Tom Davidson

My friends at the Online News Association put together a terrific program at the University of Alabama-Birmingham for entrepreneurial journalists and others interested in starting news and information sites. (Thanks to the Gannett Foundation for the necessary financial support.) 

I spoke a bit about emerging business models to support these kinds of sites (and – plug warning – the work of my partners at GrowthSpur).

You should search on Twitter for the #ONAUAB hash for some of the fascinating discussions that grew out of the sessions. Less fascinating, perhaps, was my presentation – but for those who asked for it, it’s here.

(Why, yes – I used Prezi. My friend Tim Windsor snarks that Prezi screams 2009 the same way a Yamaha DX7 synthesizer screams 1983. But, hey, I liked a-ha.)

Also: Here’s Robert Hernandez’s excellent presentation on how journalists can use social media tools (both to build audience, and to be better reporters).

And @DannySanchez’s informative riff on free tools doesn’t have a perfect online analog – but he writes about nearly all of those tools (and even more) on his blog, Journalistopia.com.

I’ve been preparing a presentation to the terrific News Entrepreneur Boot Camp at the Knight Digital Media Center next week. I’m part of a panel of folks who have transitioned from the newsroom to business-side roles.

As part of the prep work, I’ve re-read a hefty stack of posts about emerging revenue models for news – advertising-supported for-profits, L3Cs, non-profit structures, even the wishful-thinking paid-content model.

Running through many of the pieces was an irksome thread: A focus on single solutions. Most framed the discussion in terms of “what’s the source of revenue,” as if there were a magic bullet that can solve every operation’s money woes.

There isn’t, of course. What’s more important, though, is there never has been. In times like these, naiveté isn’t charming – and for entrepreneurial journalists, it can be downright dangerous.

No successful news media organization has ever relied solely on a single source of revenue. In fact, the most successful industry segments – newspapers, magazines and broadcast stations – have long had many revenue sources, almost too many to list.

There’s more elaboration – and a rough list of the different sources — in this deck.

Key takeaways:

-  Don’t think too broadly. Even something as seemingly straightforward as “advertising” isn’t a single source of revenue. There are myriad advertising products – each with distinct strengths and weaknesses, sets of customers and sales models.

- As you plan the revenue models for your own proto-business (that’s what start-up journalism sites are, folks), copy the best of traditional organizations. Find multiple streams of revenue.

(Lest this come off as too scolding: I think it’s fantastic to see journalists actually interested in this sort of question. For decades, most of us acted as if the money that powered our organizations was created by magic. Worse, some assumed that it was the result of their brilliant journalism. For a welcome example of incisive, if tardy, analysis, see James Fallows’ terrific Atlantic piece on Google and the news industry.)

Most of what I hate about the newspaper industry was encapsulated in a single session at the American Society of News (not Newspapers! Really!) Editors meeting in D.C. a few days ago. An otherwise smart agenda took the inevitable detour down the rabbit hole with yet another discussion of pay walls.

Walter Hussman, publisher of the Arkansas Democrat-Gazette in Little Rock, flogged his usual paywall-as-a-defense argument: In a world where online users are worth less than print readers, he seems to say don’t bother with the former. “Why would I want to be platform agnostic when I can get (ad rates of) $40 (per thousand print readers) instead of $4?”

 I was reminded of two recent, similar quotes:

•  An analysis ascribed to Washington Post president Steven Hills in a devastating New Republic piece on the paper’s woes: Post print readers are worth $500 a year in revenue; online readers are worth only $6.
• Rupert Murdoch’s assertion that users will cough up for online content: “When they’ve got nowhere else to go they’ll start paying.”  

Hussman and Hills are both falling for the same “defense first!” mentality that has crippled innovation at newspapers. They’re implicitly assume print readership will stay the same forever (it isn’t ), and that print ad revenues will maintain, too (they aren’t).

Rupert is making an even bigger mistake. He assumes “nowhere else to go,” conveniently forgetting that his media empire was built on expensive printing plants and government broadcast licenses, each of which makes competition economically unfeasible.

Clearly, Rupe hasn’t noticed that those monopolies are gone (or maybe he’s blustering). Local television stations are emerging as real competitors  to newspaper sites in many markets. Some, like Allbritton Communications in Washington, are building separate sites to target niches and general news. And there are plenty of independent  local  sites, with new ones springing up all the time. On their own, they may not seem formidable. But enough of them in a community could ruin a local newspaper publisher’s day. No wonder potential entrepreneurs are licking their chops.

 (The ease of publishing via free services like WordPress  and Blogger are a key reason that “information wants to be free.” More on that, including some semi-geeky economic theory, another day.)

 If competition makes paywalls nothing more than defense (and the numbers sure seem to make that case), then what’s a better answer? What gets at Hussman and Hills’ arguments that print readers are worth more?

Let’s take this out of the emotional world of change for a second, and into the dispassionate world of math. Everyone remember the commutative and associative properties from third grade?

If your print readers are worth 10 times your online users, then work to get 10 times the number of online users. You’ll make the same amount of money. (Actually, you’ll end up with more – production costs are lower on digital platforms. No paper, no trucks.)

Daunting? Sure. Simply regurgitating your print product in digital formats won’t grow your audience ten times. No single product will, either.

But a network of niche products is part of the answer.

So is good app for the iPad (and don’t forget the waves of similar devices that are sure to follow).

It also means forcing the business side of the house to think clearly and execute.  And it means engaging in biz-side thinking ourselves.

If our goal is to grow our audiences again – not merely milk the ones we have – we have to engage consumers. We have to give them what they want, when, where and how they want it.

Yes, it’s not easy. Innovation never is.

But doing nothing – or hiding behind a paywall – merely guarantees a slow, lingering death for newspapers. That’s unfair to shareholders, to employees – and ultimately to the communities we serve.

Eleven years ago, I caught the break of my life: I got a one-year Knight Fellowship at Stanford. (I still find it so shocking that I rarely mention it. Friends say it usually takes at least 18 seconds before I bring it up in conversation.)

I’m unabashed about how grateful I am to the program – whatever I’ve achieved in the past 10 years of my career is due solely to what I learned on that fellowship.  Jim Bettinger and Dawn Garcia are to be commended for dramatically shifting the program’s focus to address the radical changes facing our industry.

Until two years ago, the program operated much like the Nieman Fellowships at Harvard, or the Knight-Wallace program at Michigan: Pitch us an idea that will make you a better journalist. It might be Internet economics (my topic); it might be studying the narrative form of American musical theater.

Stanford has unique qualities, however – it’s a world-class university in the heart of Silicon Valley, a place that has consistently spawned great companies.  Now the Knight program asks applicants to submit ideas that “focus on innovation, entrepreneurship and leadership to foster high quality journalism during a time of profound transformation.”

For several years, I’ve gotten to peek at the stack of ideas as one of several former fellows who help the program staff screen applications (nearly 150 U.S. applications for the 2010-11 class). We completed that initial screening last week. There’s still a lengthy process of interviews and review by the program committee before next year’s fellows are announced in April.

Still, there are several useful lessons in this year’s stack, applicable not only to future Knights, but to anyone who aspires to entrepreneurial journalism. (All opinions are my own, of course, not those of the program.):

What was great:

•  A “just do it” attitude: Personally, I loved the people whose proposals (and, usually, their current work) showed a bias to action. They launch stuff knowing it isn’t perfect, then adjust based on the audience reaction. That’s a far cry from the attitude most of us developed in the days of monopoly outlets. (I remember an editor screaming at us we should never experiment on our readers. Sounds reasonable – but in practice, it meants we never tried anything new.) A thousand start-ups are experimenting out there – and an axiom of the startup world is that with enough experiments, someone will figure out what works.
• Awareness of the trends in technology. You don’t need to be a technologist to get a fellowship – but it sure helps to know broad trends in technology, especially as they affect journalism.  The best applicants understood that cheap tech gives anyone the ability to publish; and that it’s getting easier by the day to organize and display vast pools of raw data.
• It’s not just about the World Wide Web anymore. (Doesn’t the very phrase “World Wide Web” sound archaic?) Several applicants noted that publishers need to deliver information when, where and how consumers want it – and increasingly, that means mobile devices. The best name-checked the iPad specifically.
• Recognition that Stanford is a candy store of knowledge. The best went out of their way to discover the particular professors, classes and research going on at Stanford related to the applicant’s idea. (Hint: If you’re thinking of applying for a fellowship anywhere in the future, write that one down.)

What wasn’t so great:

• Applicants who focused their proposals on “saving newspapers as we know them,” rather than saving journalism. There’s a difference.
• Those who acted as if the fellowship is a lifetime achievement award: “I’ve done this and this and this – so someone somewhere owes me a sabbatical.”
• A corollary: “I need a year off to learn all this new, foreign digital stuff.” Stanford is a marvelous place to learn about the interplay of technology and storytelling – but basic knowledge can be acquired anywhere. Start with the people on the digital side of your current or former shop.  And don’t make the mistake of implying that they’re not journalists because they sometimes hold different opinions than you. (Someone did that in a fellowship application a year ago. Guess what? They didn’t get a fellowship.)
• “At the end of the year, I’ll have produced a report.” To steal a line from my former colleague Chris Krewson: The future of journalism isn’t going to be invented at a conference. Studies are helpful, of course – but only when they lead to actual publications that can be tested in the marketplace.

Best of luck to the Knight class of 2011. I’m insanely jealous of you all.

Publlishing hyperlocal information? Getting some grant money for it now from a local foundation? Or running a local foundation that’s interested in doing more to improve the flow of information, especially as traditional media suffer 1,000 cuts?

Here’s a chance to double down – and also gain access to significant training, guidance and knowledge.

The Knight Foundation, which is probably doing more to help journalism through this tumultuous period than any traditional media company, is coming up on the deadline for another round of its Knight Community Information Challenge. Note that this program is separate from the Knight News Challenge, which is about funding innovative ideas.

The FAQs are make clear the requirements. An added benefit (besides the dough): Registration is still open for the introductory Media Learning Seminar in Miami March 1-2. (If you go, and have never seen Amy Webb do her thing: Try not to let your jaw hurt anyone on its way to the floor.)

Moreover, there’s a chance to get answers to any questions you have about the program. The fine folks at the Knight Digital Media Center at USC and Cal-Berkeley are hosting a web-based Q&A on Feb. 26.

Journopreneurs: This can be a terrific start to your hyperlocal site – if you can partner quickly with a community foundation willing to match any Knight Foundation funds. But before you get all giddy, think about sustainability! If you get this money, what are you going to do make sure you can generate real money at the end of the grant? (Hint: “Apply for another grant” is not an acceptable answer.)

I had a quick conversation the other day with someone interested in using my colleagues at GrowthSpur  to help launch his news web site. As usual, I encouraged him to charge ahead – but urged him to pick a niche, not launch a general news web site.

This goes against years of training and experience most of us have as traditional journalists: Bigger is better, right? Cover more things, get a bigger audience?

It’s hard sometimes to pull ourselves away from topics we know too well. So to understand why niche sites work so well, let’s look instead at the same issue in another industry – retailing.

Sears' logo, circa 1970

In the middle of 20^th Century, Sears was the dominant store in America. It offered most things to most people, conveniently located at almost every mall in America. Their shirts weren’t the greatest, but they had a plentiful selection. Downstairs, the hardware department had most of the tools you’d need; out in the garage, you could get a new Die-Hard and fresh tires.

Today, Sears is a mere shadow of itself – and it wasn’t dethroned by Montgomery Ward or others who tried to do the same thing, just better. (more…)

I’ve ranted a couple of times already about how journopreneurs need to make smart, inexpensive choices – especially about technology.

Over at the GrowthSpur blog, my colleague Dave Chase offers his thoughts (also live at OJR) about picking a good online content management system.

Dave speaks from vast experience. He was on the launch team of Microsoft’s fabled Sidewalk project (it caused several of my old bosses at Tribune to birth kittens, and ultimately forced good innovation out of self-defense). More important, he’s a local-site operator himself, at Sun Valley Online.

It’s worth a read.

A snarky comment on Alan Mutter’s blog set me off the other day. Alan was reacting to Mark Potts’ excellent riff on the coming iSlate (not just a fanboi dream, but potentially a great leap forward). Predictably, some of the commenters were pining for 1994:

“This smells a little like Google, which siphoned off $21 billion a year from newspapers without a squawk until publishers woke up.”

We’ll leave aside the petty detail ($21 billion, yes. From newspapers? Um, no.) to focus on the bigger point. The real culprit in the Great Mass Media Collapse isn’t Google. It isn’t Craig Newmark. It isn’t the Original Sin of Not Charging for Content in 1994. (Alan, we tried. Remember AOL and Digital Cities?)

The real culprit? Gordon Moore.

The hero of our story

What, my journalistic brethren? You can’t quite recall studying him along with John Peter Zenger*, Thomas Jefferson & Woodstein back in J-school?

That’s because you almost certainly didn’t – but you almost certainly should now.

Moore, the co-founder and former chairman of Intel, observed in a 1965 trade-magazine article that the power of computing devices was doubling every two years. The importance wasn’t that electrical engineers could cram more circuits onto a chip – but that in doing so, the cost of computing would fall proportionately.

He theorized that the trend would continue indefinitely. Nearly 45 years later, it still holds – so much so that it isn’t called Moore’s theory, it’s called Moore’s Law. To a technologist, Moore’s Law is what the First Amendment is to us.

Want to know why you can get a DVD player for 29 bucks? Moore’s Law. Want to know how your cellphone has become so complicated you need a 15-year-old to explain it? Moore’s Law.

Want to know why newspapers are collapsing, or why local broadcast stations are becoming little more than a transmitter stick in an empty field? Then stop griping for a moment, and understand Moore’s Law.

Exponential equations (doubling every two years) are tricky things to wrap your mind around. It’s not a straight line on a normal graph – it’s a hockey stick (or the right half of a parabola, to get all precise about it). To really get a feel for the numbers, you need to play with them.

The Official Chart of Silicon Valley

Dell.com has a spiffy, reasonably functional desktop computer this morning for less than $300. It runs at a speed – does things, in other words – that would have cost $600 in 2007, $1,200 in 2005.

OK, you say, got it: computers get better over time. But do you really get it? Keep going: The same performance would have cost nearly $20,000 10 years ago, at the height of the digital bubble. Not so long before that, when I was studying Zenger, Jefferson et al (and playing poker all night) in college, that much computing power would have cost nearly $5 million.

Here’s how that is “killing” newspapers: Let’s say you had an idea back at the top of the bubble in 1999 – a niche site for a community without a newspaper, or a portal of all the opinion pieces relevant to your city. You’d bring in a technology partner for a consultation. He says, “It’ll cost you a million bucks.” You’d probably gulp, and walk away. And, years later, you’d still be thinking “I can’t do that idea because it’ll cost a million bucks.”

Meanwhile, some kid who understands Mr. Moore’s relentless math is chasing after that idea for under $30,000.

Therein are the roots of the woes affecting Old Media.

Our audience now has endless choices of news and information because you don’t need a $120 million printing press or a $50 million TV license anymore to publish. As Jay Rosen noted nearly four years ago, the people formerly known as the audience are now collaborators and potential competitors.

For the same reasons, our advertisers have the same sort of cheaper options. The local restaurant that used to buy a 2×5 coupon ad every week? Publishing their own coupons online, and laying our zero cash for a marketing program from Groupon. The car dealer? Using cars.com and AutoTrader for about $2,500 a month combined instead of buying a full-page ad for $10,000 a week.

Blaming Craigslist isn’t going to change those facts. Neither is blocking Google from crawling your site. (Notice how Rupert is screaming – but hasn’t actually blocked robots.txt yet?)

But “stop blaming the wrong people” is only half my intended message.

Why did we bother to study Zenger and Jefferson? Why are they considered heroes centuries later? Because of their spirits of daring, the possibilities they opened for us.

We should understand Moore’s Law now for precisely the same reasons. Yes, it has been a gigantic sledgehammer that has shattered the underlying business models of mass media, and it isn’t going to be repealed any time soon.

It also helps to remember that hammers are used to build things, too.

Instead of looking back, face the other direction. Pick up the hammer, and start thinking about what you can do with it.

Certainly that’s what my work is about these days. But I’ll pontificate some more about what kinds of things you can do with the hammer in a couple of days.

(*Colonial-era printer. Pissed off the governor of New York by daring to print criticism. Charged with seditious libel. Got off with the novel idea that truth is a defense. See, Bill Francois, I was paying attention.)

The gang at GrowthSpur, of which I proudly call myself a member, is having another of its introductory sessions for hyperlocal and niche site operators.

We think journopreneurs – and people who just want to operate great local sites, whether or not they claim the “j” word – are one of the key parts of the emerging local information landscape. If you’re interested, drop a note to Mark Potts or to me.

It happened again: I heard a tale of a laid-off journalist who spotted an unmet need – a community that was no longer being covered the way it should be. So she decided to launch a neighborhood blog. Terrific!

Then came the thud: She’s already hired someone to take care of all the technology and design. For only $5,000. And she’s thinking like a businessperson – she bargained him down to that.

I joked about this a little the other day. But, really, it’s not funny.

Journopreneurs have a tough enough time doing all the things they need to do to launch a site, and figure out how to make a living at it. I want to scream when I see people so intimidated by Technology (cue dread-inspiring music) that they blow cash they could use on freelancers, marketing and another month’s mortgage payment.

I don’t blame the design and tech shops – they have a tough life, too. But if you want to be a hyperlocal or niche-site operator, learn the about technology. You don’t have to write code (God knows I don’t) – but you at least need to understand enough to know you don’t spend $5,000 on something you could easily do for $500.

I offer some-more practical advice – not just more harrumphing – over on the GrowthSpur blog. (Fair warning: There’s a pitch in there for GrowthSpur’s partnership services.)