How to make money on a digital-only community site

Let me state from the outset that I don’t know if anyone in our industry has completely figured out how to make money with a digital-only community information site, least of all me. But here are some of my thoughts, and I would love to begin a discussion that actually leads to some solid answers, so please comment.

My last post talked about an experiment in Batavia, NY, by Gatehouse Media, where a media company launched a digital-only operation in a market where it doesn’t publish a print product. I proposed that my company, Gazette Communications, do something similar in Iowa City, IA.

A friend, Elizabeth, commented with a great question: How does it make money?

We have a responsibility to do more than just build it and hope they will come… how could a site like this serve the other, and equally important, constituency – local advertisers? We will need to be just as innovative in creating, er, fostering, the buyer/seller community as we are in creating new forms of journalism.

She makes excellent points. My expertise, if you will, is more on the content and audience than on revenue, but I’m going to give it a shot.

First off, we have to change the expectations. Twenty-eight to 30 percent profit margins are not realistic. A journalist – in this type of environment with this type of assignment – has to have an entrepreneurial mindset. Build everything in an open-source environment. Do something crazy like offering free classifieds. Draw audience by fostering those community and civic needs that are not being met. And, most importantly, be open to experimentation in revenue streams and content.

It’s a newspaper company thinking and acting like a startup – which is what every media company needs to do to survive the digital transition. – Scott Karp

I strongly feel this experiment will require thinking in terms of micro-pennies, or small amounts of revenue from new businesses that normally wouldn’t or couldn’t afford to advertise in a print product.

Online advertising means that small businesses who previously were not typical print or broadcast advertisers can now afford to advertise. In other words, there is a potential long tail of small advertisers that could prove a significant source of new revenue. – 10 ways that ad sales people can save newspapers

One idea my friend Tom is big on is in creating a revenue sharing network with other local bloggers. I think someone needs to run with that idea.

Here is another resource for disucssion purpsoses that Tom sent me: Counting your piles of Benjamins.

So those are just a few ideas I could come up with in the 15 minutes I dedicated to thinking about this today. What are your ideas? What have you done that is working? What have you done that has failed?

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3 thoughts on “How to make money on a digital-only community site

  1. I really think a huge key is thinking more like a startup.

    I just wonder if a newspaper gave 5 teams of 3 people seed money to go out and start something – what would happen?

    Office space is a huge expense…do these people need an office? Can they work out of one person’s home? Maybe the parent company leases a small office and then all the 15 can work from there? At current home prices – they could probably buy a house pretty cheap.

    I just think we need to “own” it – you know…really get in there and figure out what really works.

  2. 30% margin may or may not be realistic contingent upon keeping your overhead as low as possible. I think a key element to something like this is the value-add.

    Unless you have a pretty sizable (or well-targeted) audience, web advertising amounts to a pittance. You have to add some kind of valuable service along with the content, and charge a small fee for it.

    Create arrangements with local businesses to sell their services through your local portal, and collect a small transaction fee. Do “premium memberships” in some form or another. Sell merchandise.

    I think if you look at the current crop of web2.0 startups and how their business models evolve as they come out of beta, you’ll see that the idea of ad-supported free services is generally losing traction. Where they remain, they primarily serve as gateways to get you into some low-cost payment plan.

  3. I am starting to take my feet on affiliate programs too, so this article is excellent starting point! :) Shared it on Stumbleupon and submitted on Digg :)

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