Knowledge Bridge

Global Intelligence for the Digital Transition

//Anne Nelson /june 26 / 2013

Digital start-ups: What to do when the grants dry up

Latin America has a vibrant range of online news organisations, reporting on everything from drug trafficking to the latest developments in science. Some have long histories of producing exceptional content but financial realities are starting to catch up with them as grant funding becomes harder to find.

In April, more than 20 representatives of Latin American and Spanish online journalism organisations gathered in Austin, USA, for the Iberoamerican Colloquium on Digital Media. The principal question on the table was: what is the path to sustainability?

As if finding the answer isn’t hard enough, the meeting revealed that some online news organizations have a very different understanding of what “sustainability’” means than others.

Many – such as La Nation from Argentina and O Estado from Brazil–  are part of larger legacy news organizations.

With most of their overheads and much of their content production covered by the parent company, relatively few ads cover many of the remaining costs. Additionally, a strong online presence serves as a way to promote the print brand.

But there is also a new generation of start-ups without financial backing from a parent company, outlets inspired by the same motivations that have fueled organizations like US national investigative reporting group ProPublica and the Texas Tribune – namely, a passion for investigative reporting, frustration with the limitations of the existing news media, and excitement over the new possibilities of digital platforms.

The participants in Austin demonstrated an impressive range of content, with strong offerings in human rights reporting, such as La Silla Vacia in Colombia, as well as scientific research such as Spain’s Materia and the arts, such as Argentina’s Revista Anfibia.

Many of the start-ups were fruits of a bold initiative by the Open Society Foundations (OSF) over a decade ago. OSF funded a number of young journalists around the world to create digital alternatives to the traditional news media in their countries, and several have made a mark. Plaza Publica in Guatemala and El Faro in El Salvador have added a range of perspectives that outlets in their societies previously lacked. During the recent controversial trial of former Guatemalan dictator Efrain Rios Montt, Plaza Publica ran a detailed  interview with U.S. investigative journalist Allan Nairn, an eye-witness to war crimes committed in the Rios Montt era.  El Faro has run hard-hitting articles on Salvadoran gangs and drug trafficking.

Over their first decade, Plaza Publica, El Faro, and their counterparts concentrated on building out their reporting capacity and constructing their digital platforms, in the belief that philanthropy would provide their core funding. But now the ground is shifting. With grants for independent media becoming harder to find, the message is clear: philanthropic support may not go away entirely, but it’s an excellent time to seek new sources of revenue. The search for business models is on.

An informal survey of Austin’s field of journalism start-ups (many of them leaders in their markets) confirmed that none cover their operating costs without external sources of support. In the early days, strong hope was placed in digital advertising, but now there is no suggestion that digital advertising alone could support a serious journalism site. Digital advertising pays a minute fraction of print rates, and it is continuing to favour non-journalism web and mobile platforms. Furthermore,  advertisers are often scared off by the investigative content the Latin American initiatives were founded to report.

Many of the digital start-ups get around the limitations of international grants though accessing  other forms of direct and indirect support. Plaza Publica is based at the Universidad Rafael Landivar, a Jesuit institution, which covers most of its overheads. Revista Anfibia has a similar arrangement with the Universidad de San Martin, a state institution in Argentina. Chilean site Ciper was launched with the support of the national media conglomerate Copesa. The shared experiences of the group suggested that if a start-up wishes to launch as and remain a news-only operation, it may have to seek supplements to philanthropic support and partnerships with local institutions.

All of these, of course, may come with strings attached.  But the broader discussion in the news industry is coming to the conclusion that the era of news as a “commodity” business is waning. The old models of charging for content, through paywalls plus advertising, appears to be working for some institutions, but these tend to serve affluent audiences who will pay a premium for content and offer an attractive demographic for luxury brands. This approach has little to do with the mission or the audiences of the Latin American start-ups.

The services model for sustainability

So what’s the alternative to the “commodity” model?  There is mounting evidence that independent online news will be evolving into a service industry, to market digital skills and training and to help to organize communities. The Austin group reported that they were involved in a range of experiments to develop new revenue streams, many of them promising.  With the help of Kevin Davis from Investigative News Network, these approaches were categorized as:

• direct, which markets online content in various ways;

• indirect, which generates revenue through advertising and philanthropic support;  and

• ancillary, which produces income through training, events, merchandising, and services.

So far, it appears that no single approach can be identified as a magic solution; once again, it appears to be a question of an evolving mix, heavily influenced by local factors such as political environment, market conditions and competition.

The new marketplace will press online platforms to find their audiences, listen to their needs and attend to them as a community.  With luck, they may find that they can support their news production through fine-tuning an array of services in combination with (or in place of) advertising.

In Chile, Mi Voz has benefited from the creation of study centres to teach digital skills, while Brazil’s Observatorio da Imprensa has implemented journalism training programs.

Mexican start-up seeks revenue in the ‘mix’

Only one organisation in Austin was described as a free-standing digital organisation, and – not coincidentally – it was the only one that expects to turn a profit in the foreseeable future.  This was Mexico’s Animal Politico.

Notably, Animal Politico was launched in 2009 as a for-profit, digital-first project, starting life as a Twitter news service; founder Daniel Eilemberg that he explored the possibility of  philanthropic support, but abandoned the idea. The project has since expanded into a website and an array of services, including marketing digital advertising expertise and events.

It does not purport to be a “pure” news site; Animal Politico includes entertainment as well as hard news, and has experimented with many forms of audience engagement. It has emphasised social media since the start, and engages its youthful demographic through talk shows on popular rock stations in Mexico City. It has kept its overheads low and built a growing advertising base by engaging a young urban audience. Animal Politico was early to experiment with mobile platforms and Facebook ads, and, as of June 2013, has 476,000 Facebook “likes”. Animal Politico now receives over a million unique visits a month and expects to go into the black within a year.

Animal Politico has benefited from the restrained nature of its competition in the Mexican media market, in which corruption, government controls and gang violence have stifled traditional reporting. But it has also been shaped by the unrelenting pressure of the market to adjust “the mix”. For those who question the advantages to entering the field as a “digital-first”, market-driven project, Animal Politico is providing a compelling test of the theory.

Article by Anne Nelson

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