What We Know About the Business of Digital Journalism

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Columbia Journalism School | Tow Center for Digital JournalismAltogether, editorial costs run to $5,000 or $6,000 per month—higher than atThe Batavian, but still fairly modest for a site that runs about eight longer articlesper day and, according to George, attracts 80,000 unique visitors monthly. Mostimportant, costs are far below the roughly $20,000 in advertising that Georgesays Baristanet pulls in each month. For several years, according to George, thesite’s profits have provided a sizable second income for the two founders andtheir hired editor.Baristanet also eschews cost-per-thousand pricing in favor of a simple calendarmodel, and, though rates run higher than at the Batavian, an advertiser can geton the site quite cheaply. Merchants pay from $150 to $1,600 per month (weeklyrates are also available) depending on their ad’s size, placement and frequencyof rotation. George says businesses in the area have no interest in buying by theimpression or by the click, though Baristanet does report such statistics to them.Because Baristanet rotates ads across its available inventory, a merchant’s exposureis limited by the amount of traffic the site gets. According to George, consultantshave advised against ad rotation, but so far the hospitals, car dealerships,real estate agents, restaurants and other businesses that advertise on the site don’tseem to mind. Merchants occasionally call wondering where their ad is; Georgeadvises them to refresh the page a few times until it appears.As a result, Baristanet achieves an enviable ratio of revenue to traffic. With anaverage monthly volume of about 475,000 page views, the site enjoys an RPMin the neighborhood of $42—many times the revenue it would get if it used astandard CPM model. Just as The Batavian’s revenue would collapse if merchantscomplained about being stacked together on a single page, Baristanet could notdo the business it does each month if it had to guarantee a hard number of impressionsto each advertiser.It seems fair to assume that the site’s appeal to advertisers is not tied to suchnarrow statistics. George suggests that merchants are paying relatively little to be apart of a one-of-a-kind community resource that enjoys wide recognition in thetowns it serves. Baristanet claims to have 53 percent household penetration in itscore market of Montclair and has logged more than 300,000 comments since itsLocal and Niche Sites: The Advantages of Being Small 49
The Story So Far: What We Know About the Business of Digital Journalisminception—roughly one for every other person in all of Essex County(thoughmany come from repeat commenters). “It’s been an easy sell,” George says. “Everybodywants to partner with us.”* * *That local online journalism can succeed in such different environments—prosperous suburban New Jersey and Rust Belt upstate New York—is an indicationthat it can be viable elsewhere. A 2010 survey of 66 “promising local newssites” around the country, conducted by the Reynolds Journalism Institute at theUniversity of Missouri, found that the top objective of these sites was to “produceoriginal news” and that on average nearly half of their content came frompaid staff, rather than, for instance, aggregation or reader contributions. 13Advertising was far and away the most important revenue source for these sites,accounting for 45 percent of revenue on average. (Foundation grants came next,at 17 percent of revenue, and reader donations followed at 12 percent.) For 28 ofthe sites surveyed, advertising supplied three-fourths or more of annual revenue.Fifty-six percent of the sites operated as for-profit ventures, and of these, halfreported making a profit the previous year. (It is important to remember theseresults are entirely self-reported.)Clear lessons emerge from the experiences of Baristanet, The Batavian and theAlaska Dispatch. First, all three sites have embraced calendar-based advertisingpricing systems that yield more revenue than they could expect pricing strictlyby the number of impressions. Low prices, anecdotal successes and a sense ofcommunity engagement allow local merchants to find value on terms that anational advertiser might reject out of hand. The sites have managed to appeal tolocal advertisers by selling in terms that work for them. “A lot of advertisers don’tunderstand CPMs,” says Victor Wong, CEO of PaperG, a company that helpspublishers attract local ads. “They don’t understand what a page view means, theydon’t know when the page ran, they don’t trust CPM measurement.”50
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