The biggest difference between Business Insider and a similar site that doesn’t break even is traffic: Blodget’s venture managed to pull in 5 million unique visitors a month by the end of 2010, about double its audience of a year earlier. In March 2011, Business Insider had almost eight million visitors, which represents a 60 percent jump in just three months. If the site becomes truly profitable, it will be by virtue of having continued that growth—getting to an audience of fifteen million to twenty million visitors each month while keeping expenses flat.

The example of Business Insider suggests a provocative comparison with the old-media world. In the newspaper industry, a rule of thumb has been that every 1,000 additional readers justifies an additional newsroom employee. Going by Blodget’s numbers, the comparable figure in online news media is closer to one person on the editorial staff per 100,000 readers.

As far as costs are concerned, then, the real advantage of digital-only operations, from The Batavian to Business Insider, is that they don’t have to “trade dollars for dimes”—they are natives of the dime economy. By contrast, legacy news outlets must navigate a tricky cost transition when they go digital, cutting expenses and boosting online revenue while minimizing the damage to the traditional advertising that still sustains them.

This process begins by learning how to get the most out of their newsrooms in each medium. At The Atlantic, Justin Smith says, cost efficiencies depend on employees working across the digital/print divide. “There are very few employees who don’t do both print and digital work,” he says. “Maybe a couple of fact-checkers and one senior editor who concentrate on long pieces. We have about sixty people in editorial, and 99 percent of them are completely integrated.” In advertising sales, all salespeople sell print and digital.

The Atlantic got a lot of attention in 2010 for having become profitable (“a tidy profit of $1.8 million”) for the first time in decades. But the numbers disclosed were for the company as a whole, including print, digital, and events. Still, Smith insists that the company’s move to profitability depended on containing costs on the print side. “We were brutal about shifting resources away from print,” he says. The company made layoffs in both the editorial and ad sales departments.

Does this mean The Atlantic makes money online? The company reported that digital advertising revenue rose 70 percent, and print advertising revenue 25 percent. But in trying to isolate the digital business profit, Smith said, “We do an allocation [based on staff time spent] to do profit analysis of various platforms. We lay this in as editorial cost in a line item. The digital version of The Atlantic is definitely profitable. And it is a source of growing profit.” Smith says this is the case even as the company continues to increase staff and resources on the digital side. The New York Times’s report on The Atlantic had the magazine’s overall revenue doubling, to $32.2 million in 2010, with advertising revenue accounting for about half of that. Digital ads supplied 40 percent of ad revenue.

For a large metro newspaper, the calculus of cost-cutting is tougher. Even in the face of declining readership and ad revenue, executives often fear that major cuts will only accelerate their slide in circulation.

Detroit is an exception. Newspaper executives there met early in 2008 to consider their options, none of which was very attractive. The Detroit area was on its way to a dead-last rating in a survey of 363 cities’s job growth for the first decade of the twenty-first century. While most U.S. cities had one newspaper, Detroit had two—the Free Press and the News—bound in a joint operating agreement and dividing diminished circulation and ad revenue. (The agreement means that the two newsrooms compete, but their partnership handles both papers’ ads, circulation and printing. The Free Press is owned by Gannett and the News by MediaNews Group; as part of a revised agreement, Gannett must pay MediaNews around $45 million over a twenty-year period, according to Crain’s.)

Then-publisher Dave Hunke assembled his team, and they kicked around ideas on how to cut costs.The ideas ranged from publishing a pocket-sized newspaper, to arming 200 citizen journalists with cameras, to a “dinner in a bag” promotion that would give special consideration to readers when they pick up meals at a local grocery store. The newspaper executives also considered deep reductions in staff or space devoted to news.

In the end, they came up with a radical idea: eliminating home delivery of both papers on Monday, Tuesday, Wednesday, and Saturday. The reasoning was that those four days were responsible for only 23 percent of the papers’ print ad revenue. The cutbacks went into effect in March 2009.

Bill Grueskin, Ava Seave, and Lucas Graves are the co-authors of "The Story so Far: What We Know About the Business of Digital Journalism." Grueskin is dean of academic affairs at the Columbia University Graduate School of Journalism. Seave is a principal of Quantum Media, a NYC-based consulting firm. Graves is a PhD candidate in communications at Columbia University. For further biographical details, click here.