Explore your options: Revenue models for nonprofit news
This chapter introduces the most common revenue streams for nonprofit news, with examples. It offers templates for forecasting revenue based on the kind of revenue a news organization chooses to pursue.
Lisa Williams, INN’s former director of digital engagement, wrote this in 2015 for NetNewsCheck, which allowed INN to republish it. The following version is slightly updated.
Online businesses – and I include in this any organization that has to bring money in the door to keep the lights on – can be divided roughly (okay, very roughly) into two types:
Those of us in the media industry understand pageview-based business models: create content that a lot of people want to look at, and then make money running ads against it.
However, most web-based businesses are conversion businesses: give something away in the hope that some small fraction of the visitors to a site will “convert” – to being members, donors, customers, ticket holders at an event – you name it.
There’s a very simple test to figure out which of these two kinds of business you are. Ask yourself this question: “If I doubled my traffic, would my revenue double?” If the answer is “not even close,” you’re probably a conversion business. You may also breathe a sigh of relief at opting out of the pageviews arms race, leaving it to folks like Vox and Buzzfeed.
But now that you know you’re not in the race for pageviews – a race to the bottom, since the value of those pageviews is going down every year – are you doing what conversion businesses must do to grow and be sustainable?
In my world, too often, there’s a disconnect between what nonprofit news organizations see as the product – publishing journalistic work online – and revenue – how the organization brings in money to pay salaries, rent and the light bill.
How about we work toward reconnecting those things?
Take a look at any article page on your site and ask yourself: what am I asking visitors to this page to do besides read, watch or listen? Maybe you’ll notice that you’re asking them to share a link on Facebook, or follow your work on Twitter or leave a comment.
When visitors do the things you’re asking them to do, does your organization become more sustainable in the long term? How about asking them to cross the line from being consumers to being supporters of your work?
Successful organizations based on a conversion business model know that not every visitor will “convert” to a supporter, member, donor or customer right away (in fact, only a tiny fraction of visitors ever will – which means that you can’t ignore traffic growth just because you’ve opted out of the pageviews arms race). That’s why so many of them prioritize asking visitors to sign up for email newsletters instead of trying to get them to be Facebook or Twitter followers.
Why? Email is still king when it comes to conversion. People are much more likely to “convert” – become a donor, buy a ticket to an event you’re running, or support a Kickstarter – from a message they see in their inbox than from looking at a Web page in their browser or seeing a call to action on a mobile device.
So most effective conversion-based organizations think through their approach to their audience with a mix of direct calls to action (“Support our Kickstarter!” or “RSVP for our exclusive event!”) and asking visitors to sign up for email newsletters.
Want to steer your news organization in the direction of greater sustainability? Take a look at any page on your site – and resolve to ask a visitor to do just one more thing besides read, watch or listen.
Revenue models are dependent on the basic strategy of a nonprofit news site as discussed in the previous chapters. The publications that build a direct relationship with consumers are most likely to rely on reader revenue, which can come from these sources:
Reporting services that distribute more through other publications or broadcasters that already have built an audience may rely more on these revenue models:
Both types of nonprofit news organizations also may get revenue from:
A Case Study on Revenue Models
News Giving Roadmap – INN members have access to this program that provides customized tools, training and resources to help them advance from wherever they are on the fundraising spectrum to the next level.
Many established nonprofit news organizations ask their audience to support their journalism. This tends to involve some reader education because people are no longer accustomed to paying for news. With that in mind, it’s important to have a plan in place as you form your organization as to how you will engage and educate your audience to financially support you.
The education process begins as soon as you launch. Individual donors are those readers whom you will appeal to on an ongoing basis to support your work whether passively through a “Donate” button on your website or through email solicitations and social media appeals. Many newsrooms use social media to build their email list.
Building an email list is critical to a individual donor strategy for several reasons: email offers a nonprofit newsroom direct communication with its audience about the mission and the organization; email solicitations offer the highest return on investment (ROI) of any donor solicitation strategy; email can be used to distribute news content that is timely or targeted. Individual donor programs tend to work best for newsrooms with a direct audience since there are direct communication channels.
Many newsrooms consider membership to be the ultimate indicator of an engaged audience. A nonprofit can employ both individual donor and membership strategies in a sequenced process – a membership program is usually built from a base of individual donors.
How does a member differ from an individual donor? In some newsrooms the terms are synonymous or donors at a certain level of giving are considered members and are treated as such. Both donor and member giving can entail a predictable gift on a recurring schedule – weekly, monthly, yearly. The general distinction is that donors give but receive no tangible, ongoing benefits for their donations while inherent in a membership is a benefit exchange: a t-shirt, access to events, special communications, etc.
Additionally, most nonprofits use the recurring nature of the gift vs. a one-time donation as the differentiator for membership. The important benefit of a membership program for a newsroom is that it creates a predictable revenue stream that helps with operational planning and determining annual fundraising goals. Readers, especially those who join membership programs that offer minimal benefits, are sending a strong signal that they buy in to the organization and its mission. Knowing who these readers are is quite beneficial to the newsroom since these individuals can be cultivated to champion your mission, attend your events and connect you to potential donors.
The Membership Guide from the Membership Puzzle Project
Guidebook on how to build a membership revenue model to support local journalism
How nonprofit media can build a strong membership base
Tapping into the membership economy
The subscription economy is alive and well. The success of Amazon and Netflix have shown publishers that users are willing to pay for digital content. In 2016, The New York Times saw a 60 percent increase in digital-only subscriptions over the prior year. What’s the key to that kind of growth? An election year didn’t hurt, but according to The New York Times 2020 Report, the key to their success is strong, high-quality content.
How can a nonprofit news startup adopt a subscription model? A startup may have a significant and loyal audience that it ported over from a defunct newsroom. Because of the previous relationship, that audience may be willing to pay for content at the start. A more likely scenario is a freemium model where the content is initially free, to build audience. Once the newsroom has an established audience it may venture into creating specialized, high-value content for a subscription premium.
Events offer large and small nonprofit news organizations many ways to achieve impact goals. They can generate revenue, provide a vehicle for community engagement and create awareness of your organization and mission for potential audiences. If you are a digital newsroom, events bring you to life and can help you build trust with your readers.
In terms of revenue generation, beyond ticket sales, events lend themselves to sponsorship revenue. Several INN members with an investigative news focus have shared that it’s easier to get sponsorships for events because potential sponsors are less fearful of being associated with an event, which is generally viewed positively, vs. being associated negatively with hard news content on their website. Events allow for face-to-face interaction with your audience – they get to know you and you get to know them and how to communicate with them if you are strategic and capture email addresses. As noted above, email solicitation is a powerful fundraising tool with the highest return on investment. Building your email list at events will support your fundraising efforts long term.
Asking donors to make a major gift requires preparation and thought. Be sure to review some of the ample advice on this subject that has been written for nonprofit organizations.
The John S. Knight Journalism Fellowships at Stanford University posted these tips written by one of its fellows, investigative journalist Djordje Padejski. The blog item was republished by INN with permission in 2015, and the advice is still current (with minor updates made to avoid broken links).
Many journalists trying to advance their innovation ideas look for grant money. Even though it is a writing task, crafting a proposal for a grant officer can be a tough job for a journalist. We have a tendency to use our charismatic storytelling skill, but grant writing is not creative writing. It’s not poetry. Ideas need to be presented clearly and concisely so it’s easy for grant funders to quickly know exactly what you want to do. Here are 15 tips on how to prepare effective grant from a journalistic perspective.
Research the issue you are addressing. Act like this is your reporting job and you are covering a story for your news organization. Find similar projects, look for their pitfalls, failures and successes. There are some really great tools you can use beyond Google to research grants and funders, such as the Pivot alert (subscription) and from Candid, the Foundation Center search tool (subscription) or Guide Star (free). Understand the funder’s perspective – learn and take notes!
Carefully read the instructions before you even submit a proposal. Maybe the funder you are looking at is not a good fit for you. Get a better sense of the funder through the projects it has previously supported. Sometimes you can tailor the idea to fit the specific requirements; sometimes you cannot. It’s like working with different editors in the newsroom: There always will be ones who don’t like your stories.
Do you know someone who won a grant from the foundation you are thinking of approaching? Talk to them. Ask for an interview. Maybe you can even get advice. Grantees will always have insights on the funder’s dos and don’ts. People like to talk about their work, especially with a journalist.
Keep your project description to one sentence no longer than 15 to 20 words. Think of it like the lead of your project. Even the most innovative projects can be defined briefly and described clearly. What exactly do you want to do or to develop? Do you plan to produce an iPhone app, launch a series of events or grow your audience in Europe?
Clear definition of the problem being addressed is the key to explaining any great proposal. However, don’t take up more space discussing the problem than your solution. Funders like to hear what problem inspired your idea, but they are also very interested in how you are going to tackle it.
It sounds so simple, but not connecting the problem with the solution is a common grant proposal flaw. Think about how your proposed solution answers the problem you defined. Don’t emphasize issues you won’t address with your proposal. You don’t need to present the whole picture and that’s very different from journalism.
There is no harm in mentioning organizations and projects that are similar to yours. Demonstrate you are familiar with the challenges. Make sure to explain how your approach is different from what already exists. If you are building on previous ideas or others’ work, that’s OK. You’re not expected to reinvent the wheel. Also, it’s highly advisable to refer to a similar project funded by your targeted funder.
Refer to things people are familiar with. The tagline for my crowdfunding campaign on Kickstarter was: “FOIA Machine is like TurboTax for government records” — and it was clear that the project guides users in filing FOIA requests like TurboTax guides people through filing their taxes. Usually, you will be presenting abstract ideas, so it helps to illustrate with concrete examples.
Attach visuals whenever you can. Add links to wireframes or illustrations that will help the reader to get a better sense of your project. Now, instead of footnote you can add hyperlinks to backup your points.
Break your idea into phase, be realistic about what is possible for different stages of your project. Naturally, every project has a beginning, middle and end, like a journalism piece. Leave enough time to kick off the project and, for example, hire a developer for the project. The end phase should include collecting and reporting feedback. If you are building a prototype, thoroughly explain the phases. If you are putting on an event, think about all of the things you need to do beforehand: book a room and speakers, draft an agenda, send out invitations.
Be realistic about what you really have and what you really need to execute your project. Do you need five or 10 people on your team, full-time or part-time? Your friends may be a great asset, but don’t be too optimistic that they will all come to help you at the end. Find the balance to ensure you can deliver on your promises. Do not overpromise, do not underpromise.
The funding you’re requesting should match the activities you are planning and resources you will need. And it should add up! Don’t forget to include all the costs, but double check work; budget exaggerations and math errors will undermine your position. If you are the principal, make sure to pay yourself, but do not spend half of the budget on your salary.
Be as meticulous and exact as possible. Use strong and active verbs. Write in simple language. Avoid phrases such as “could become” or other ambiguous language and abstractions. Use facts, data and straightforward language.
You need to convince reviewers that you and your team have the necessary skills and background for the project. Some funders are very clear that, as the Knight Foundation once put it, they “won’t fund a proposal to build a tool for journalists or reinvent the government procurement process if no one on your team understands those spaces.” Therefore, make sure to note your related work or references. Attach letters of support; ask your supporters to discuss why your idea is important.
Try to integrate your overall vision into the proposal. Be careful not to overpromise. Few projects are likely to “start a revolution,” or “change the world” all by themselves.
RESOURCES: Local News Lab: Unlocking the Secrets to Foundation Funding
Media Impact Funders (The Knowledge Network for Media Funders, maintains a searchable database)
Getting a Grant: How, Where and Why to Apply for Journalism Funding (News Media Alliance links to Guidebook and continuously updated Grants Directory)
Racial Equity and Philanthropy: Disparities in Funding for Leaders of Color Leave Impact on the Table (The Bridgespan Group, 2020)
Overcoming the Racial Bias in Philanthropic Funding (Stanford Social Innovation Review, 2020)
Advertising is a call-to-action from the advertiser to the publisher’s audience, usually to stimulate traffic to the advertiser’s business. Advertising rates are based on quantifiable metrics: CPM (cost per thousand impressions), page views, audience demographics, etc. Although there are similarities to advertising, sponsorships seek to establish a deeper, more holistic relationship between an advertiser and a publisher. Sponsorships tend to fall under the branding umbrella, which provides more options for placement than advertising, i.e. a sponsor could get ad space on your site, have their logo on your program and/or pay for the lunch at your event.
Compared with advertising, sponsorships are relatively easy to deploy as a revenue strategy. There are fewer infrastructure (website and back office) needs, however, both advertising and sponsorships require a solid execution plan regarding product or service offering, pricing, placements, etc.
As noted in the earlier section on Distributed Audiences, some news nonprofits focus on paid syndication. The extent to which this can be a revenue source depends on the mission, expertise and reputation of the outlet and the nature of its content. In the INN Index survey of 88 member organizations in 2018, only 24 reported syndication revenue, mostly in the single digits as a percentage of total revenue, and 17 of the 24 were investigative or explanatory organizations that have the capacity to produce stories other publications are not doing. Some organizations forgo syndication revenue because they are getting philanthropic funding to distribute their work widely and free as a public service.
RESOURCES: Knight Foundation article about how the Center for Investigative Reporting turned content distribution partners into paying customers.
Many nonprofit organizations outside the news business earn revenue providing training and other professional services. For example, you might know someone who paid the Red Cross for CPR training. Training and professional services currently make up a tiny share of news nonprofit revenue. But if you have an idea for earning such revenue, be sure to read the section ahead about the tax implications.
INN believes nonprofit news organizations have an enormous, largely untapped opportunity to dramatically grow their earned revenue. We provide resources on how to grow revenue from sources such as display advertising, event sponsorships, and sponsored content, and how to recognize the tax implications.
A nonprofit is organized for a particular mission, and the revenue related to that mission is nontaxable. But there are instances when a nonprofit does something the IRS deems to be not part of its mission. That revenue is classified as unrelated business income and subject to tax.
For example, if your nonprofit news site sells advertising, you may see that as supporting the mission, but the IRS can rule it as unrelated income. The distinction could be based on the ad’s content. If it is about the goods and services of the advertiser, or a company’s current special offers, it is not supporting the nonprofit mission. But if the ad space showcases a company as a proud sponsor of the nonprofit, then that revenue would more likely be recognized by the IRS as supporting the mission and therefore not subject to the unrelated business income tax (or UBIT). It is best to check with your accountant or tax adviser as you pursue an earned income strategy.
Other examples of unrelated income:
Some nonprofits may also owe state or local income tax on unrelated income. These jurisdictions generally follows the same IRS guidelines, but nonprofits should check with a tax preparer familiar with both their local laws and Form 990, which tax-exempt organizations must file each year with the IRS.
In late 2020, Google News Initiative and INN released the Nonprofit News Guide to Earned Revenue — a comprehensive “playbook” showing nonprofit newsrooms how to grow revenue from display advertising, event sponsorships, sponsored content, and other earned revenue sources.
The impetus for the guide came out of data from INN’s 2020 Index indicating that earned revenue made up, on average, just 11% of reporting members’ total revenue. But some statewide outlets (such as Texas Tribune and NJ Spotlight) had grown earned revenue to about one-third of their overall revenue.
IRS Publication on Unrelated Business Income Tax, What Nonprofits Need to Know about Form 990
INN Case Study: How Madison365 Stays True to Its Mission While Earning More than Half Its Revenue from Businesses
INN Case Study: Rivard Report; How a Local News Organization Managed to Generate 3X More Earned Revenue than the Average Nonprofit Newsroom
Some INN members, including Adirondack Explorer and Nonprofit Quarterly, have print products that provide them with significant revenue from advertising. Print publications also may have promotional value and maintain loyalty from legacy subscribers and supporters. Some INN members launched online and added print publications, such as The Highlands Current in New York State. Most of the smaller INN outlets that are publishing in print also are posting news online daily.
So what role should print play in a startup business plan? INN believes there is no one answer. Instead, startups should look at what has succeeded at outlets serving similar geographic regions, covering similar topics or otherwise sharing common characteristics.
When we surveyed 88 newsrooms for the 2018 INN Index study, 14 had print products (16%). The total circulation of the print products was nearly 740,000. (That number did not include Mother Jones, an INN member that began as a national magazine in 1976, has embraced digital-first publishing but maintains a paid print circulation of 190,000.)
Even among news nonprofits that have a print history, donations and grants often remain the biggest source of revenue. A member that has been publishing a regional magazine in the West since 1970, High Country News, reported in 2019 that it was getting a little over 4% of its $3.5 million in revenue from advertising, sponsorships and events, compared with 68% from donations, grants and other contributions.
Henry E. (Hank) Scott, a media consultant with wide-ranging experience in publishing, explains below the print strategy he used as founder of West Hollywood Media Company:
When I launched WEHOville.com as a hyperlocal news site in 2011, I was told by a good friend, Alberto Ibarguen, who runs the Knight Foundation, that it’s impossible for a digital news site to be profitable without a print component. At that time, WEHOville, wasn’t a nonprofit (and didn’t have an affinity relationship with one) and couldn’t solicit foundation or local tax-deductible donations.
I believed Alberto, in part because of my earlier work as part of a group turning around the Creative Loafing alternative newspaper group. I worked with all the papers — Chicago Reader, Washington City Paper, and Creative Living Atlanta, CL Charlotte, CL Tampa, etc. But I lived for a year in Atlanta and focused closely on that paper. We had great web traffic, but I remember that most local advertisers, while they felt they should embrace digital advertising, also wanted to advertise in print. “My wife loves to see the ad in the paper,” was a quote from one business owner that I will never forget.
I also remember hearing about the importance of print from managers of major brands such as Yves St. Laurent when I was working as a consultant for The Wall Street Journal, which was working on a plan to launch a Saturday edition with more of a lifestyle focus. The YSL manager told me it was important, given the quality and reputation of the brand, to have its ads printed on high quality paper and published adjacent to quality content, which he told me was something he couldn’t count on digital media platforms to provide.
So WEHOville launched West Hollywood Magazine, a high-end publication focused on art, style, architecture and design and the people involved in all of that in West Hollywood. Unlike other “city” magazines on the Westside of Los Angeles County, we did not engage in a “pay to play” process. That iteration of West Hollywood Magazine was very expensive to produce, with elaborate photo shoots, well-paid writers and printing on quite expensive paper.
We later reduced the print quality of the magazine and changed its focus to less upscale topics — WEHOville’s annual Best Of contest, etc. We continued to publish every two years a tabloid newspaper election guide to educate local voters about City Council and L.A. candidates and issues on the ballot. Both are quite profitable, although also are a lot of work.
Scott sold the company in 2020 without fulfilling his dream of launching a weekly print edition, which he said he thought would work because a city survey shows 50% of West Hollywood residents would like to get their news in print. And one is able to get a much higher profit margin from a print ad.
Foundations are investing many millions of dollars in nonprofit news. This seed money is fueling the fast growth of the field, but nonprofit news organizations must determine what revenue mix will be successful for them over time. In February 2019, INN hosted a town hall that provided an overview of where nonprofit outlets were getting their revenue and what they would need to do to sustain themselves in the future. The hourlong video also reinforces many points made so far in this guide and provides answers to common questions: