cousin of Politico, is about to launch a local news and info site in Washington that will surround reporting by a small group of professional journalists with the best from a network of local community blogs—about 100 so far, and more being added every day. Led by former WashingtonPost.com editor Jim Brady, TBD may be the most interesting and far-reaching of the many experiments in creating new models for local coverage—a true example of GrowthSpur godfather Jeff Jarvis’ “cover what you do best and link to the rest” philosophy. You should read TBD Community Engagement Director Steve Buttry’s explanation of what TBD is up to with its blog network, which is designed to drive traffic and revenue to all those hard-working local bloggers while providing deep, comprehensive coverage of the D.C. area.
GrowthSpur’s role will be to help the TBD network bloggers with ad sales, by providing them tools and training and assembling them into a local network in which they can sell each others’ ads. The first of the TBD bloggers are already on the GrowthSpur ad server and out selling ads to businesses in their communities. It’s been awesome meeting and working with dozens of cool, passionate bloggers in the D.C. area, and it’s fascinating to have a front-row seat to watch Brady, Buttry and the rest of the TBD team assemble this pioneering effort in reinventing local coverage. We can’t wait to see it launch in the next few weeks. We think TBD is going to be a model for the future of modern metro news sites, and we’re honored to be able to help the bloggers make some money for their efforts.
Journal Register isn’t a startup like TBD; in fact, until recently it was the very model of a creaky old newspaper company, saddled with debt and declining business and too much outdated thinking. And then John Paton was hired as CEO earlier this year and the company jumped headlong into the future. Paton is the smartest, most forward-thinking CEO in the newspaper business, committed to making Journal Register truly a “digital-first” company. For a glimpse of Paton’s thinking and what he’s doing, check this out, not to mention his Digital First blog, and the company’s remarkable Ben Franklin and Idealab projects. Paton and his team are doing breakthrough work that other media companies should be emulating—ASAP.
We’ll play a part in this corporate metamorphosis by providing ad-sales network support for blog networks that Journal Register is bringing together in the Philadelphia suburbs. As with everywhere else we’ve looked, the area around Philadelphia is teeming with bloggers covering their communities or focusing on specific local topics. Journal Register will bring them together to supplement its newspaper coverage there, with GrowthSpur, again, helping them the bloggers become mini-publishers by assisting them with ad sales and allowing them to sell each others’ ads. As with TBD, just being around the smart thinkers at Journal Register like Paton, Dan Sarko and Jon Cooper, is invigorating and inspiring—these folks are not afraid to try new things to provide better local coverage for their audiences and more opportunities for their advertisers.
We continue to work with other blogs from all over the country to help them learn to sell ads and create sustainable business models, and we hope to be announcing more partnerships soon to build out local ad-sales networks with other media companies. Right now, TBD and Journal Register are providing us with real-world laboratories to show off what GrowthSpur can do to help local bloggers make money and tap into local advertising revenue. We’re excited to be working with these great partners to help create—and support—the future of local media.
PS: GigaOM has more on the partnership.
Matt McGee, over at HyperlocalBlogger.com, is doing a great series on search engine optimization (SEO) for hyperlocal sites. This is valuable information—it helps makes your blog easier for search engines to find, and that in turn increases your audience. A lot of big-time sites pay big-time bucks for smart advice like this. Go over to Matt’s blog and get some SEO help for free.
One of the most important things we’re doing at GrowthSpur is finding world-class tools that our local blog and site partners can use to enhance the revenue potential of their sites. There are an overwhelming number of vendors out there, and we help our site partners by cutting through the clutter, evaluating the best-of-breed in each category, and finding the best vendors.
If you’re an independent blog, why go through the trouble of figuring out the right choice in vendors yourself? That’s one of the advantages of being in the GrowthSpur network: we do the hard work of finding and vetting these vendors for you—and we get you a great deal on their products at the same time.
So we’re very pleased to be able announce a couple of key vendor partnerships with PaperG and Mixpo, two smart, well-regarded startups that provide cutting-edge advertising tools—making them immediately available to our site partners.
PaperG makes it easy for sites to create great-looking ads at low cost. This solves a big challenge for local sites and blogs: when you sell an ad for a few hundred dollars, you don’t want to eat up your profit by hiring an artist to create the ad.
PaperG’s Flyerboard product can turn any piece of printed material into an interactive online ad, with links to an automatically generated mini-site, maps, sharing capabilities and more, all in a format that advertirsers can use themselves to create an ad. And the company’s new PlaceLocal product—which many observers describe as being “like magic”—takes a business’ name and address, search the Web for photos, logos, reviews and other information about the business, and produces great-looking, ready-to-go banner ads in a few seconds. These are great products that are redefining how ads are created and managed online—in fact, The New York Times recently described PlaceLocal as “an ad engine to put ‘Mad Men’ out of business.”
PlaceLocal in action
Over the past couple of years, PaperG has become the leading provider of these automated ad-creation tools to big publishers and media companies; we’re pleased to be able to make Flyerboard and PlaceLocal available to members of the GrowthSpur network and to be PaperG’s representative for dealing with small, independent site publishers. (Disclosure: GrowthSpur CEO Mark Potts is a longstanding PaperG advisor and investor.)
“We’re always looking for ways to get our automation technology to those who need it the most,” says PaperG CEO Victor Wong. “Now we can help hyperlocal publishers reach hyperlocal advertisers by working with GrowthSpur.”
Mixpo takes advertising to the next level, moving from banner ads to video advertising. Mixpo easily transforms the power of TV-style advertising into an engaging online experience that is interactive, targeted and engaging. The result simplifies the process of delivering the right message to the right audience at the right time in a rapid, relevant and engaging way. Local restaurants can directly engage their customers, car dealerships can capture test-drive interest, event-promotion companies can offer discount coupons and more in this new, integrated and captivating way—the possibilities are endless.These are highly effective ads that bring premium prices from advertisers, and we’re thrilled that we’ll be able to offer our local ad-network partners the ability to use Mixpo to make money with video ads that are easy to create and manage. You can see examples of their video ads here.
We’ll have more vendor partnerships to announce in the coming weeks, as we continue to add tools to the GrowthSpur toolkit for our local blog and publisher partners. And we’ve got some other very interesting partnerships—building local blog ad networks for major publishers—on deck. So there’s more to come soon as we build the GrowthSpur network into a powerful tool for the development of revenue streams and sustainable business models for local blogs and site operators. Stay tuned!
We talk to a lot of local site operators who hit a point of frustration a few months in: They’re busting their ass covering their local communities, but they aren’t making any money at it. That’s because while it’s easy to start a local site, it’s hard work to keep it going, and even harder to make it a success.
What you’re looking for as the proprietor of a local site is sustainability. That’s the point where you’re bringing in enough money to make the site something more than just a hobby—and maybe even start making a living off it. Many local journalism entrepreneurs assume this will be easy: Start site, cover town, wait for advertising to roll in. It doesn’t work that way. Not by a long shot. And many journalists, frankly, are a little naive about this. They’re great at journalism, but not necessarily at business. So it’s important to put as much time into the business of your site, and making it a sustainable success, as you do covering stories around town.
Alan Mutter has some smart things to say about this in his post, “Journalists running startups face tall odds.” Alan writes:
I fear a good many journalistic entrepreneurs are doomed to fail because they are not objectively confronting the steep odds they face – or putting nearly enough thought and effort into giving themselves a fighting chance to succeed.
Unless they invest as much deliberate effort in building audience and revenues as they do into chasing stories, the journalists run the very real risk of going broke and/or wearing themselves out before they achieve the critical mass necessary to ensure the long-term viability of their ventures.
Working without a proper business plan and hoping for best is a well known recipe for disaster. Unfortunately, that’s what most start-ups are doing.
That’s hard for a lot of aspiring local media moguls to hear. But it’s really important to understand.
There are many elements to running a site with an eye toward sustainability:
- You need to have a business plan and budget—a realistic one, and even then you’re probably too optimistic. Apply the same sort of cold skepticism to your own claims and numbers that, as a journalist, you’d apply to somebody else’s. Be ruthless—the marketplace will be.
- You need to pay attention to marketing your site, really getting the word out in the community, over and over and over again. And then a few times more. Just because you and your family and friends know you’re covering your town, odds are most of the rest of your potential audience has never heard of you.
- You need to control your costs. This is a biggie: Many startup local sites dream of hiring all their journalist friends and paying strings of correspondents to cover the local news the way it really should be covered. That’s instantly expensive and probably not sustainable for the vast majority of community-focused sites (as some high-profile startups—we won’t name names—already know quite painfully, or are about to find out). You’ve heard of “too big to fail?” Your operation needs to be too small to fail: keep costs to a minimum while you scramble to bring in sufficient revenue to keep the lights on.
- You need to be out aggressively selling advertising to local businesses. That’s the revenue that’s the lifeblood of your site. A simple “Advertise on this site” link ain’t gonna work, not by a long shot. Advertising is sold, not bought, and you need to go out and sell, or find somebody who will sell for you. (This is where we make the plug for what we’re doing at GrowthSpur, which includes training site operators to sell ads, giving them tools to help bring in revenue and getting them into local ad sales networks in which you and other local sites can all help each other make money. Drop us a note at info (at) GrowthSpur (dot) com and find out you can make money running a local site. End of plug.)
Starting a local site, as we said, is easy. Getting it to sustainability is hard. Making it truly successful—to a point where you can make a living doing it—is extremely hard, but not impossible: We know sites that are doing it, and bringing in six-figure annual revenue and turning a profit. The common denominator among them is hard work, aggressive ad sales, ubiquitous marketing and realistic expectations and budgets. Over the next few years, we believe many other sites will attain this level with GrowthSpur’s help. But it starts when the site founders avoid pie-in-the-sky dreams and take a smart, realistic view of what it really takes to sustain a site and make it successful.