Gaining ground, or just treading water?

Photo: AP

Is nonprofit news sustainable? Last week the Knight Foundation laid out the case for optimism in its third report on nonprofit news: “Gaining Ground: How Non-Profit News Ventures Seek Sustainability.”

If the report were a weather forecast, the prediction for nonprofits would be partly cloudy with a chance of sun. Most of the 20 news organizations it examines aren’t sustainable yet, though a few are, and Knight argues that a handful of others are on their way.

But beyond that optimistic framing, the details of the report point to continuing problems. Of the 14 nonprofits included in both this report and the last one, published in 2013, only three have been able to grow, while four have cut staff, and the other seven have held steady. Web traffic gains have been modest, once we account for traffic inflation across the internet. And finding a revenue model to keep the lights on remains a daunting challenge.

The report divides its focus between local and state/regional news nonprofits. While there is some geographic diversity in state-focused nonprofits, all but one of the featured local news sites serves an East Coast or California city. (The exception, Grand Rapids’ The Rapidian, has a tiny annual budget of just $34,000.) Flyover country is apparently arid ground for local news nonprofits. Few American cities can boast the cultural capital of places like New York, New Orleans, and the Bay Area. Even so, two of the local organizations carried over from the last Knight report have cut positions.

Nor has staffing grown at most state and regional sites. The report does detail one standout success story, The Texas Tribune, which now boasts 42 fulltime employees (up from 33 two years ago). The Tribune has an operating budget four times larger than any of the other 19 news organizations studied. But the Tribune is the exception; single staffers added at two other state sites have been offset by the loss of one job each at two other organizations.

If staff growth has been minimal, have these sites at least grown their share of Web traffic? Surprisingly, that is unclear. The report avoids giving traffic data for individual sites, a worrying omission. It does claim that traffic “increased by an average of 75 percent between 2011 and 2013,” but it is uncertain whether this refers to a rise in pageviews or visits. Either way, this figure is less impressive than it sounds, given substantial pageview and visit inflation over the entire Web since 2011, and the report’s admission that The Texas Tribune is skewing the curve for everyone else.

For traffic numbers, the best we get from the Knight report is a small chart that lists 1.2 million uniques in 2013 for state/regional organizations, and 681,000 uniques for local sites (up from 931,00 and 540,000, respectively, in 2011). The trend seems to be upward, but this growth is actually meager. The number of “unique visitors” on the Web as a whole has skyrocketed in recent years, thanks to the proliferation of smartphones and tablets. News organizations need big growth in uniques just to maintain market share.

To be sure, traffic alone is not the full measure of news organizations’ impact. Chalkbeat and the Center for Public Integrity have trackers that actually monitor whether they have been able to affect policy or create discussion. But audience is still hugely important, both to fulfill journalism’s ostensible goal of public service, and to make news organizations financially sustainable.

If staffing and traffic seem stalled, Knight does report that many nonprofit news outlets are trying to diversify their revenue streams. But barriers remain, and it’s not clear that diversification alone will ensure survival.

Right now, a diverse revenue stream might look something like this: donors or members; sponsorships; advertising; events; and some foundation funding. To date, foundation money has been the financial bedrock for news nonprofits. As Knight notes, organizations less than five years old relied on foundations for 75 percent of their revenue.

But foundation money is too fickle and limited to be a sustainable, long term option, and the foundation well runs increasingly dry the more often it is tapped. As Knight notes, “many sites acknowledge the difficulties in retaining funding support from national foundations over a long period of time.”

It is hopeful to think that a nonprofit news site would be able to attract support by building a donor or member base. But this simply might not be a reliable way to scale. For instance, as Knight notes, “The average number of donors increased from 500 to 700” between 2011 and 2013, “mainly driven by donations of less than $1,000, which accounted for 97 percent of all donations in 2013.” This means that donor funding, even if it improves, is unlikely to ever be a significant source of money for a news non-profit.

That leaves events, which seem to be working well for a few news nonprofits. But as Michael Wolff of USA Today points out, conferences and similar events can be a huge drain on resources: “Other than the handful of notable conferences on the tech side, events or ‘experiences’ remain a low-margin, tough-going business for everybody else.” Events can complicate organizations’ life in other ways, too. Money from events is taxable, and in large quantities might even imperil the nonprofit status of the organization as a whole.

One bright spot is that advertising is up slightly for news nonprofits. But here, too, the Knight report hints at future uncertainty:

Several organizations and thought leaders interviewed believe traditional advertising will be a declining revenue source for the nonprofit news industry as sites struggle to compete with the volume of traffic offered to advertisers by larger, for-profit news organizations.

In other words—and contrary to the optimist gloss on traffic noted above—nonprofits are losing traffic share to commercial news organizations, not gaining it.

Nonprofits are thus learning the lesson that nearly all digital media firms have learned: online, scale is king. The five largest digital firms—Google, Yahoo, Facebook, Microsoft, and AOL—take home 64 percent of all online ad revenue.

There’s more in this report to consider, from how news organizations plan for the future to what we can learn from a case study of The Texas Tribune. Nonprofit news organizations are not going away anytime soon.

But unfortunately, the report also shows that the nonprofit news movement has peaked. Growth has stalled, with news nonprofits fighting just to pay for the staff and coverage they already provide. The pace of new nonprofit outlet creation has fallen, with none of the sites featured in the report founded after 2010. While raw traffic may be trending upward slightly, overall traffic share seems to be stable or dropping.

Newspapers have lost more than 16,000 jobs in the past decade, with more than three out of 10 print journalists laid off. Against this grim backdrop, we should cheer the addition of a couple hundred nonprofit journalists, and appreciate the often impressive quality of the work they do with minimal resources. But we also need to keep a broader sense of perspective. Judging from this report, nonprofit news is never going to fill the news gap in the states and communities that need it most.

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Nikki Usher and Matthew Hindman co-wrote this piece. Nikki Usher is an assistant professor at George Washington University's School of Media and Public Affairs and a Tow Fellow at Columbia. She is the author of Making News at The New York Times. Matt Hindman is Associate Professor at George Washington University’s School of Media and Public Affairs, and the author of The Myth of Digital Democracy.