March Carnival – Measuring Efficiency

Core strength – Efficiency

(NOTE: Yes, this post is about the nonprofit world but I fully recognize that there are small business and large for profits involved too (think Patch vs. Batavian). I am actually very bullish on a marketplace for journalism as well – but that is a separate post.)

More and more this country is betting on nonprofit news organizations to fill the gap left by commercial media. I think this has lots of potential, but it could be a lost opportunity if we don’t play our cards right. I don’t claim to know how to play our cards, but we should at least acknowledge that these players from Block by Block are in the deck.

As Susan Mernit noted in her post, “we have a movement, but we have no tangible support.”

The meat of this post

I see the strength of these players as efficiency. The SF Public Press (disclosure, I’m on the advisory board and Spot.Us has raised money for them on several occasions) is operating on roughly $70,000 this year. That is up from roughly 30k last year.

(NOTE: All of these are 2010 numbers – but the point still stands)

That gives it a burn rate of about $5,800 a month. Average unique visitors is around 12,000. Divide one by the other and and we can crudely say they spend about .48 cents to acquire each reader.

Compare this to The Bay Citizen which has an operating budget of over $5,000,000 a year.

That makes for a burn rate of $400,000 a month. At a booksmith event Lisa Frasier said their traffic was about 175,000 (note: This is probably growing since they are a young organization. This also doesn’t count NY Times traffic).

This means The Bay Citizen spends $2.2 to acquire a reader. Even if we double their traffic numbers, assuming the NY Times brings in another 175,000 unique readers, their cost is $1.1 per reader – still twice that of the SF Public Press.

(Again note: I haven’t contacted The Bay Citizen to confirm their monthly burn rate and I’m basing their traffic on something that was said by Lisa Frazier at a booksmith event. I know – this is shoddy reporting, but I don’t work for CJR anymore. I am not a media reporter.)

I’d bet we’d find similar breakdowns between Twin Cities Daily Planet/MinnPost, Texas Watchdog/Texas Tribune and other small vs. large nonprofit organizations. For the record – Spot.Us’ “efficiency rating” is between .21-.55 cents depending on our monthly traffic and I have ideas on how to lower that. In fact, it was this efficiency rating that inspired me to build Spot.Us as a platform NOT a news organization.

Here’s the Rub: Nobody is wrong, Nobody is right, Nobody is sustainable…. yet.

I am not for a second suggesting that The Bay Citizen, ProPublica, MinnPost, Texas Tribune, etc are a bad idea. To the contrary – as somebody who is caught up in these times I want as many experiments as possible and I think the folks at these organizations are doing good work. I consider many of them colleagues and friends. It is natural that some of these experiments will be large and costly (we haven’t even hit the journalism community’s Manhattan project…. yet).

I think there is also something to be said in the breakdown above about amassing a larger audience. There is a value to that which is not measured in dollars. While this and other “X factors” won’t show up in my obviously crude efficiency rating (monthly traffic divided by burn rate), it does create unmeasured value which should be considered.

All this is to say – the answer isn’t (a. ditch these large nonprofit efforts. Equally it isn’t  (b. to ignore these smaller players.

They are two extremes. Neither are wholly sustainable. One is too small to scale. They operate on volunteers and struggle to get by. The other probably can’t support its own weight and drops money on either side – money that could be used to support more reporting.

The Rub for Foundations

Giving away money is a tough job. I got a glimpse of this as a reader for the Knight News Challenge the last two years. You’d think it would be easy. You are sorely mistaken. The problem is that there is more need than can ever be filled through philanthropy. The hope, as the old proverb goes, is “to teach a man how to fish” rather than give him a free meal.”

When foundations see the Sandler family put down 10 million a year, they take notice. That’s a big bet. Perhaps by doubling-down they can help that organization reach a level of sustainability.

To me there is a tension between the notion of funding a few huge nonprofits with millions of dollars so that they can become “sustainable” when their existence from the start was based upon the philanthropy of a handful of rich people. These large nonprofits are, by design, going to have large burn rates. Meanwhile organizations that can run for a year on 150-70k or less can’t get funding because they haven’t amassed enough money to perhaps become sustainable. I’m not saying the reverse course is correct (fund the small players and let the large ones eat their young) just recognizing the tension and “the rub” for foundations.

Syllogism time.

IMPORTANT: All of the arguments for A, B and C below are on shaky ground. This is not to argue for any kind of universal syllogistic truth (“Man is mortal, Socrates is a man…..) but to show one train of thought played out to its logical conclusion. I myself can imagine a very different syllogism based on counter-arguments.

• A = Journalism isn’t “sustainable” in the true sense of the world.
• B = The aim of philanthropy is to get maximum impact of $’s.
• C = The efficiency rating I created above (Monthly traffic/burn rate).

Argument for A: On a cynical day when I think about the nonprofit news model trend I see journalism becoming closer to the arts.

Let’s face it – the high arts (poetry, orchestra, visual arts) have never really been “sustainable.” But we aren’t worried about their disappearance. It could be that “high” journalism has also never really been “sustainable.” Sure, the classifieds and advertisements placed around it was lucrative – but the journalism itself was a loss leader. I think everyone can agree to this.

The uncoupling of advertising and content has shifted journalism closer to the high art world. Think poetry. Thus we see a rise in nonprofit news philanthropy. Talk about sustainability is really about squeezing revenues out of something that is inherently not sustainable. Again disclosure: This is on cynical days. Catch me on a good day and I’ll have you investing in one of my for-profit journalism ideas 😉

B: The aim of philanthropy is to get maximum impact. In journalism this is a difficult choice because we aren’t sure what will maximize impact at this point in time. I think this is precisely why the Knight News Challenge was a brilliant use of funds. It placed some wide bets and shifted the journalistic conversation to recognize risk-taking.

But if (and that’s a BIG IF) A is true, then it would seem the efficiency rating would play a bigger factor in deciding what bets to place.

A + B = C

Reads: If journalism is not sustainable in the true sense of the word then to maximize impact in journalism foundations should give to organizations with high levels of efficiency.

Remember my “C” is crudely calculated and there are other X factors (amassing a large audience, what audience you serve, your level of reporting) that aren’t numerically valued – but certainly there is a way to factor.

Quick plug: Collaboration is Queen

I give The Bay Citizen credit for their openness to work with community partners. They are one of the few large players who have made an earnest attempt at this and so far are doing great. Perhaps it is through this middle road that both sides can find a happy medium. Because the Bay Citizen is still new (as we all are) it’s difficult to know where that medium ground will lay. They’ve started by offering $25 a post to community partners. I don’t know if and where the needle will move in the future – but the point is that at least we see a needle.