Thoughts on sustainability

Thoughts on Sustainability

KCIC Bootcamp 2011

Ben WirzDirector of Business ConsultingKnight Foundation

#kcsustain

The problem facing American journalism is not fundamentally an audience problem or a credibility problem. It is a revenue problem.

-Pew Project for Excellence in Journalism

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About Ben

• Russia/Journalism/Investment Banking

• Private Equity (11 Years)– Mgmt @ 2 start-up companies• Business Dvlt, Strategic Planning, Finance Arlo

•Joined KF in 2010, focus on working with grantees on sustainability & growth challenges.

•Trying to break 200 Twitter followers @bthewirz

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Unless you push for sustainability, you are not ultimately helping to solve this problem.

The problem facing American journalism is not fundamentally an audience problem or a credibility problem. It is a revenue problem.

-Pew Project for Excellence in Journalism

$180M/yr invested in journalism by foundations 2007-2010

$1.6B/yr editorial cuts by legacy newspapers.

Source:”The Information Needs of Communities”, FCC, June 2011

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Simplified News Business Model

Mission/Brand

Content Creation

Marketing & Distribution

Audience Engagement

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80’s Newspaper Revenue Model

Content Creation


Audience Engagement

25% Subscriptions 75% Advertisement

15% Content Creation

75% Marketing & Distribution

Revenue

Costs

• High cost of distribution, natural geographic monopolies, limited audience choice & aggregated bundles of content•Mostly one-direction

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But then along comes…

…the internet-Cost of distribution goes to 0-Advertising divorces content

-75% of online ads go to Google & FB-Content is unbundled

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Online News Biz Model 1.0* (Approx.)0-10% Subscriptions 90-100% Advertisement

60-70% Content Creation

10-20% Marketing & Distribution

Revenue

Costs

Content Creation


Audience Engagement

Audience contributes content

Content shared & aggregated Social Sharing

*eg Salon, HuffPo, Alaska Dispatch, BaristaNet

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Problems with Online News 1.01) Ad rates (CPMs) for traditional news are low.

Source: “Lessons from the Trenches”, Salon Presentation, Nov. 2010

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Problems with Online News 1.02) Costs of creating news (particularly long

form and investigative) are highSample Costs, released by Salon @ 5.5M monthly uniques & 45M PageViews

Versus RPM of $9Source: “Lessons from the Trenches”, Salon Presentation, Nov. 2010

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In Online 1.0, only Big (10M+) and small (1-4 staff) are economic

Source: “The Story So Far” 2011, Columbia Journalism School

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Key Differences in StrategySmall Strategy*

*eg Barista, Batavian, West Seattle Blog

Big Strategy**

**eg HuffPo, Examiner, Demand Media

• Market location, not audience•Sell ads on a non-CPM basis ($40-$1500/month)•Focus on short form local content•Keep staff minimal & productive (1-2 articles/day/staff member)•Keep CMS simple•Typical revenue of $50-100k

•Market audience, not location• Sell ads on CPM basis• Use technology/editorial to optimize content and drive engagement.• Minimize costs by aggregating content and soliciting audience, advertiser content. •Tie reporter pay to page views.•Aggregate niche publications (eg AOL)

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Batavian – Revenue & Cost Strategy

•Based in Genessee County, NY, population ~60k•Founded in 2008, profitable by 2010•~$125k in revenue•50k uniques/month & 500k pageviews•2 person mgmt team + 2 part time staff.• 5 pieces of short form content added/day•100 Advertisers•Advertisements priced at $40-260/month (effective RPM of $17).•All articles placed on home page •All 100 advertisers rotated equally across page.•Very Simple CMS•Daily Deals

Key Characteristics:•Minimal Cost Structure•Basic CMS•Non CPM Based Advertising•High Penetration

Source: “The Story So Far” 2011, Columbia Journalism School Study

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Online News Biz Strategies 1.5 (in process)

Mission/Brand

Content Creation


Audience Engagement

Different levels of sustainability requires rethinking each of these components to move beyond ads and subscriptions

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Most News Non Profits Only Monetize Mission/Brand.

Mission/BrandRevenue Source Examples Target % Range Today

Foundations Everyone 10-30% 50-100%

Major Individual Donors

ProPublica, Texas Tribune, VOSD

0-60% 0-60%

Corporate Sponsorship New Haven Independent, Texas Trb

0-10% 0-3%

Online Donations/Membership

Most 0-10% 0-5%

Events Minnpost, Texas Tribune, Chicago News Co-op

1-30% 1-10%

RULE OF THUMB: Online Donations/Membership = $.30-$.80 per Monthly Unique Visitor (eg 1,000 monthly uniques ~ $500/year)

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A Few Are Also Monetizing Content


Sell Subscriptions TT, Pro Publica 10-30% 0-2%

Pay Walls The Times of London, FT (not non profits)

0% 0%

Syndicate Individual News Pieces

Independent News Network

0-10% 0-3%

Crowd Source Spot.Us/Oakland Local 0-10% 0-5%

Long Term Content Partnership

Bay Citizen, Texas Tribune, Chicago News Co-op, VOSD

1-30% 1-10%

RULES OF THUMB: 1: Establish value early (invoice everyone, even if its free) 2: Syndicate with multiple partners (Reuters, Newscred, Digital Scirocco, AP, Kindle Singles, etc)3: The more unique and/or analytical content is, the more valuable.4. Aggregate/Share content from other sources to reduce your own costs

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Some have started to think strategically about audience.

•Most Loyal visitors are a very small part of the overall audience•Fans make up 4% of visitors, but 55% of traffic• Fans are 38% more likely to donate than non-fans (per PBS)• Fans care about community and content and are looking for ways to participate online

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Key: Build a Community, Not a PortalNote: Technologies to drive engagement are getting cheaper and can be used, increasingly, by smaller sites.

Check out: Parse.ly, Outbrain, Envolve, Double Recall,OnePass, Press+

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Monetizing Audience is still an open question


Direct Advertisement/Sponsorship

MinnPost, TT ?% 0-5%

Pay Metering, Ad Walls New Haven Independent, ProPublica

?% 0-3%

Crowd Source Content St. Louis Beacon/PIN ?% 0-5%

Share your audience OwnBrain ?% ?%

MatchMaking for a fee Startup Digest, Craigslist

?% ?%

RULE OF THUMB: Pay metering (flexible pay walls) are NOT about making everyone pay for content, they are about identifying and isolating fans and enthusiasts and engaging them around their enthusiasm for the site. RULE OF THUMB: Advertising not CPM based “The advertisers on our site are not doing it because they expect click-throughs and new customers; rather, they look at it as being a good civic-minded organization.” –GablesHomePage

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A handful are looking to leverage marketing/distribution capabilities

•The Civic Commons•St. Louis Beacon•Oakland Local (for profit)

The Civic Commons is more than just an online engagement platform. We work closely with stakeholders in the community to give as many citizens as possible a voice in the process. The Flats project is no different. We are conducting engagement activities at various locations in the Flats and conducting community meetings to engage residents, property owners and organizations in the Flats community.

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How to Figure It Out (Overview)

• Start by monetizing the aspect of your organization where you think that you create the most value.

• Integrate monetization efforts with the process of content creation, distribution and audience engagement.

• Copy as much as possible from organizations that you think have a model that makes sense for you.

• Practice some strategic “Revenue Promiscuity” – Think about trying at least one monetization technique from

each bucket.• As much as possible, measure your success/failure in each

of your monetization efforts

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Think of yourself as a startup (or Plato)

1. Accept that you don’t know.2. Set out explicitly to figure it out.3. Do not ignore the problem.4. Stay lean.A startup is an organization formed to search for a repeatable and scalable business model.

-Steve Blank.

Expect to Solve Challenges through Testing & Iteration (like Aristotle)

Startups have problems in 3 key areas:

• Management: Set Priorities, Define Key Metrics

• Product: Build “Right” Features. Measure, Iterate.

• Marketing: Distribution, Distribution, Distribution. (Search, Social, Mobile)

SOURCE: DAVE MCCLURE, 500 Startups, Metrics4Pirates Presentation, June 2011

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Postulate a Value Proposition1. Who is your customer?

A) The person whose life you’re trying to change

2. What are you offering that will make their lives better?

3. What minimum viable product will test this value proposition?

4. How will you know if customer’s life is better?

What is Minimum Viable Product (MVP?MVP = F(Customer, Problem, Time or $$$)

• Focus on CUSTOMER– Qualitative Discovery, Quantitative Validation

• Get to know habits, problems, desires (FUN MATTERS)– what causes pain? what causes pleasure?

• Define 1-5 TESTABLE Conversion Metrics of Value– Attention/Usage (session time, clicks)– Customer Data (email, connect, profile)- Revenue (direct or indirect)- Retention (visits over time, cohort behavior)- Referral (users evangelize to other users)

• Note: Paid Solutions drive FOCUS (& pay rent)


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To test MVP, First Make Assumptions Explicit

Revenue Sources %

Online Donations 10%

Wealthy Individuals 30

Advertisement 25

Foundations 30

Events 5%

TOTAL 100%

How many monthly uniques/page views will you haveWhat % of readers will donate?

What % of registered readers will donate?How many registered users will you need?

Is this realistic? What % of target audience does this imply?

What growth rate will that require in registered users

What % of non registered readers will donateHow many non registered readers will you needWhat growth rate will that require

What will average donation size be Registered vs. UnregisteredMonthly/Annual/One-time

Boil down assumptions to 5-7 key Metrics that you can measure

Seven metrics that matter: 1. Acquisition: (rate of gaining new users)

2. Engagement: (how deeply are you engaging users)

3. Virality: (new customers coming from existing customers)

4. Monetization: (% of total users participating in the business)

5. Churn: (loss of existing users)

6. Lifetime customer value (projected monetization returns by class of customers)

7. Program Productive (Yield on promotional activities, both paid and viral)

Source: Escape Velocity, Geoffrey Moore (2011)

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Today

Current Funding Horizon

Launch early, iterate often

Launch

Current Funding Horizon

Alpha 1st Iteration 2nd Iteration etc

Look for Product/Market FitPMF = F(Customer, Solution, Alternatives*)

• Product / Market Fit occurs when:– Customers like your stuff better than other options– Not static, Not optimal – just Local Max 4 F(customers, solution, time)– make sure you’re moving in optimal direction 2 local max

• Q: what competitive solutions are available? – … that your customers know about?– how are you diff/same? – in ways that people care about? (will pay for)

• KILL a FEATURE regularly (or rotate 1% tests)– Q: what is MOST $ cust pay 4 LEAST func MVP relative 2 BEST alt?

• NICHE 2 WIN: RE-define cust + DIFFerentiated featuresSOURCE: DAVE MCCLURE, 500 Startups, Metrics4Pirates Presentation, June 2011

Develop a marketing strategy based on what customers are doing

Q: What channels? Which users? Why?A: High Volume (#), Low Cost ($), High Conv (%)

• Design & Test Multiple Marketing Channels + Campaigns• Select & Focus on Best-Performing Channels & Themes• Optimize for conversion to target CTAs, not just site/landing page• Match/Drive channel cost to/below revenue potential

• Low-Hanging Fruit: – Blogs– SEO/SEM– Landing Pages– Automated Emails


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Optimal Outcomes

1.Success2.Failure (allows for iteration)3.??? Not Sure

Be sure you know what success & failure look like, as this is more difficult in a nonprofit context

Thoughts on sustainability

Economy & Finance

Transcript of Thoughts on sustainability