Advertising in a Sustainable Not-for-Profit Model

We’ve been getting a lot of great feedback to our models, both online and out in Aspen, since we made them public yesterday. Some of the best comments have come from Jim Barnett, who questioned some of the results in our not-for-profit model both in the comments and later in a piece on theNieman Lab site.

He asks whether our model for the growth of advertising revenues–to 49% of all revenues by year three from 18% in year one–is possible or desirable at a lean not-for-profit new organization. First, to determine whether such growth is possible we looked to Joel Kramer, CEO at MinnPost.com. Kramer told David Westphal in a piece at OJR in October that he hopes 70% of MinnPost’s revenues will come from advertising by 2011.

Here’s the paragraph from the OJR piece:

Q. What was your hope, what is your hope on the mix of advertising and contributed revenue?

A. When we started we said our hope was, by 2011, 70 percent advertising, 30 percent membership. Right now it’s running about 50-50, maybe a little higher on the membership side. It’s pure guesswork because it’s a new model. The key is to get to a sustainable model by 2011. There are a lot of reasons to become optimistic, but the advertising side really needs to get better.

Kramer has since been hard at work developing display ad business (MinnPost was charging a $15 cpm earlier this summer) and new advertising units, including a Twitter-like service that he thinks could be a new form of classifieds for local news.

Our model only has 49% of revenues coming from advertising in the third year. Still, it’s a fair point to wonder whether not-for-profits should join the scramble for advertising and sponsorships when for-profits are having such a hard time of it themselves. Kramer himself comments on Barnett’s post to say our model appears to overestimate potential advertising and underestimate membership revenues. He also does a good job of answering Barnett on the pressures such a lean organization faces in separating business from editorial.

Again, we’d love to play that scenario out in our Google doc to see if those differences amount to a wash.

Advertisers’ Boycott of Glenn Beck Continues To Leave Fox News Unharmed

beck_8-18Even more advertisers, including Walmart, CVS and Best Buy, have pulled their ads from Glenn Beck’s Fox News program, joining a group of more than 20 following a campaign by ColorofChange.org after Beck’s ‘Obama is racist’ comments.

It was big news yesterday – given major play on HuffPost and discussed on MSNBC – and while it signals some success for the ColorofChange.org campaign, the fact that Beck’s network, Fox News, isn’t hurt at all continues to be ignored.

As a Fox News spokesperson told Mediaite yesterday, “The advertisers referenced have all moved their spots from Beck to other programs on the network so there has been no revenue lost.”

That is a point that has been reiterated since advertisers first started exiting the individual show, and it proves the advertisers are more concerned with appeasing a section of their base than actually taking a stand.

Fox News continues to pick up the check from each of these companies, and continues to benefit from Beck and whatever he says on his program. Meanwhile, until Beck’s commercial blocks are filled with ads for the Wall St. Journal, Fox Business Network and Fox Searchlight Pictures, which they aren’t, his show isn’t ultimately hurt either.

Meanwhile, the other side is mobilizing as well. On right-wing blog RedState.com, and in a campaign on SupportGlennBeck.com, Beck supporters are working on a campaign to get in touch with each of the companies who have moved their ads away from Beck’s show.

But the Beck fans don’t have to worry. If the advertisers really want to make an impact, they’d remove their advertising from Fox News in general. Of course, that won’t happen – the audience is too big. Instead, the pseudo-boycott by these companies will continue, and Fox will let Beck talk about whatever he wants all the way to the bank.

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Advertisers Wimp Out: ‘Boycott’ Glenn Beck, But Stay On Fox News

geicocaveman

Glenn Beck is in even deeper trouble over his remarks that the president is “racist” now that GEICO has joined Progressive Insurance, Lawyers.com, and Procter & Gamble in pulling advertisements from Beck’s Fox News show. Or is he?

Color of Change, a web-based grassroots group with more than 600,000 members that bills itself as “the largest African-American online political organization in the country,” has led a campaign to drive advertisers away from Beck’s show. They’ve been successful to a point, but the advertisers haven’t moved away from Fox:

From the GEICO press release: (emphasis added in bold)

“On Tuesday, August 4, GEICO instructed its ad buying service to redistribute its inventory of rotational spots on FOX-TV to their other network programs, exclusive of the Glenn Beck program,” said a spokesperson for GEICO Corporate Communications in an email to ColorOfChange.org.  “As of August 4, GEICO no longer runs any paid advertising spots during Mr. Beck’s program.”

From the P&G/Progressive/Lawyers.com press release:

“No P&G ads should have appeared on this program in the first place,” said Martha Depenbrock, Brand Building Stakeholder Relations for Procter & Gamble in an email. “To be clear, if any of our advertising appeared on the Glenn Beck show, it was in error and we appreciate you bringing this matter to our attention…”

“Our (advertising) order specifies no Glenn Beck,” said Linda J. Harris, Media Director at Progressive Insurance in an email to ColorOfChange.org. “We have confirmed with the network that our spots should not be running there.”

The reason these spokesmen were able to blame their ads appearing on Glenn Beck on technical problems with a straight face is because cable ad buys work differently from network purchases. Networks sell ads by time slot, but cable channels sell ads by number of eyeballs. If GEICO, Progressive, and the rest initially expressed preference for Beck’s slot, it’s relatively easy for them to heroically shift their ads to different slots while still getting their dollars’ worth. Fox holds onto the marquee advertisers. And as long as they can find replacements to air during Beck’s slot — and given his ratings, they likely will be able to — Fox and the advertisers are able to please everyone without addressing the gaping hole that is Glenn Beck’s initial remarks. Call it advertising shuffleboard.

Color of Change scored a legitimate political victory in keeping high-profile advertisers away from Beck’s program, but it’s unclear whether the move will have much financial impact, thanks to the tricks at Fox’s and advertisers’ disposal.

Online advertising and alternative revenue models

Though it seems natural that online advertising would slow during a down economy, we’re seeing signs that it will never reach the lucrative stature that the print industry has known for years. Blogads CEO Henry Copeland told me a few months ago that when it comes to highly-trafficked blogs, there’s too much supply and not enough demand. The ease of entry not only for publishing, but for entering the ad market as well — Adsense, affiliate links, etc. — has created an overabundance for cheap advertising, dividing it up into millions of $5 morsels that do very little for individual bloggers and take away advertising dollars from the bigger players.

This is not to say that content is worthless, but that people are having to find alternate ways of monetizing their sites. Bloggasm, for me, is a loss leader to sell my digital PR services, and we’re finding that more and more bloggers are using their blogs to make connections within their fields, leading to more lucrative jobs and contracts.

This creates a dilemma for many mainstream journalists, however, because of the ethics concerns that would arise if they used their content to promote paying gigs. We saw this with the Washington Post salons a few weeks ago. But still, journalists like Chris Anderson and Malcolm Gladwell have turned their celebrity journalism status into well-paying speaking gigs, and likely many lower level journalists have enjoyed at least some prosperity from the connections they’ve made through their journalism. But though this may solve a problem for the journalist, what does it do for the news organization?

For them, it’s simply a matter of clawing for smaller and smaller sums in advertising dollars.

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News Innovators on the Frontline: Pegasus News

Mike Orren launched Pegasus News in 2006 with the idea that local neighborhood news is more important “than things happening on the other side of town.” Now the site covers what appears to be every neighborhood in the Dallas Fort-Worth area. Although Pegasus has gone through some corporate turnover, it is now owned by Gap Broadcasting, which runs 116 radio stations in 24 markets. That alliance has Pegasus poised for an expansion. We spoke with Orren late last month.

Pegasus News was founded around local news, but you don’t like the hyperlocal tag. Can you tell us why?
Pegasus News banner.We launched at the time when hyperlocal was at the peak of being a big buzzword and we were sort of lumped in with that movement. But, I actually don’t believe there is a business model with hyperlocal. What we went after is what I call pan local.

You’ve got to have the hyperlocal neighborhood information in the context of what’s going on in the larger market. There is such a finite universe of people in a specific neighborhood that care enough to go out of their way to look for information and news about where they live, that universe is not enough to sell advertisers. But if you can put that in the context of ‘where am I going to go eat tonight, what’s going on locally in niche areas of interest that I have,’ that’s an opportunity to bring a lot more people into the fold. Then when you put neighborhood information in front of them they’re more likely to engage with it.

We cover all of Dallas-Fort Worth, but then we slice it up for the user geographically and behaviorally based on information that we gather from your clicks around our site.

We are not covering any one neighborhood at near the level of specificity that say a West Seattle Blog is. Though, there are some niches in those areas that we probably cover in that depth.

Still, local news is key to your editorial model. What is the plan for Pegasus News if the daily newspaper goes away?

A database of local political campaign contributions maintained by Pegasus News staff.

A database of local political campaign contributions maintained by Pegasus News staff.


Even though The Dallas Morning News isn’t going away tomorrow, we think they’re going behind a paywall soon. On the one hand, it’s a great opportunity for us to fill a void, because I don’t believe a substantial number of people are going to pay for that content. The flip side is it’s very expensive content to produce.

My view is that ten years from now you’re going to see more good real useful local news coverage than at any time in our history. But, between now and then there is going to be something of a dark age. Say the Morning News quits covering city hall. We haven’t yet grown enough to have people covering city hall. I believe there comes a point where the models cross and Pegasus or a network of blogs become sustainable to fill that void and even surpass it.

The question becomes what happens during that interim period. I tell people all the time, if I were a small local government person who wanted to pull some shenanigans I would do it in the next three years. Seriously.

When we launched I set out to truly be a replacement for the daily newspaper but the revenues aren’t there to sustain that. I would rather live and get our shots in and grow into that over a long period of time than kill ourselves and try to do something beyond our grasp.

What obstacles on the revenue side prevent you from taking that bigger role now?
The biggest obstacle for us on revenue has been brand awareness in the local marketplace. We’re pushing 500,000 monthly unique visitors. That is enough to sustain a business. The problem is we’re just now getting over the hump where we know when we go to talk to someone about advertising that they’re going to have even heard of us. That’s starting to change but it’s taken a long time.

What’s next?
We’re getting ready to launch sites in some of Gap Media’s markets. They own a bunch of the old ClearChannel staions, all in markets smaller than Dallas-Fort Worth. So, we will launch in Shreveport, Tyler and Yakima this year. We’ll have them on air constantly promoting us and their experienced sales staff out selling us.

First we’re doing a redesign, relaunch of Pegasus that will serve as the template for all of the sites to come. The database stuff is going to be done here in Dallas and we’ll have one person on the ground creating content in those markets.

Where do your revenues come from?
It’s all advertising, a combination of display, sponsorships, and direct marketing. A big part of our model is the ability to customize behaviorally and geographically. We’re able to sell ad campaigns that are very targeted. So even though it looks and feels like a display ad, there’s a lot more going on behind it.

Ad for FC Dallas on the Pegasus News website.We do some direct e-mail; some of our email blasts are ridiculously small. For instance, say you are FC Dallas and you want to push a ticket special for the game this weekend. We’ll send an email only to the 220 people who’ve shown an interest in FC Dallas based on their clicking patterns on our site.

We also have geo-located mobile ads on our iPhone app. Our app is much more transactional than news, so it lists garage sales, restaurants, concerts, gyms. We’ll show a sponsored listings based on where the user is.

How much did the app cost to develop?
It’s hard to say because we developed it internally. It took two developers three weeks. It’s a very simple app. We’re starting to look at some of the iPhone 3.0 possibilities and that will cost us some money if we go forward.

How well has the iPhone app gone over with advertisers?
Really, really well. They’re very excited about it. I don’t think we have anybody running who’s just running mobile. Generally they’re doing it as an add-on. But when we tell them we’re going to reach out to everyone in a 3-mile radius of your business, they’re like ‘that’s awesome.’

Revenues, Again

The first cut of our revenue opportunities list is now up here and in the side bar. We have another half dozen categories to add to this list, but please let us know if you think we’ve left anything out or missed the boat on something entirely.

From this first list, I was surprised by how many of the folks pointed to the value of a printed product. It is the most noteworthy area, of many, where my early assumptions were proven incorrect.

Jeff Mignon and Nancy Wang of Mignon-Media have been helping us with this project and were instrumental in developing this list of revenue opportunities.