“Untapped Opportunity.” A New Playbook Helps Nonprofit Outlets Boost Earned Revenue

Long before the pandemic struck, nonprofit news leaders sought to implement a finely tuned business model combining philanthropic dollars and earned revenue, which the Institute for Nonprofit News (INN) calls “important and strategically necessary for nonprofit news organizations to find true sustainability.”

Yet the INN 2020 Index found that in 2019, earned revenue made up, on average, only 11% of reporting members’ total revenue, trailing foundation support (48%) and individual giving (35%), while exceeding other charitable sources (5%). The numbers were less stark for the median local news outlet with $287,000 in revenue. About a third of this group’s revenue came from foundation grants, 40% from individual giving, and 25% from earned revenue sources including advertising, sponsorship and events.

The pandemic made outlets even more reliant on philanthropy since they couldn’t earn revenue through live events and advertising from local brick-and-mortar businesses. Chasing philanthropic dollars may be the best course of action when the country is in lockdown and foundations are feeling generous, but it’s not the most effective long-term strategy.

Jennifer Preston, Knight Foundation’s vice president for journalism, told me that while “there is not a single model for sustainability, the strongest organizations include leaders who are completely focused on revenue, whether it’s from local philanthropists, national foundations, local events, sponsorships, advertising, memberships or subscriptions.”

Don’t just take her word for it. Citing its 2020 findings as an “impetus,” the INN and Google News Initiative (GNI) recently released “The Nonprofit News Guide to Earned Revenue,” a playbook showing nonprofit newsrooms how to grow revenue from display advertising, event sponsorships, sponsored content and other earned sources. “It is apparent,” the authors wrote, “that nonprofit news organizations have an enormous, largely untapped opportunity to dramatically grow their earned revenue.”

Obstacles to adoption

The INN/GNI’s 66-page report is a robust read filled with case studies, tips and techniques, and statistics primarily focused on how outlets can generate earned income from business partners and sponsors. Rather than get into the technical and HR weeds, I’d like to explore some of the study’s bigger questions. For example, why weren’t nonprofit outlets generating more earned revenue before the pandemic?

At the most fundamental level, outlets were following the money. A 2019 report from Media Impact Funders found that by 2017, over 1,200 funders made over $255 million in journalism grants to 925 organizations. Since 2009, 3,106 funders gave $1.7 billion in journalism-related grants. Meanwhile, “individual giving, including both major gifts and small donations, continues to be a financial mainstay,” reads the INN’s 2020 Index.

This steady influx of philanthropic dollars can disincentivize outlets from allocating finite capital to resource-intensive revenue-generating activities like selling sponsorships or building business partnerships.

For example, “The Nonprofit News Guide to Earned Revenue” states that “news outlets that had success with earned revenue figured out how to align their financial goals with the interests of their community members, including local business owners.” It sounds simple in theory. But in practice? Not so much.

An outlet needs to define its “financial goals” beyond staying in business. It must identify the “interests”—an inherently subjective term—of members of a diverse community. It must also forge consensus, which is a tall order even in the best of circumstances. Once this work is done, the outlet must then tackle technical and financial components, like identifying resonant content, optimizing “the tech stack,” designing ads, and crafting sponsorship agreements.

Underinvestment in revenue generation

The INN/GNI study provides case studies exploring how two outlets cracked the code: the San Antonio Report, which created a successful business membership model that “offers an opportunity for companies to underwrite relevant content and receive recognition without placing advertisements,” and Madison365, which created a program promoting its mission of “producing coverage specifically for communities of color to find potential sponsors who support that goal.”

Make no mistake, this is incredibly hard and complex work, especially when compared to filling out a grant application. This explains why, pre-COVID, outlets were reluctant to shift attention away from ample foundation support to seemingly low-yield earned income streams. INN found that while two-thirds of nonprofit outlets’ expenses went to editorial operations in 2019, only 10% went to revenue generation and 4% to technology. These figures have “remained mostly steady,” the report stated.

This underinvestment in revenue generation and technology can also inhibit outlets’ efforts to optimize unearned income streams, which INN classifies as membership programs, subscriptions and individual donations. The INN found that while nearly a third of nonprofit organizations reported having a membership program in 2018, most of the programs were “very young—less than three years old—and may not have realized their full revenue potential.”

Competition “is likely to intensify”

Nonprofit journalism leaders may be content with a revenue model built on the steady flow of foundation dollars. But larger trends may ultimately force their hand.

Last January, NeimanLab’s Laura Hazard Owen and Joshua Benton reported on journalists’ simmering frustration with funders’ micromanaging and unhelpful infatuation with unproven technology platforms. “I came to understand that if someone was paying us to do something, we did it no matter what,” said one unnamed journalist. Why should outlets jump through funders’ hoops to secure funding for dubious tech investments when they can pull in unrestricted revenues from readers and advertisers?

Or consider the pandemic’s impact on outlets’ bottom line. INN’s 2020 Index found that 40% of responding news organizations expected revenues to decline because of COVID-19. Respondents also cited low cash reserves and uncertainty around “foundation funding tied to volatile financial markets.” More earned income helps outlets withstand future economic shocks, the abrupt cessation of funder support, and a projected decrease in individual giving in 2021.

Even if foundations and individuals keep the money flowing at 2019 or 2020 levels, it still may not be enough to keep pace with the rapidly expanding field. The INN’s 2020 Index found that 31 nonprofit members launched in 2018-19, up from 27 in 2016-2017. The composition of the nonprofit field is “likely to shift from large, specialized reporting and investigative shops... toward more local news and local/national partnerships and collaborations,” the report stated. “Competition for donations is likely to intensify.”

A few weeks back, Rachel Schallom, the deputy editor for digital at Fortune, told NeimanLab we should expect to see even more nonprofit outlets in 2021 thanks to surging demand for trusted local coverage and the fact that professionals concerned with issues like staff diversity, pay inequity and audience community building are discovering that “it’s easier to build what you want from the ground up than attempt to change the processes, priorities and personnel in an existing structure.”

Earned income growth opportunities

“Although vulnerable to economic downturns (like those caused by a global pandemic), earned revenue is a critical lever that too many organizations have left untapped,” INN/GNI’s new report reads.

To that end, the pandemic has presented outlets with opportunities to capitalize on previously under-leveraged earned income streams. Speaking to Poynter’s Kristen Hare, University of Oregon journalism professor Damian Radcliffe was struck by the “continued subscription bump that many news organizations and media outlets have seen during the pandemic.” He attributed this trend to outlets’ generous introductory subscription offers and other incentives. “The challenge,” Radcliffe said, is “moving forward will be to reduce churn and retain as much of that audience as possible.”

In addition, “virtual events are here to stay,” Stat co-founder and Executive Director Rick Berke told NeimanLab, citing the medium’s relatively low cost and the ability for outlets to lure attendees speakers who don’t have to give up a day or two of travel. “There’s an opportunity for scale,” he said, “even if you can’t charge as much for a virtual event as you can an in-person one.”

The authors of the new INN/GNI report agree. “We believe that event sponsorship remains a core strategy for all nonprofit news organizations because smaller in-person events are becoming viable again, especially in certain states, and there are big opportunities to gain audience and revenue from virtual events—even after the global pandemic, one day, fades away.”