Block by Block publishers work to diversify revenue sources

Today, we hear more from Michele McLellan on her findings from surveying community news entrepreneurs. This is the group of publishers brought together last fall at the Block By Block Community News Summit, enabled in part by The Patterson Foundation.

We're working to support Michele in learning more about this community and the tools and techniques these publishers need to achieve sustainability in local digital journalism.

Here are MIchele's thoughts on what the survey shows us about the revenue mix for these sites. Her post appears here and also at the Knight Digital Media Center's Leadership blog:

In local community news space, advertising rules but it's not the only revenue source

Advertising is the top source of revenue for local online news publishers but many are testing other sources in an effort to diversify their funding streams.

Twenty-seven sites, or more than 60 percent of the 50 sites responding to my Block by Block survey, said they rely to some extent on local advertising revenue. Twelve sites, or about one fourth of the sites, rely on advertising for 90 percent or more of their total revenue.

While some community publishers are finding profitability and growth with advertising revenue, they are developing other sources.

Other major sources of revenue are national ads, donations and grants, which each are sources for 16 sites, or more than a third of the sites surveyed earlier this year.

Ben Ilfeld, publisher of the Sacramento Press, says he and his co-founder thought they would make money from events but eventually found a more promising stream in helping local businesses use social media. That now makes up two-thirds of its site revenue and the other third comes from advertising.

"We had a very successful experiment with social media consulting and it has become our No. 1 source of revenue," he said. "We had a terrible time selling sponsorships to local events and we stopped."

Only nine sites reported income from events, and only two derived 20 percent or more of their income from them. Those are NewWest, a regional site based in Missoula, Montana, and TheTerminal in Birmingham, Alabama.

The Batavian in upstate New York has achieved profitability through ad sales. But publisher Howard Owens says he also believes he must seek additional sources of income.

The small community news publishers appear to be far less reliant on donations than the larger sites I call the New Traditionals. These nonprofit sites often count most heavily on philanthropy to get started and they start out with full-time professional staffs.

Oakland Local, a community site, was started in Fall 2009 with a grant but co-founder Susan Mernit quickly started focusing on earned revenue. In the first quarter of this year, the site sold $15,000 in ads and sponsorships and raised $5,000 through small donations and another $1,000 with training.

"We are focusing on developing individual giving and sponsor support for content, ads and training," Mernit said in an e-mail. "We are working it hard!"

Despite their advances, small, local, entrepreneurial community sites face steep challenges. Fewer than a third of those responding, 13, reported that they achieved profitability last year. Another 13 said they broke even in 2010. (About 10 publishers skipped the question.)

As well, many publishers are reporting low total income. Among 30 small sites reporting income of less than $100,000, a third are making less than $10,000, a third are making $80,000 or more and the rest are in between.

Fourteen sites reported more than $100,000 in revenue last year.

I am continuing to run this survey. If you think a site should be included, please nominate it here. This research is aimed at identifying what community news publishers need to be successful.

Much of the ongoing effort of Block by Block, with support from The Patterson Foundation, will be focused on helping the smaller, entrepreneurial publishers develop their revenue streams. The foundation is about to hire a community manager to help the publishers connect virtually with one another and with the expertise and information they need to develop their businesses.

I'm very excited about what's coming up.

Next week: Sources of content - paid staff or volunteers?