To download the complete version of "The Story So Far: What We Know About the Business of Digital Journalism," a new report on digital news economics from the Columbia University Graduate School of Journalism, click here.

That is not to say, however, that any online venture that falls between a small community blog and Google is doomed to fail. In addition to running The Atlantic, Smith is a founder of Breaking Media, a collection of sites aimed at specific—and affluent—professional communities. Its properties cover law (Above the Law), Wall Street (Dealbreaker), fashion (Fashionista), green transportation (AltTransport), and accounting (Going Concern). Above the Law is the most successful of these sites, with a monthly audience of more than 700,000 unique visitors. Smith won’t say when the company might turn a profit, but his formula depends on pulling together sizable audiences at minimal cost—each site has just two journalists, with ad sales and administration centralized.

Henry Blodget’s Business Insider site is pursuing a similar strategy, on a much larger scale. Blodget has disclosed financial details about his media company, reproduced below, in what was an unusual move for a private firm. “We’re a private company, and we’ve never disclosed any of that stuff, either. But I’m honestly not sure why,” he explained on March 7, 2011. “So we’re going to try an experiment. We’re going to disclose that stuff. Then we’re going to see if something horrible happens to us.”

The statistics tell an interesting story. With forty-five full-time employees, including
twenty-five in the editorial department, Business Insider is hardly a grass-roots effort. In
2010 it cost almost $5 million to run. But unlike many sites of similar size, Business Insider managed to turn a tiny profit in 2010—about $2,127, or as Blodget put it, about enough to buy a MacBook Pro.

One factor accounting for Business Insider’s survival is that the site targets investors and financial professionals rather than a general-interest audience. But that also means it must fight for readers and advertisers with the rest of the financial press, including giants like Bloomberg and Reuters and lower-cost sites like paidcontent.org and Breaking Media’s.

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.

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.