Local Seattle News Site, Crosscut, May Switch to Nonprofit Model To Pay the Bills

One of Seattle’s best-known technology investors, Tom Alberg of Madrona Venture Group, had a conversation a couple years ago with David Brewster, the founding editor of Seattle Weekly, about how the Internet was transforming journalism. “Tom said, ‘Local news is a big opportunity, and online media is a big opportunity. Let’s brainstorm some ideas,'” Brewster recalled.

The idea that emerged as a company in April 2007, Crosscut, has proven it can build a growing audience, but not a sustainable business model. This past week, it laid off editor Chuck Taylor (a highly-respected former managing editor of Seattle Weekly) in an effort to conserve cash. The company is now considering whether to switch from its for-profit operation that relies heavily on online advertising, to a nonprofit model supported primarily by a broad network of donors, sort of like National Public Radio, with supplemental income from events and ads.

Whatever Crosscut does will be watched by a lot of people in Seattle politics and government, as well as by journalists around the country, who are yearning for a sustainable way to cover public affairs as mainstream newspapers continue in a downward spiral. Crosscut got off to a promising start last year, with $500,000 in seed capital from a group of 25 prominent people in Seattle, including Alberg, former Environmental Protection Agency director William Ruckelshaus, former Mayor Paul Schell, University of Washington computer science professor Ed Lazowska, and ex-city council member Jim Compton. It has more than doubled its number of unique visitors per month in the last year, with more than 73,000 visitors at last count and more than 225,000 page views a month, Brewster says. One early story about Alaska Gov. Sarah Palin, shortly after she was named Sen. John McCain’s running mate, nearly melted its servers with traffic. But the buzz didn’t generate enough dollars from advertisers, especially as the economy headed into recession this fall, to make the for-profit model look like it could work.

“When people look around at starting this kind of thing, you look at cities with high rates of Internet adoption, a highly educated population, and a high interest in civic matters,” says Brewster, Crosscut’s publisher. “Seattle, Minneapolis, and Vancouver, BC, are a few natural cities for this. Our thought was that advertisers are moving to the Web, Web ads are moving to the local level, and the mainstream media is losing altitude. It provides an opportunity.”

Notice the use of the present tense with regard to the word “opportunity.” When I saw Taylor post an update on his Facebook page over the weekend that he was looking for a new job, my first reaction was that Crosscut must be toast. Brewster says that isn’t so. The 6-person board has recommended that the company switch to a non-profit model, but that a final decision has to be approved by the 25-person investment group, Brewster says. It’s possible that Taylor will be called back to run a stronger version of the site in two or three months, he says. The site will continue for the time being with five of its seven core employees, and its roster of 40 freelancers, Brewster says.

Still, I wanted to know a little more about the model, and why it hasn’t worked. First, Crosscut didn’t really try to sell many ads in its first year, while it was building up its readership base and doing surveys, Brewster says. Once it hit a stride, it targeted ads at companies that would like to get their names in front of a politically influential demographic, as well as arts patrons, Brewster says. It drew some interest from wineries and country inns. For a while, condominium advertising was a bright spot, but that has been a casualty of the downturn, he says. The advertisers were sold one-month packages with rates based on 50,000 impressions, Brewster says, a similar model to the one used by mainstream newspaper web sites.

Crosscut is now looking at ways to diversify its revenue streams, so it isn’t solely dependent on online advertising. One option is to host conferences, possibly with other civic-minded organizations like Town Hall. Another is to go the nonprofit route, soliciting support from readers through small donations. Foundations and wealthy individuals could also be part of the mix, Brewster says. Ultimately, he can envision a nonprofit news source, with a variety of revenue streams, with as much as half of its revenue coming from online ads.

A few models are emerging that are at least producing quality journalism, if not Rupert Murdoch-style profit margins. One is VoiceofSanDiego, another is MinnPost in Minneapolis. VoiceofSanDiego has created some interesting partnerships with local television, in which it gives the station a day’s notice when it has a big scoop, giving the station’s reporters a chance to get some film and do some of their own reporting, and allowing everyone to break the story simultaneously, and amplify it. Brewster is thinking about a similar idea for Seattle.

“The dream here is to do something for Seattle, at the local level, that has the kind of quality you see in the New York Times or the Wall Street Journal, to be able to bring it home locally,” he says. Something like this can be feasible in a nonprofit with an annual budget of $800,000 to $1.2 million a year, he says. “That sounds good to me,” Brewster says. He adds, “We’ll see how well we do in raising it.”

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