Jun 29, 2010

The deal behind deal brokering

One revenue stream that piqued interest at last week’s National Association of Hispanic Journalists convention in Denver was what I called the “Groupon” model, or deal brokering. Oxygen deprivation prevented me from explaining it with any sense, but the words are finally coming together now that I’m back at sea level. Here’s how it works, according to the Nieman Journalism Lab:

Let’s say a neighborhood restaurant offers a prix fixe meal for $10 (obviously not a restaurant in New York City). Two hypothetical dollars go towards the actual cost of ingredients and food preparation, while the remaining $8 is profit.

Business as usual
But what if that restaurant wants to draw more customers on a slow night during the week, or perhaps over a holiday weekend? It can partner with a hyperlocal news outlet, which will promote a discounted price and broker its sale to a limited number of readers (or viewers or listeners). For that, the hyperlocalist earns a modest fee.

Special pricing
There are three important thing to remember: The number of discounted meals must be limited; the discount should be valid only for a limited time or on a specific date; and customers must pay for the discounted meals in advance. Promoting the discount can happen through the usual channels (online, in print or on air), or through an emailing list or Twitter feed. The hyperlocal news outlet also can use an e-commerce service such as PayPal to facilitate sales.

In this example, the hyperlocalist must broker four times the number of discounted transactions to match the restaurant’s net profit at the regular retail price. But the beauty of this revenue model is that there is very little work involved. That means a nice piece of change for the hyperlocalist with only a smidgeon of effort.

For the Twin Cities (Minn) Daily Planet, revenues from deal brokering actually surpassed traditional advertising sales in the first two weeks of its “Deal of the Day” program, the Knight Citizen News Network reported last week. My former news site also had success with a brokering program, though the cost of printing coupons eventually erased most of the profit. (Unfortunately, my program launched before Facebook and Twitter gained mainstream momentum, before the iPhone was born, back in the Stone Age.)

The numbers above are for illustrative purposes only. In fact, the Nieman Journalism Lab and Knight Citizen News Network articles recommend bigger paydays for deal brokers, and brokering services can be sold to retail businesses other than restaurants. Now go make money!

Jun 16, 2010

The bitter pill of profit

I’m spending the rest of this week prepping the sickest PowerPoint presentation the National Association of Hispanic Journalists’ annual convention has ever seen. The show, going down in Denver next week, certainly won’t be for the faint of heart — lasers, a smoke machine and vuvuzelas will be used to drive my bulleted points home. Combine that with the mile-high altitude, and there’s bound to be at least one nosebleed in the audience.

For those who won’t be in attendance, here’s the abridged version of what I have to say: Entrepreneurial journalists must be entrepreneurs first, journalists second. Period.

That’s not to say that hyperlocalists and other journopreneurs must toss out the separation of church and state, that quality content and good reporting should fall victim to greed. I’m a big advocate for the “emotional value” of hyperlocal journalism. As I’ve written previously:

They [news consumers] assign value to it, they incorporate the information into their decision making, they allow it to influence their lives. That kind of quality far outweighs a website’s page views, a newspaper’s circulation or a broadcast outlet’s audience numbers.

But keeping a newsroom in that high gear requires money. Writers’ salaries must be paid. Equipment must be maintained. Transportation to and from news events must be covered. Even the most altruistic volunteer would find it difficult to run a news organization full time without an income to pay the rent or mortgage, or at least some compensation for expenses incurred.

The news business is just that — a business. It’s how big-box operations like AOL and Yahoo! News approach things, and hyperlocalists should do the same. Hyperlocalists are likely to leverage that emotional value to earn sponsors and donors, whereas the big boxes rely on volume to drive page views and advertising revenue.

But the goal — to generate profit or at least revenue — is the same, regardless of the news organization’s size or even its nonprofit status. (Yes, nonprofits need money too. They just reinvest it into their core missions, instead of distributing it to investors.)

It’s a bitter pill. Choke it down.

Photo courtesy of Flickr user Micah Taylor.

Jun 10, 2010

Share and share alike

As I’ve said previously, I enjoy speaking with fellow hyperlocalists and learning of their own adventures in entrepreneurial journalism. Part of that enjoyment stems from the fact that I work from home with little to no human interaction during the day. And then there’s my genuine interest in what’s going on in other people’s lives.

Recently I spoke with one hyperlocalist whom I’ll call Loretta for privacy’s sake. Loretta operates a popular hyperlocal website and was invited to join a regional network that shares advertising revenue with its members while collecting a cut for itself. Currently, the network doesn’t have an umbrella site for aggregating its members’ content or directing readers to its members’ respective websites.

Despite that, there are definite advantages to Loretta’s participation in the network. First, this particular network carries name recognition, though it’s still too fresh out of the box to call it a brand. (Details of its business practices couldn’t be confirmed, so it shall remain nameless in this post.) Next, it stretches across an entire region, which should help reel in large advertisers and their large ad budgets. Last, there’s the notion that all boats will rise with the revenue tide, even those that aren’t as seaworthy as the rest of the fleet.

There’s only one thing about this arrangement that makes me leery. Revenue sharing assumes revenue, and when talking about advertising, that usually means page views. This network is so brand-spanking new that it doesn’t yet have an audience of its own and is relying on Loretta’s site and others to drive traffic. In other words, it can’t deliver page views to Loretta’s site. Instead, Loretta’s site will deliver page views to the network, which will then take its cut of the ad revenue.

The way I see it, if Loretta and other hyperlocalists are doing all the work to drive traffic, then they should reap most of the revenue. The network still deserves a cut for using its name and relative size to leverage ad sales, but the fact is, those ad sales won’t happen without the hyperlocalists’ hard-earned page views.

I don’t know the numbers of Loretta’s revenue-sharing arrangement, but I hope she gets her fair share of the deal. Best of luck, Loretta!

Photo courtesy of Flickr user enggul.

Jun 8, 2010

The revenue parade

A few months ago, I wrote about using an editorial calendar to leverage a little revenue for the newsroom. It seemed like a good idea at the time: If one can predict news coverage (like the kind expected with holidays, elections and other cyclical events), then one can plan to make money around it.

I finally saw the concept come together last weekend, marching down the avenue like a big parade — the neighborhood’s 18th annual gay-pride parade, to be exact. Thousands of people lined the street to see politicians wave at the crowds, drag queens dance to Miley Cyrus, and leather mamas prowl on motorcycles. It was a good gig.

My original game plan for the parade was to photograph the hell out of it, with the intent of building a marketable stockpile for other publications to use (for a fee, of course). But I also took note of what spectators were doing on the sidelines. Some of them were noshing on breakfast, many others were on their cell phones, calling or texting friends for a post-parade lunch. Still others were buying souvenir flags and buttons.

That’s when I had my epiphany. Everything these spectators did represented revenue-raising opportunities for a hyperlocal news outlet. Hungry crowds would have spelled jackpot for local restaurants and the hyperlocalist selling discounted meal tickets in advance. (For more information on this revenue-sharing stream, check out this brilliant post from the Nieman Journalism Lab. It’s a goody.) Advanced souvenir sales using the same method could have added to the profits.

A hyperlocal news outfit also could have hosted a pre- or post-parade event, driving revenue either through a cover charge, advanced ticket sales or event-planning services. Of course, selling ads to parade participants, retailers along the parade route, and even those marching politicians up for re-election would have been another juicy revenue stream.

Admittedly, these ideas have nothing to do with how editorial content is created. Instead, they’re about diversifying the money flow without guessing when or how that flow happens. And if an editorial calendar can help a hyperlocalist do that, then why not use it.

Photo courtesy of Flickr user ennuipoet.

Jun 7, 2010

Beware of false profits.

Journoprenuers took a licking last week from two heavies in the media landscape: the federal government and Apple CEO Steve Jobs. Both made comments that would invest journalism’s future in its past, that is, institutional mainstream media that for years hasn’t been able to find its own ass with both hands and a flashlight.

First, the Federal Trade Commission (FTC) unleashed its draft policy recommendation “to support the reinvention of journalism.” While the document suggests the IRS recognize novel small-business structures for nonprofit tax breaks, it also pitches ideas that would keep small media outlets from doing their thang.

A tax on large broadcasters would relieve them of obligations to provide “public-interest programming,” like the kind a hyperlocalist would produce. A 2-percent tax on advertising sales would add a layer of meshugas to a small content producer’s books, as well as add an extra charge on local advertisers. Increased postal subsidies and a tax on accessing the mobile web would favor large print publications over hyperlocal newspapers and websites.

These proposed taxes would go towards establishing a national local-news fund, doling out university grants for investigative journalism, and tax breaks for hiring salaried journalists. Personally, I oppose government money in the media piggybank, and while a tax credit for hiring journalists is nice, hyperlocalists generally rely on freelance or volunteer contributors. The FTC document doesn’t do enough for small media.

And then there’s what Apple CEO Steve Jobs had to say at The Wall Street Journal’s D8 conference. The appointed messiah of media told conference participants, “I don’t want to see us descend to a nation of bloggers myself. I think we need editorial more than ever right now,” PaidContent.org reported Wednesday.

One might quip that Jobs’ disdain for blogs stems from the Gizmodo iPhone fiasco, but I think there’s another reason. While bloggers (and the online hyperlocalists who have that title hanging over their heads) create oodles of content, they probably don’t have the financial resources or tech savvy to distribute that content through an iPhone or iPad app. That’s money out of Jobs’ pocket and control out of his hands.

According to PaidContent, Jobs followed his swipe at bloggers with: “Anything that we can do to help The New York Times, The Washington Post and other news-gathering organizations find new ways of expression so they can afford to get paid so they can keep their news gathering and editorial operations intact, I’m all for it.”

Sadly, Jobs doesn’t recognize the original news gathering that hyperlocalists and bloggers do, and how some of those large media outlets base their “reporting” on a smaller outlet’s original stories. Again, I suspect this elitism stems from the lost potential of app sales: The iTunes store sells iPhone apps for The Times and The Post, as well as a Times app for the iPad.

Where is the love for hyperlocalists? When did innovation and imagination (the kind that Apple touts in its advertising) fall victim to monopolies? Instead of encouraging new voices and new investment, the FTC stifled them to preserve the industry’s collapsing status quo. And instead of lending Apple’s devices to new experiences with content, Jobs whittled them down to technological troughs for whatever iTunes’ gatekeepers deem worthy of consumption.

My advice to the FTC and Jobs: Beware of false profits.

Images courtesy of Flickr users 1Happysnapper (photography) and reelsinmotion.

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