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December 29 2011

00:20

Open Philanthropy Post

Last month, Fast Company’s new blog, FastCo.Exist, published my piece on Lucy Bernholz and Open Data in Philanthropy.

Networked technologies and big, open data are in the process of reshaping nearly every industry–music, health care, education, scientific research, and journalism, as well as the nonprofit sector, civil society, and government. The consequences of long-tail economics and wise crowds are forcing almost every institution to adapt (and hopefully improve) or face obsolescence. Except, perhaps, one prominent sector: institutional philanthropy.

Read the whole piece here.

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September 15 2011

18:23

8 Ways Tech-Based Foundations Are Changing Philanthropy

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Not so long ago, most major U.S. foundations fit the image of the giant East Coast institution, rooted in fortunes made by titans of the manufacturing and extractive industries. For decades, the Ford, Carnegie, and Rockefeller foundations carried out sweeping programs on a scale that rivaled those of governments. Many public reforms and institutions were buoyed by their efforts, including public broadcasting, public libraries, and the Green Revolution.


But in recent years that primacy has been challenged by a host of new foundations, rooted in the digital communications and technology sector, that are rewriting the rules of American philanthropy. They don't always march in lockstep or speak with one voice, but they are generating a new philanthropic culture nonetheless.

Here are eight ways in which the new tech philanthropies are making their mark:

1. Their footprint is large and growing. In fact, tech-based donors represent the fastest-growing sector in U.S. philanthropy today. This claim could be based on the Bill & Melinda Gates Foundation alone. Founded in 1994 with an endowment of $94 million in Microsoft stock, it immediately experienced dramatic growth. This was further galvanized by Warren Buffett's 2006 contribution equivalent to $30 billion, which was to be paid out over a number of years.

The Foundation Center's list of last available audited statements (as of July 2011 at this writing) places the Gates Foundation's assets at nearly $34 billion at the end of 2009. This is more than the assets of the three next largest U.S. foundations listed (Ford, J. Paul Getty, and Robert Wood Johnson) combined.

In recent years, Gates has been joined by a number of other donors from the tech community, among them eBay's Pierre and Pam Omidyar, founders of the Omidyar Network; eBay's Jeffrey Skoll, founder of the Skoll Foundation; and the Google philanthropic arm known as google.org. Not only are these organizations built on vast new fortunes, their assets are also often neutral or even counter-cyclical compared with traditional foundations' portfolios.

2. They are generating new organizational cultures. Institutions tend to mirror the dominant administrative cultures of their origins, and foundations are no different. The new tech-based philanthropies, rooted in startup culture, tend to be distrustful of big bureaucracy and admiring of innovation. The Gates Foundation began in Seattle with a bare-bones staff that had to be doubled in 2006 when the Warren Buffett contribution arrived. The Omidyar Network dispensed with traditional titles to indicate its idiosyncratic approach to the funding process. (This decision included the word "foundation." One of the network's alternate labels is "philanthropic investment firm.") Omidyar programs are shaped by individuals whose titles include "principal" and "managing partner." The network collaborates with "partners" rather than funding grantees. The Omidyar Network is also pioneering the use of social investment, investing in for-profit companies for the sake of social impact, at times acquiring equity in the process.


Thumbnail image for omidyarnetwork.png Many of the new foundations favor a "venture capital" approach to their grants, in which many new projects are seeded with the expectation that a number of them will fail, and the successful models will proceed to the next level of support. This approach often places a heavy emphasis on project monitoring and evaluation as part of the ongoing funding process.

3. They promote a global perspective. The Ford Foundation and the Rockefeller Foundation were deeply involved with the architecture of the Marshall Plan that rescued Europe from the ashes of World War II. Now the Gates Foundation and its counterparts are taking a close look at the developing world, and at Africa and India in particular. The Gates Foundation's three program areas are global health, global development (with a strong emphasis on Africa and India), and U.S. programs (with a primary focus on education). The Omidyar Network's portfolio includes a number of projects in India and Africa. Google's philanthropy has experimented with a number of different approaches, among them pro bono tech projects and public health initiatives in Africa. Some of these global initiatives include surprising new approaches, such as Jeff Skoll's Participant Media, which finances films to advance public education on critical global issues. Participant's most recent project is Contagion, a feature film that portrays the world in the grip of a rapid-fire pandemic. The project features a public education website, and its advisors included public health expert Dr. Larry Brilliant, formerly the head of Google's philanthropy and currently president of the Skoll Global Threats Fund.

JeffSkoll-low-res-276x300.jpg

4. They're still in motion. Some of the older technology-based foundations include the David and Lucile Packard Foundation (founded in 1964) and the William and Flora Hewlett Foundation (founded in 1967). These foundations have been around long enough to define their portfolios and institutional approaches, and bear a stronger resemblance to traditional East Coast foundations. But their younger cousins are far from set in their ways. The Case Foundation was founded by former AOL CEO Steve Case and his wife Jean in 1997. Google was only launched as a project in 1996, and google.org wasn't formed until 2004. Google is still adapting the administrative structures for philanthropy, with an increasing role played by various policy and regional offices.

Google has made a habit of experimentation in philanthropy as it has elsewhere. It has included traditional grant-making, staff volunteer projects, and the creation of online platforms for worthy causes, such as online crisis mapping to help disaster victims locate missing friends and relatives. (Google's philanthropic projects include the Google Foundation, a subset of google.org.)

case-foundation.jpg

5. They believe in "social entrepreneurship." Digital media celebrates a culture of grassroots participation, so it's no surprise that many of their foundation portfolios feature projects in micro-finance, anti-censorship, and public participation in good governance. The Case Foundation has experimented with the Make It Your Own Awards, in which individuals are invited to suggest "citizen centered" solutions to their community problems and compete for $25,000 grants to implement them -- chosen by a public online voting process. The John S. and James L. Knight Foundation is based in Miami with origins in the newspaper industry, but it has moved decisively into the spheres of digital media and tech-based philanthropy. Knight has not only pioneered its News Challenge as an online public competition for digital media grants; it has also forged new approaches to collaboration among philanthropies with shared goals.

6. Their funding interests often reflect their core businesses. It's only natural that foundations that arose from the digital revolution would take a strong interest in innovators in the field. The Omidyar Network and Google have recently made major grants to the Wikimedia Foundation, the non-profit organization that supports Wikipedia, as well as to Global Voices, an international blogging community, and its academic birthplace, the Berkman Center at Harvard. Tech-based philanthropy also displays a strong affinity for other areas of science and technology, especially medical science and public health. The Gates Foundation has undertaken massive public health campaigns involving vaccinations, malaria eradication and nutrition in the developing world; the Omidyar Network and google.org have also made important contributions.

7. Individual and institutional philanthropy are both significant, and are sometimes carried out simultaneously. Pierre Omidyar's wife Pam was a co-founder of the Omidyar Network, and also founded two other philanthropic enterprises, Humanity United and HopeLabs. A large community of individual philanthropists is taking shape in the tech sector, and their influence is certain to be felt in coming years. Nor will they all be American. Skype, which was founded by Scandinavians and is based in Luxembourg, has been exploring new philanthropic avenues, including technological support on behalf of social good. A new generation of Indian philanthropists has emerged in recent years, such as Dr. Abraham George, a technology entrepreneur who created the George Foundation to promote projects in health, education, and poverty alleviation.

8. They're West Coast-oriented. This point is less obvious than it may seem. For decades, much U.S. foundation activity was concentrated in the Northeast Corridor, running from Washington through New York to Boston. This route involved heavy traffic with the federal government, New York media and cultural institutions, and northeastern universities. The new corridor involves Los Angeles, San Francisco and Seattle. (It is noteworthy that while the Case foundation is based in Washington, D.C., and the Gates Foundation has a Washington office, none of the organizations mentioned in this article maintain a foundation office in New York.)

Many Americans can describe themselves as "bi-coastal," but important cultural distinctions still exist. The West Coast elite have a different relationship to the news media than their East Coast counterparts. To start with, they read different newspapers -- and may not look for their news in newspapers at all. They naturally have more ties to Stanford and Berkeley and fewer to Harvard and Yale. They will be more attentive to Asian and Latin American culture and less concerned with Europe than their East Coast counterparts. Most importantly, theirs is a technology-driven environment that still carries the expectation that innovation can fuel growth.

This is not to say that East Coast foundations have disappeared from the media scene. The Open Society Foundations, based on the fortune of financier George Soros, has major offices in New York and London. It provides some $50 million a year to media projects, many of them devoted to freedom of expression and grassroots digital democracy efforts around the world. The Ford Foundation also plays a major role in supporting freedom of expression and international media development. The MacArthur Foundation funds an innovative array of programs in which media, human rights, and international development converge.

But other traditional players of the past have receded from the field. The New York Times Foundation has closed its doors and the Tribune Foundation has retrenched, while the Freedom Forum has dedicated much of its recent funding activity to the Newseum in Washington, D.C.

These trends have increased the relative influence of the West Coast donor community, but there have also been signs of increased consultation and collaboration among the various donors. Ideally, the surge of the tech-based donor activity can usher in a new age of American philanthropy, combining the energy of the new institutions with the experience of traditional foundations, to offer the world a much-needed array of innovative solutions.

This article is adapted from forthcoming issue of Anthony Knerr & Associates' publication, Strategy Matters

Anne Nelson is an educator, consultant and author in the field of international media strategy. She created and teaches New Media and Development Communications at Columbia's School of International and Public Affairs (SIPA). She consults on media, education and philanthropy for Anthony Knerr & Associates. Her most recent book is Red Orchestra. She tweets as @anelsona, was a 2005 Guggenheim Fellow, and is a member of the Council on Foreign Relations.

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July 13 2011

01:51

Reading Roundup: Philanthropy – 7/6-12/11

1) Silicon Valley status symbols emphasize mind over material
2) A Modest Story About Moving Cash
3) Budget Talks Could Put Tax Breaks for Donations in Peril
4) Make Today’s Lessons Accessible for Tomorrow with Metadata
5) It’s The Relationship, Stupid!
6) Beth Falcone and Jamie MacDonald Launch GiveCorps
7) Giving is Love

1) Silicon Valley status symbols emphasize mind over material

Jessica Guynn at Los Angeles Times

In brief: “Silicon Valley’s rising young stars are rejecting the traditional symbols of status: fast cars, yachts, luxury homes. To make their mark, they’re putting their wealth into social causes and start-up ventures.”

My 2 cents: If you read through the article, you’ll find some gender-biased comments. The piece is driven by anecdotes, and doesn’t provide any broad data to support its broad premise.  It does reference an ethnographic dissertation published by Alice Marwick, available here.

2) A Modest Story About Moving Cash

Karen Pittelman at Resource Generation

In brief: A quick, inspiring story about a small foundation that took its mission-related investment approach seriously enough to move most of its accounts from a corporate bank to one that shared its social and environmental vision.  Bonus: they’re making better yields on their assets now.

3) Budget Talks Could Put Tax Breaks for Donations in Peril

Lisa Chiu at the Chronicle’s Government and Politics Watch

In brief:

As members of Congress and the White House prepare for this weekend’s closed-door negotiations on a deficit-reduction measure, many nonprofit leaders are worried that charitable deductions for wealthy Americans could face strict new limits.

President Obama this spring said he supports limiting deductions for wealthy people as a way to help bring more tax money into federal coffers—and that would include deductions affluent people take for gifts to charity.

See a more recent follow up post here.

My 2 cents: I’m beginning to wonder if there is an organized lobby for limiting the charitable deduction.  If so, I haven’t seen it mentioned in these stories.

4) Make Today’s Lessons Accessible for Tomorrow with Metadata

Sophia Guevara at Re: Philanthropy

In Brief: Metadata 101 for foundation staff.

My 2 cents: +1

5) It’s The Relationship, Stupid!

Richard Woo at Philanthropy 411

In brief: “When we pay as much attention to authentic relationship development as we do to program development—there is a greater chance of becoming relevant. Relationships are boundless, programs are finite.”

6) Beth Falcone and Jamie MacDonald Launch GiveCorps

at Citybiznews

In brief:GiveCorps is an online platform that provides an easy way for donors to learn about and give to local nonprofit organizations and get discounts from area merchants in return.”

7) Giving is Love

Brigid Slipka at writings on giving & living

In brief: “Parting with your money is hard. But the hardest thing of all may be acknowledging what giving truly is, without scorn or eye-rolling or uncomfortable silences.”

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Tags: Philanthropy

July 05 2011

22:51

Awesome Foundation Seattle Community Meeting

On Thursday, June 30, 20+ Seattle residents came out for the first local Awesome Foundation community meeting. On behalf of my co-organizer, Tommer Peterson and myself, a big thanks for those who joined us.

We met coders, artists, activists, co-working enthusiasts, and at least one roboticist – a truly awesome mix.  Lots of people couldn’t attend, but wanted to get involved, so here’s our follow up post, as promised.

Read on for:

  • A quick overview of the meeting
  • Information about next steps
  • Notes from the Q&A session

If you already know for sure that you want to get involved and weren’t at the meeting, head over to our Awesome Foundation Commitment Form.  If you are new to Awesome Foundation Seattle, you can read our initial invitation post and my personal note about why I’m psyched to get AF Sea started.

Our Proposal

Tommer welcomes participants

After a getting-to-know you warmup, Tommer introduced the basic Awesome Foundation concept – 10 people (aka “Trustees”) giving $100 and collectively sharing a $1000 grant to the most awesome proposal each month. Awesome Foundation chapters are sprouting all over the world, and Seattle will probably be the 20th chapter.

I talked about a vision for community engagement beyond the basic giving model.  Once we get good at making grants, I’d love to discuss an awesome group blog for Seattle, highlighting everything that makes the city great and helping to identify potential grant applicants.  Maybe we could have awesome volunteer days or give a larger, special grant once a year.

There’s a lot of potential, and our direction will be determined collectively by those who get involved early.

To build that broader engagement, we want to shake up the basic model a bit.  Tommer and I proposed 4 basic participation levels:

  1. Full-time Trustees: people who can make the $100/mo commitment for the first consecutive 6 months. This group will form the foundation of the foundation, make the first critical decisions about how the chapter will operate, and review grant applications each month.
  2. Guest Trustees: for folks who want to participate at a lower financial level.  Guest Trustees join the full-time Trustees for at least 1 month (or more) out of the first 6 and review grant applications in those months when they are making a contribution.
  3. Friends of Awesome: aka “Volunteers!” A number of folks have expressed support of the Awesome Foundation idea, but are not able to participate financially. We do need volunteers in several capacities. Let us know if you would like to help design, build and manage our local WordPress blog; organize events; and/or support our efforts to publicize grant opportunities
  4. Grant Applicants: The all-important piece of the puzzle.  We’ll always be looking for fresh, exciting proposals.

Next steps

A mingling of awesome

After the post-meeting mingle, everyone filled out a form indicating their level of commitment. What’s next?

Step 1) If you missed the meeting and want to get involved, it’s very important that you fill out the online Awesome Foundation Commitment Form.  Please fill it out by Monday, June 11.

Step 2) Tommer and I will take all of the input from the paper and online forms and do our best to put together a great mix of full-time and guest Trustees.  We’ll send invitations to join that firs group and take final confirmations.

Step 3) Within a couple of weeks, we’ll announce our first group of Trustees and a calendar for future guest Trustees.

Step 4) Trustees will convene to decide and announce our grant-making calendar.

Step 5) The awesome commences – taking applications and making grants by the end of the summer.

Q&A

Participants had lots of questions.  Tommer and I want to make sure everyone understands that we don’t hold all the answers.  Instead, we’ll be looking to our fellow Trustees and Friends of Awesome to guide the way as we get started in Seattle.

Q: What’s the mission statement of Awesome Foundation? What kind of work are you looking to fund?

A: Unlike most initiatives, AF doesn’t have a tight focus on any particular area of work.  Grants from other chapters have focused on the arts, technology, and fun community engagement.  In fact, there’s a new international chapter focused on Food.  The mission of Awesome Foundation Seattle will be as broad and deep as our the imaginations of our Trustees, Friends and Applicants allow.  You can read the shared mission statement here and scan grants that have been given in other cities on the shared blog.

Q: What’s the decision-making process – quorum? majority of trustees? does it need to be unanimous?

A: Every chapter is free to choose its own process.  There is a draft Trustee manual that lays out decision models from several cities, and the first Seattle Trustees will have to decide how to decide.

Q: Would grant applicants be encouraged to reapply?

A: Yes!  Based on the experience of other chapters, we will want to stay in touch with applicants who don’t receive a grant in any given month and encourage them to keep old and new proposals flowing.

Q: Will there be parties?

A: Absolutely!  As often as we can, we’ll want to celebrate our grantees and invite more people to meet and mix with us to keep the awesome growing.

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June 27 2011

21:46

Reading Roundup: Philanthropy – 6/21-27/11

This week’s philanthropy reading roundup.

I actually missed #1 one, from June 15, in my first roundup.

1) Big Foundations & Effective Government Spending

Sean Stannard-Stockton at Tactical Philanthropy
In brief: Sean continues to argue that private foundations should participate as intermediary partners in the US federal Social Innovation Fund by responding to 4 reasons for non-involvement. Makes for an interesting case study on blockages to cross-sector partnership.

2) Social Impact Evaluation: Useful? Utopian?

Jonathan Lewis at Huffington Post
In brief:

Soon, in-the-trenches anti-poverty practitioners with long experience, community-based organizations close to their clients, market-based programs with real revenues and real customers, and experimental, innovative initiatives with great promise may be written off as woolly-headed, undisciplined or unscalable simply because they are un-evaluated… We need evaluators and critics. The rougher and tougher, the better. What we don’t need is academic hegemony over activism.

3) Person’s Choice Award for Foundation Data Presentation

Lucy Bernholz at Philanthropy 2173

In brief: As part of an ongoing appeal to foundations to share their data, Lucy celebrates the Knight Foundation’s new report, An Interim Review of the Knight News Challenge, for its useful and beautiful data presentation.

4) Passion Needed For Data Driven Analysis in Philanthropy

Phil Buchanan at Tactical Philanthropy

In brief: “We should use stories responsibly, when they reinforce and illustrate what the data shows.”

5) Seattle Foundation Raises More Than $3.5 Million for Charity

Philanthropy News Digest
In brief:The Seattle Foundation has announced that a one-day online fundraising event on June 23 generated donations totaling more than $3.5 million from 18,800 people. From Seattle Foundation president and CEO Norman Rice: “This event represents the democratization of philanthropy, in which everyone can make a difference in the world around them.”

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Tags: Philanthropy

May 30 2011

00:31

Seattle Needs Awesome and Awesome Needs You

All over the world, people are working together to forward the interest of awesomeness in the universe, and it is time for Seattle to join their ranks.

I’m talking about the Awesome Foundation, and we* want you to help form the Seattle chapter.

Are you in? Fill out this very brief interest form and help spread the word through your networks.

Need more info? Read on…

Awesome Foundation is a global of community of good folks experimenting with simple, lightweight funding structures that foster the creation of surprise and delight.  Every month, each chapter gives one $1000 grant to the most awesome application.  Grants can go to efforts in the arts, sciences, magic, poetry, civic engagement, new media…. you name it.  Grants are unrestricted and may go to individuals, non-profit organizations, for-profit organizations, or other entities. There are no reporting requirements; this is a relationship built on trust.

Funds are contributed by Awesome Foundation trustees, who collectively make the granting decisions. Most Awesome Foundations have ten trustees who contribute $100 a month. In Seattle we’re are trying to build a diverse, accessible chapter.  We are considering a larger group of trustees, allowing for more participation by lowering the financial commitment.

We will be joining a rapidly growing family of Awesome Foundation chapters around the world.  This is philanthropy for the rest of us.  If you want to consider joining as a founding trustee or would like to be informed when we start taking grant applications, fill out our very brief interest form. We’ll invite everyone to a get-together over food and drink to talk it over and move forward. Please try to signal your interest by Saturday, June 4th.

Learn more at awesomefoundation.org.

Why does Seattle need Awesome Foundation?

Seattle is too awesome not to have an Awesome Foundation chapter.  How awesome is Seattle? Let me count some ways…

That’s just scratching the surface of awesome activity in our back yard.  We believe that out there in this dynamic mix are hundreds of ideas that could get a start or a boost with a 1,000 bucks and some community love.

Awesome Foundation is an opportunity to make Seattle even more awesome by inter-networking our creative communities.

Why should you be an Awesome Foundation Seattle Trustee?

  • You are already an ambassador of awesome, a community maven, a dedicated activist, a mover and a shaker.
  • You’re looking for a fun, new way to make friends and build your community.
  • You believe that people-powered, decentralized networks can build a better Seattle and a better world.

Bonus: according to tradition, chapters generally grant the first person holding a trustee slot the right to title that position for all future occupants of the slot on the board (e.g. The Tim Hwang Chair for Higher Awesome Studies).

Are you ready to get it started? Sign up to come to a dinner and learn more.

While you’re at it, please share this post widely across all of your awesome networks.

* Who are we?

The founders of Awesome Foundation Seattle are:

  • Tommer Peterson: Long time Seattle resident, artist, theater-guy, rabble-rouser, and deputy director of Grantmakers in the Arts. Age 61.
  • Nathaniel James: Consultant, digital activist, community builder and social entrepreneur, working at the intersection of technology, media, advocacy and the arts. Recently returned to Seattle after 3 years living and working in Washington, DC. Serves on the board of National Alliance for Media Arts and Culture. Age 32.

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March 15 2011

15:14

Say "No" to Money (to Raise More Money)

Say “no” to money. We dare you. 

Believe it or not, sometimes saying ‘no’ to money, helps the money pour in.  Counter-intuitive? Yes.  But does it work? Yes! 

Based on 10+ years of game-theoretic research and live lab experiments, conducted by two of the company's US founders, NYU and UC Berkeley economics professors, give2gether has built an online fundraising platform, that also introduces some brand new line of thought on crowd and donor sourcing  

Consider ALL or NOTHING when it comes to setting your fundraising goals.

Set an ambitious but not unachievable target, and vow to your donors that unless you hit that target in the allotted time, you will return all the money raised so far. Every single cent.

For example – a hospital looking to raise $50,000 for a new CT machine creates a ‘conditional giving’ campaign.  Either they raise the $50k needed to buy the new machine, or they return any money raised by the time the campaign ends.  They can’t buy half a CT machine, and they won’t redirect the money raised into another cause.  It’s the machine or nothing.

Sounds crazy, eh?  What sort of fundraiser worth their salt would promise to give back money that has been donated by generous, supportive donors?? 

Here’s the thing.  By opting into the ‘conditional giving’ or ‘in it to win it’ strategy, it has been proven in Berkeley XLab (Economic experimental lab) that your donors are more likely to rally, rise up, step up to the plate and come through for you. They know exactly what is at stake, and they won’t let you down. 

Knowing that the balance of the money raised so far rests on their shoulders, gives incentive to civil philanthropists to make the final push, give more than they normally might, and enlist the support of their own networks to help meet your goal before time runs out and the money is snatched back.

And here’s something else interesting.  Try setting a maximum donation amount for your donors.  No, we didn’t say minimum, though that too.  We said maximum.  Donating money is scary. How much to give? How often? Help your donors make those decisions by removing the guilt and uncertainty.  Set an upper limit and time after time, they will donate amounts closer to their top limit, based on your suggested amount.

Now. We don’t just want money from donors.  Your donors are more valuable to your campaigns and causes than just their credit cards, cash and cheques. What you really want are for them to inspire their friends. You want each donor to share and spread, post and get excited, introducing your project to their entire social network and community.  One person with their $50 quickly turns into 100 friends who reach out to their friends each with their $20-50 donation, and see an average social activist bring in x20-x30 of his original individual donation! Awesome!

Our research demonstrates that:

(1) by increasing transparency, fundraisers can enlist trust, donor engagement and commitment  

(2) conditional giving, i.e., the ‘in it, to win it’ principle encourages donors to rise to the occasion to help campaigns succeed and meet their target  

(3) money is not enough, but that people’s vocal support and advocacy are ultimately more important for exponential growth 

 

Shachar Kariv Bio

Educated at Tel Aviv University & New York University; Ph.D. in Economics. In 2003 joined the Department of Economics at University of California, Berkeley as Professor & Faculty Director of UC Berkeley Experimental Social Science Laboratory (Xlab), a laboratory for conducting experiment-based investigations of issues of interest to social sciences. His fields of interest include game theory, decision theory, and experimental and behavioral economics. His research includes social learning, social networks, social and moral preferences, and risk preferences and are published in a variety of academic journals including, The American Economic Review, Games and Economic Behavior, Journal of Economic Theory, and others,

 

 

November 19 2010

16:00

The Washington Independent is folding, the CEO goes over the books and outlines the lessons he’s learned

On Wednesday, the nonprofit news and politics site The Washington Independent announced that, after just under three years of publishing, it’s closing shop. Its state-based sister site The New Mexico Independent said it would reduce its staff to just one part-time blogger.

News organizations open and close all the time, but this one hit home for me. I joined The Washington Independent in late 2007 as its managing editor and went on to be its top editor before joining the Lab. Several of my former colleagues have already lamented the loss of a valuable news organization; I could do the same, but in the spirit of the Lab, I’d like instead to look at what went wrong financially and what lessons could be learned by other nonprofit publishers from its experiences.

To get a sense of what happened, I spoke with my old boss, David Bennahum, the CEO of the American Independent News Network, which publishes the Washington and New Mexico sites plus a network of six other sites. Back in January, Bennahum told me that in the first five years the organization existed, he’d raised $11.5 million. With that kind of impressive fundraising, what went wrong? And what kind of outlook do other nonprofit news sites have? Here are three contributing factors to the closing:

The economic crisis

Nonprofit organizations are no less susceptible to the pain of an economic downturn. In the past two years, foundations and other donors regularly cited shirnking endowments as a reason for not renewing gifts or initiating new giving. That forced the network to spend less and still dip into reserves to cover costs. “It’s actually quite difficult to get these [nonprofit news sites] funded and get them to run,” he said, no matter the editorial success of the site. “It just never gets easier.”

In an email Bennahum sent to his staff, which he forwarded to me and is published in full at the end of this post, he broke down the numbers like this:

  • In 2006, 2007, and 2008 we raised $8.3 million and spent $6.5 million.
  • We ended 2008 with a surplus of $1.6 million.
  • In 2009 we raised $2.7 million and spent $3.1 million, eating into our reserves by $400,000.
  • In 2010 we will raise $1.9 million and spend $2.7 million; we expect this to leave us around $400,000 in reserves.

Going forward, each site in the network will need to generate enough fundraising to support its operations — successful fundraising for one site will no longer support other nodes in the network. The Washington and New Mexico sites were the two not pulling in enough to cover their costs independently. They also both launched in 2008 with a similar structural problem. In Washington’s case, a single $600,000 donation largely got the project off the ground. New Mexico launched with the backing of a small pool of donors. Those early donors didn’t renew another year.

Not enough multi-year commitments

Bennahum says in hindsight, he should not have launched without multi-year commitments from big donors, even if it meant starting off smaller. For example, had he negotiated the $600,000 donation as three $200,000 grants over three years, The Washington Independent would have been smaller, but more stable. “We would have been half the size — which means today, instead of this position, I might have had several hundred thousand more dollars left,” he said. “We probably wouldn’t be closing The Washington Independent.”

The Washington Independent launched with two full-time editors, about ten reporters (a mix of full and part time) and a substantial freelance budget. By the closing announcement, the staff was down to one editor and four reporters. “You have to have your own diet. If someone puts out a big buffet in front of you, you have to think twice,” he said. “That’s a lesson I’ve learned that we’ll just never repeat again.”

Not growing gradually

Bennahum says the next year will focus on what he described as “a more diversified mix of journalism projects that work in recessionary times.” Earlier this year he launched a site called The American Independent that aggregates stories from around the network and runs original content from states without standalone sites. The idea is to produce new content without the commitment of launching a new state-based site. Currently, reporters file stories from North Carolina and Texas. The funding for those reporters ends in January 2011, which they understood when hired on contract. The site, though, will continue to operate.

“The incremental cost to adding reporters [to The American Independent] is potentially a much lower price than you could operate a newsroom,” he said. “It creates a much more organic and gentle growth path.”

The network will continue operating sites with small staffs of one to three reporters in Iowa, Colorado, Michigan and Minnesota. The Florida Independent received a grant from the Knight Foundation this year for $175,000 (the network’s largest donation) and will continue to operate with a staff of five.

Bennahum says he wants to experiment more with syndicating content across his sites to see if even a site with one reporter can serve a community. “It’s just a great thought experiment,” he said.

So what does The Washington Independent’s demise say about the growing nonprofit sector of journalism? Bennahum said that, for now at least, journalism still isn’t in the same category as the sort of nonprofit entities that get long-term foundation support, like hospitals or schools. Philanthropists are still watching where the news industry is headed.

“‘Let the market sort it out,’ is a lucid response, and not necessarily wrong,” he said. “For the foreseeable future, success [in nonprofit journalism] is going to be the exception to the rule.”

David Bennahum’s staff email:

Dear Team Members:

In four years, we have built an extraordinary news organization. We can proudly track 600,000 monthly readers, and cite dozens of stories that have had a demonstrable impact in the communities we serve. Along the way, we’ve also received over 40 awards for excellence in journalism. We have pioneered a model that melds the benefits of the Internet (speed, voice, dialogue) with the discipline of serious investigative journalism.

I am proud of all we have accomplished together.

It is all the more remarkable for how we’ve done this in the worst economic climate since the Great Depression.

So I want to be transparent with you in regards to our financial position, as it will have consequences for 2011. Here’s the arithmetic:

  • In 2006, 2007, and 2008 we raised $8.3 million and spent $6.5 million.
  • We ended 2008 with a surplus of $1.6 million.
  • In 2009 we raised $2.7 million and spent $3.1 million, eating into our reserves by $400,000.
  • In 2010 we will raise $1.9 million and spend $2.7 million; we expect this to leave us around $400,000 in reserves.

Thus we have, for two years, been self-financing from reserves accrued during better economic times. I am grateful for these reserves, and that we could use them judiciously over 24 months. However, it is no longer possible to self-finance the gap between income and expenditures, for the simple reason that our cash reserves are too limited to do so.

Much of the shortfall in our income has to do with the larger economic climate. But not all. Here are some other factors that I, frankly, underestimated: We agreed, in the past, to open programs without multi-year commitments from supporters. In some cases, these supporters have not renewed their commitments, yet we have kept operating the programs at close to scale. In particular, this is the case both for The New Mexico Independent and The Washington Independent.

We are approaching our fifth year of operations; some of our founding supporters have, understandably, felt that the time has arrived to shift their support elsewhere. This is a relatively predictable pattern in philanthropy: 3-5 years of support from any given source is a safe assumption. Replacing this support with new support requires a 9-18 month development cycle. In this economic climate, it is closer to 18 months. The net result is that we see, in addition to a shortfall, our most conservative estimates actually coming true. For instance, in the summer of 2009 we did a worst case scenario for 2010, with regards to income, and projected $1.9 million in revenues. This is precisely what happened.

So going forward, we must adopt a new set of rules, to ensure our overall viability through an economic crisis that persists, and may persist for several more years:

Institute “pay go” budgets: programs must be supported. When they are not, they have to be either closed or operated at the level being supported. In the case of new programs, require multi-year commitments as a precondition for operations. This is what we have successfully done in Florida, where the program has two year commitments.

Be more innovative in terms of leveraging the “network effect” to help smaller programs operate with limited budgets. We pioneered this in Minnesota, where we’ve learned to operate a robust site with one full time reporter. The site is successful thanks, in part, to the way we can syndicate content throughout the network from our sister sites.

Using this framework, there are two programs that, unfortunately, are no longer sustainable at their current levels: The New Mexico Independent and The Washington Independent.

In the case of New Mexico, we are going to institute the Minnesota model, with the aim of working to rebuild support over time. In the case of The Washington Independent, we are going to merge the site with The American Independent, and now have one national place (instead of two) for all our reporting. Over time, we aim to build up our reporting capacity in Washington as support develops.

And going forward, we will be looking to a different architecture with regards to how we create new sites: more of our programs will live as “state pages” on AmericanIndependent.com rather than as stand alone websites. This will provide us with more flexibility and leave us less vulnerable to sudden changes in support levels.

More details in terms of how these changes will affect you will be forthcoming shortly from the editorial team.

I know that this news is hard, and the decisions that led to this did not come easily. We have learned to work with less, and done so admirably, but I am taking the prudent course that will ensure our network and its mission can thrive. And if things improve faster than anticipated, I look forward to having that good problem on our hands.

Please know that you can come to me with any questions about this situation.

Thank you.

Best,
David

October 26 2010

17:00

Google donates $5 million for news innovation to Knight Foundation and new international efforts

Google and news organizations have had a rocky time of it. To overdramatize the situation only slightly: Google insists that it cares about journalism as a necessity of our shared democracy; news organizations resent it as a (perceived) key cause of the financial strife that keeps them from fully defending that democracy. Today, though, brings an olive branch — a multi-million-dollar olive branch: Google is announcing that it will donate $5 million to encourage innovation in digital journalism. The grant will come in two parts: $2 million of it will go to the Knight Foundation, the journalism mega-funder — and $3 million will go to fund international news-innovation efforts, via a partnership with an as-yet-unannounced organization.

A peace offering for innovation

“Google has been pretty clear about the fact that we want to do our part to help fulfill the promise of journalism in the digital age,” says Chris Gaither, Google’s senior manager for news industry relations. And while, on the one hand, today’s grant is part of Google’s larger work in philanthropy — as policy, the company commits one percent of its profits and equity toward charitable efforts — it’s also a way for the organization to put some money where its mouth is when it comes to its relations with journalism. “In addition to all the business partnerships and business relationships that we have with news companies,” Gaither told me, “we also wanted to try to encourage innovation at a more grassroots level.”

The $2 million to Knight will be loosely divided: $1 million or so will go toward augmenting the Knight News Challenge, the foundation’s innovation contest, which will divvy up $6 million in grants this cycle instead of the usual $5 million. In its five years of operation, Gaither notes, the News Challenge has supported projects like DocumentCloud and Spot.us — projects that innovate not just the products of journalism, but the process of it — “and we thought it was a really interesting initiative to try to support.” The other $1 million or so will go toward Knight’s broad fund for grant-making, to encourage general innovation in digital journalism. And while Google and Knight, in the conversations leading up to today’s announcement, have discussed their shared goals and interests in the news-innovation space — business models to aid sustainability, new platforms for news, and digital skills training, in particular — ultimately, it’s Knight that will be making the decisions as to who gets funding.

“It’s really quite a wonderful — not just a wonderful endorsement, but a wonderful encouragement,” says Alberto Ibargüen, Knight’s president. “Because they’re not saying, ‘We want you to do X, Y, and Z projects.’ They’re saying, ‘We want you to continue the kind of work you’ve been doing — except do more of it.’”

While the $2 million for Knight will expand the funding of its existing efforts, the details of how the $3 million for international journalism innovation will be spent are still being worked out. Google expects to announce the details of that collaboration early next year. “We’re really eager to do even more internationally than what the Knight News Challenge provides for, so we’re going to be investing the remaining $3 million in journalism projects in other countries,” Gaither says.

The value of collaboration

So, for Google, why go the funding-partnership route, rather than simply funding nonprofits directly — or, for that matter, starting its own News Challenge-y contest? “We really see ourselves as a platform for discovery,” Gaither says, “and it’s important to us that we remain independent. [Google CEO] Eric Schmidt and other executives have made pretty clear over the years that we are not content creators.” Instead, “we have a symbiotic relationship with content creators, where we really help with discovery and monetization and other things,” he notes. Ultimately, “we do our thing, they do their thing.”

And, for that end, Knight was a good match — which is why Google made the overture to the foundation in the first place. “In this particular space, Knight is an expert,” Gaither said. “Knight has already been funding and trying to promote innovation in digital journalism for a while now — so they seemed like a perfect partner to pair up with for this one.” There’s also the fact that the newly articulated focus areas of the News Challenge — mobile, sustainability, authenticity (trust and reputation), and community — match nicely with Google’s broad goals when it comes to information. “We think that organizations of all shapes and sizes can really benefit from the grants that we’ll be providing,” Gaither says. And then there’s the organizations’ shared emphasis on scalability, impact, and open-sourcing. (Knight requires that its News Challenge winners open-source their code and generally make their platforms open and available to the public.) “We really try to encourage people to release things as widely as possible when it’s appropriate for their business,” Gaither notes. “And in this case, we think that’s a cool requirement that Knight has — and it’s something that we wanted to support, as well.”

For Ibargüen, the grant — in addition to providing extra funding, of course — is a validation of one of Knight’s core approaches to grant-making and to, even more broadly, the future of news itself: teamwork. “One of the reasons I’m so pleased by this is that so much of what we’re doing really requires collaboration,” Ibargüen notes. “To have a company like Google volunteer collaboration is not merely gratifying; it also really confirms the way to work.” The news space, he says, “is an area where collaboration really pays dividends. And I’m glad that the folks at Google agree.”

[Disclosure: The Knight Foundation is a financial supporter of the Nieman Journalism Lab.]

August 31 2010

11:17

The Local Philanthropy Workshop: The state of civil society in Romania

I'm here in Odorheiu Secuiesc, Romania, for The Local Philanthropy Workshop run by the OdorheiuSecuiesc Community Foundation and TechSoup Romania. This three-and-a-half day event will really kick off tomorrow morning and lead well into the weekend, bringing together NGO and IT participants to work together, share needs and expertise, and build capacity to move Romania and our communities further towards the civil society and engaged philanthropy environment we all want. There will be plenty of conversations, workshops, and learning opportunities here at the conference facility, but our goal is to share out throughout the event so you can join the conversation!

read more

June 17 2010

17:03

Spot.Us Case Study Shows Impact of Crowdfunding on Journalism

Platforms such as Spot.Us and Kickstarter have shown that crowdfunding can work as a financing mechanism for journalism. We will likely see more crowdfunded stories in the future, which means it's important study how crowdfunding impacts journalism and the role and work of a journalist.

I'm currently in the process of completing a Ph.D. project about collective intelligence in journalism, and my case study about Spot.Us attempts to address these issues. I interviewed 15 Spot.Us donors and reporters for the study, which I presented last week in the form of a research paper at IJ-7, the Seventh Conference on Innovation Journalism at Stanford.

This is the first of two blog posts based on my paper. In this post, I offer five observations on how the crowdfunded process impacts journalism from the reporter's and donor's point of view. The quotations below are taken from the interviews I conducted with Spot.Us reporters and donors.

The Reporter's Point of View

Donating bonds readers to reporters -- Donating is a significant act that bonds reporters to the community members (a.k.a. readers). Reporters said it's very motivating to see that the community is willing to support their work. This is how one Spot.Us reporter described the feeling: "It feels great. It feels gratifying ... And seeing somebody paying $20 for a story -- it is way more than 20 cents." Reporters described the act of donating as "heartening," "gratifying" and "personally motivating, beyond professionally motivating." They consider the donors as their supporters. For them, donating is an act that supports their work and the topics they are working on.

Strong sense of responsibility -- The connection created by donations develops a strong sense of responsibility within the reporters. Reporters described this as being different from the feeling of responsibility that comes with a traditional assignment. It goes beyond the usual feelings of "professional responsibility." A Spot.Us reporter explained how this additional level of responsibility felt to her: "It is more than having it written in a nice style and formatted properly, things you worry about for an editor. You worry more about the accuracy, really honest reporting and presenting the issues correctly, because these people have directly invested in you."

Direct connection to the readers -- Rather than writing for an editor, reporters said they feel as though they're writing for the community. They find it rewarding to have a direct connection to readers, and to know who the readers are. One reporter said: "When I started working on the story [for Spot.us] I already knew who the readers are, whereas when writing a usual story [in a traditional journalism model] sometimes it feels like writing for a black hole."


Discomfort with pitching -- Spot.Us reporters don't feel comfortable pitching in public. For example, they feel hesitant to reach out to their social networks to raise awareness of their pitch. "I'm a journalist, not a salesperson," said one reporter. "I can't make myself go out and promote my pitch." Another reporter compared pitch promotion to begging by saying it's like asking for spare change by shaking a tin can on the street. Traditionally, journalists pitch directly to editors rather than to the public. Reporters said they would feel more comfortable promoting their pitch in public if Spot.Us organized promotional events that they could participate in.

Freedom to experiment -- Reporters said Spot.Us is more than just a way to finance their work; they see it as an opportunity to experiment with new methods of journalism, and an opportunity to experiment with tools such as video and infographics. The platform gives the reporters freedom they have been longing for.

The Donor's Point of View

Donating doesn't bind donors -- Donating doesn't bind donors as strongly as it binds journalists. After donating to a story, donors often don't return to the Spot.Us site to read the final work. They are more likely to stay connected with the story process if they receive notifications from Spot.Us, but even then the connection remains loose. "I'm not actually engaged with what has happened on the site," one donor said. "I will wait to get the email [telling me] here's the story done, here you are, here's the output of it. A part of it is that I'm not incredibly close to these stories."
spotusdonor.jpg Not eager to leave comments, submit tips -- Donors are not eager to participate in ways other than donating. They usually said that they don't have enough knowledge to submit tips to a story. One donor put it this way: "I participated by donating. I don't have so much to say about the topic, and I'm not used to leaving comments on websites." The donors rarely interacted with the journalists, even though Spot.Us encourages readers to do so.



Donating to a good cause -- Donors tend to support stories that have relevancy or connection to their lives. However, the primary reason for donating seems to be that they want to support a healthy society, and they consider journalism to be an essential element of this. Donating is more about supporting a good cause or the common good, rather than supporting a specific story pitch. Donors do not expect a master journalistic piece for their donation, though they are happy if that happens. "I don't think I'm gonna get anything [for my donation]," said one donor. "I'll learn something out of the process ... I consider this as a donation for the common good, more than anything else, or any kind of personal gain."

Donating to change the world -- Donors hope the stories they support will make a difference in society. They see articles as a way to produce change for the better in society by revealing wrongdoings or inequalities.

Donating builds one's identity -- The act of donating to a pitch helps builds one's sense of personal identity. Donors who are on Twitter usually tweeted after they had donated. Some donors said the act of donation made them feel part of the community, even though they were unable to define what that community is.

In my next blog post, I will discuss and analyze what these observations mean for journalism. For more information about the study or for the full paper, please contact me at tanja.aitamurto at gmail.com or on Twitter as @tanjaaita.

Tanja Aitamurto is a journalist and a Ph.D. student studying collective intelligence in journalism. She has studied innovation journalism at Stanford, and has degrees in journalism, social sciences, and linguistics. Tanja advises media companies and non-profit organizations about the changes in the field of communication. As a journalist, she specializes in business and technology. She contributes mainly to the Huffington Post and to the Helsingin Sanomat, the leading daily newspaper in Finland, as well as to the Finnish Broadcasting Company. Tanja splits her time between San Francisco and Finland, her home country.

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June 05 2010

10:03

June 01 2010

14:00

Parsing Panera: Could a name-your-own-price model work for news?

The former CEO of Panera Bread recently announced an intriguing experiment: The chain’s store in Clayton, Missouri is doing away with prices. The Clayton franchise, now run as a nonprofit restaurant and renamed the “Saint Louis Bread Company Cares Cafe,” offers the same products as typical Panera stores, the same baked goods and soups and salads. Instead of assigning a monetary value to the products, though, the store leaves it to customers to decide what they’ll pay. “Take what you need, leave your fair share,” reads a sign above the store’s counter.

Name-your-own-price schemes like this aren’t new; often, they don’t work. (“If you use a PWYW scheme too liberally, you are courting financial disaster,” the economist Stephen Dubner points out. “Just imagine if Tiffany & Co. held a PWYW day on all diamond jewelry.”) But sometimes — under the right circumstances — the approach can be quite effective. At One World Everybody Eats, a community kitchen in Salt Lake City, Denise Cerreta runs an analog service to the Panera experiment: Instead of pricing the meals One World serves, she asks customers to pay what they can — and, she told me, “to pay it forward when they can.” She’s doing something right, it seems: One World’s been in business for seven years.

Which brings me to the question you’ve seen coming, but one I’ll come out and ask anyway, as a thought experiment if nothing more: Could the Panera payment model work for news?

Request, not demand

First of all, there’s plenty of evidence to suggest that it couldn’t. Carta, the German public-affairs publication, is currently the highest-grossing participant on the donation-facilitator site Kachingle. Carta’s current yield from Kachingler donations is $198.27 — from a total of 65 people. Oof. Membership drives both journalistic and otherwise tend to suggest specific notation amounts for a reason: We like prices. Or, more specifically, we’re conditioned to expect them.

But what if our expectations changed? What if news outlets built into their online interfaces a more structured, and systematic, request for content compensation? Take, again, One World. One of the reasons Cerreta’s effort works is that, at the cafe, consumer behavior is monitored: The kitchen has built into its physical layout what Cerreta calls a “point of accountability” — a point at which, moving through the consumption-to-satisfaction continuum, consumers know that this is the moment they’re expected to compensate the kitchen for what they’ve (literally) consumed. In One World’s case, the accountability point is a simple donation box. One that is situated — explicitly, purposely, unavoidably — in public.

And that makes a big — and perhaps all the — difference. (Recall the “Big Brother Eyes” experiment from a few years ago.) Which means that, when the accountability is negotiated in private — when there is only, as in the case of online news, the glare of the computer screen to cast light on our shoulders’ angels and devils — our willingness to drop dollars in the donation box certainly becomes a more open question. But, then, what if we took a looser approach to publicness — what if we translated Cerreta’s physical accountability point to the ephemeral interactions of the web? Even if we citizens need a little push to behave in private with as much civic sensibility as we would in public, there’s nothing to say that news outlets can’t provide — or, at least, experiment with providing — that push. It would simply be a matter of building the push into the structure, and patterns, of consumption. Of creating, to modify Cass Sunstein’s phrase, an architecture of accountability.

Step one would be re-framing the terms of the transaction when it comes to compensating news providers for the content they provide: from fee (obligatory, and therefore purely economic) to donation (optional, and therefore suggestive of social good). It’s a semantic shift, certainly; but it could be a psychological one, as well.

Take the work of Edward Deci. In a series of experiments in the 1970s, the social psychologist examined the behavior of two groups of subjects: One was asked to solve a puzzle; the other was told it would be paid for solving the same puzzle. Those who worked for what Deci called the “intrinsic” reward of solving the puzzle — the simple satisfaction of a job well done — were, he found, more successful in finding solutions than those who were paid. Payment functioned, ironically, as a disincentive.

Deci was studying the motivation to work, rather than the motivation to pay; still, his overall finding (officially, that “contingent monetary rewards actually reduced intrinsic task motivation”) is illustrative. Introducing the concreteness of payment into an otherwise more ephemeral exchange can sometimes discourage action, rather than encouraging it; assigning monetary value to goods and experiences has a way of confining — and even negating — their broader value. Pricing is practical, of course, and, for the most part, entirely necessary. Still, we prefer to think of ourselves as motivated by something other than — something more than — rote obligation. And price tags, general necessity notwithstanding, tend to rob us of our altruism.

Accountability and urgency

What Deci’s findings suggest for news is that, paradoxically, “It’d be nice if you paid” could actually be more incentivizing for consumers than the more blunt, and more transactional, “You have to pay.” Paywalls are one thing; pay doors, if you will — come on in! have a bite! pay what you think is fair! — are another. Permeability suggests trust; expectations of good behavior have a way of encouraging good behavior. Broken windows, in reverse.

Again, though, publicness (read: public accountability) is key; roughly the same number of people who want to be good citizens want to be recognized for being good citizens. Every year, I receive a series of emails from my college (usually featuring a slick little slideshow: “Campus in the Fall,” “Campus in the Spring,” “Campus in the Summer, with Children and Puppies and Rainbows”) asking for contributions to its Annual Giving drive. And it usually takes several of those emails before I actually make my donation. It’s not that I don’t want, or for that matter intend, to give back; it’s just that the give-back ask lacks urgency. The payment isn’t a demand; it’s a request. It doesn’t have to be paid now; it can be paid whenever. And that decelerates the dynamic of the transaction.

One of the most recent emails I received, though, tapped into something other than nostalgia: It featured a long list of donors from my class — ostensibly, as a way of thanking them for their contributions by way of public acknowledgment…but also, of course, as a way of highlighting those who hadn’t yet contributed. The loud, empty space between ‘Ganson’ and ‘Geannette,’ I have to say, made for an excellent disincentive against future dallying. Suddenly, the urgency was implicit.

The Alumni Giving staff, in other words, built into their donation request a point of accountability. Not a virtual cash register, a “pay now, or you won’t get the goods you want” approach — an impossibility for donation-seekers who sell not goods but potential good — but a more subtle (and, yet, just as impactful) message: “pay now, or everyone will know you haven’t paid.” Social capital is an economic good as much as a civic one; the AG donation-seekers wove that fact into their email so implicitly that their request suddenly bore the semblance of demand. By highlighting the social, rather than the monetary, aspect of their appeal, they conveyed the fact that they meant business. Literally.

Leveraging the social economy

When it comes to the problem of monetization, we sometimes to fall into the trap of equating “pay model” with “pay wall.” We assume that news is a straight commodity, and that the cash register model is therefore the only viable option for monetizing it. (“We’re not NPR, after all.”) But the commodity-focused approach ignores the social aspects of media economics. Particularly online, with the web’s built-in mechanisms of mutuality, news is a social good as much as (and perhaps even more than) a product to be bought and sold. It is also an experience good — something that needs to be consumed before its value can be accurately determined. A tip-based model — which combines reward for a job well done with the social prestige of being generous enough to leave a tip in the first place — actually makes more sense than a paywall, which is necessarily predictive in nature.

Cerreta’s name-your-own-price experiment, and my Alumni Giving’s public-accountability approach — not to mention the experience of, yes, many a public media membership drive — suggest the raw potential of a request-oriented, rather than a demand-oriented, approach to the pay-for-news problem. They hint at what might happen when we bring a little humanity to paid content’s practical, yet wholly impersonal, business proposition. Most of us, after all, are much happier to make donations than to pay bills. Even if the checks we write are for the same amount.

That’s not to say that reframing the terms of transaction is a broad answer to the seeping problem of content monetization; “no silver bullets” has become a common refrain for a good reason. (Plus, as Laura Walker, president and CEO of WNYC, told me in a conversation about PWYW’s scalability, “I think there is a much stronger pull toward supporting an organization that is not supported by advertising — that is not there to deliver an audience to advertisers — but is there because of a mission. I think that’s why people value us.”) It is to say, though, that it may be worth widening the scope of consideration when it comes to how we think about payment structures in the first place. The many experiments we’re seeing with social media right now — HuffPo’s implementation of recognition for committed community members, Gawker’s star commenter system, Spot.us’s and Kickstarter’s public donor lists, Foursquare’s merit-badge framework — leverage users’ cultural connection to the news — and their desire to be recognized for, essentially, good citizenship within the cultures news systems create.

What would happen if those same motivations were employed in the service of monetizing online news? What would happen if we shift our focus from transactions to exchanges? Kachingle may not have revolutionized online payment structures; then again, its digital tip jar is a rare presence on websites. But what if The New York Times — or The Washington Post, or The Huffington Post — had its own kind of Kachingle? What if it also had a badge-like way of praising, publicly, the people who had financially supported its services? What if, instead of erecting a paywall, it built its site on an architecture of altruism?

It’d be an experiment, certainly. An experiment that well might fail. Still, though: I’d love to see what would happen if we broaden our notion of what a viable pay model could be.

February 01 2010

15:00

NPR’s Ron Schiller: “A concrete and hopeful message” can raise funds

Ron Schiller, the new senior vice president for development at National Public Radio, doesn’t subscribe to the notion that the nation’s news media are in a state of crisis. Is the landscape changing? Absolutely. But this is no time to wallow in doom and gloom, according to Schiller. It’s an opportunity to take the case for nonprofit journalism to a broader audience of foundations and grant-making organizations with a “concrete and hopeful message” about what their philanthropy can achieve.

NPR has a long track record of success with big donors — witness Joan Kroc’s $200 million gift in 2003 — but many of its major institutional donors give because public affairs journalism already is a particular area of interest, Schiller said in an interview Thursday. But with the rapid decline of traditional, for-profit media, more nonprofits, including foundations and advocacy organizations, are having trouble getting their messages out. As a result, he said, they may be more open to the idea of NPR as a “partner in philanthropy” that can address a growing and demonstrated social need.

“There is a great opportunity to go to many, many organizations with that kind of case,” said Schiller, a former vice president at the University of Chicago who was named to his post in September. “We certainly have an opportunity to educate.”

Schiller hopes the approach will yield more gifts in the five- to nine-figure range. He concedes the approach isn’t novel; universities have been using it for decades as they take on issues such as urban education. But NPR’s new direction also would align with a broader trend in the nonprofit sector in response to the decline of traditional media.

From being the news to producing it

More and more nonprofits that once operated as expert sources for mainstream media have cut out the middleman and gone into the business of producing journalism. Last year, for instance, David Westphal documented the effort of Human Rights Watch. The New York-based nonprofit is “leveraging an already robust network of fact-gatherers around the world by adding a small unit that converts its academic-type research into consumer-friendly news reports,” Westphal wrote. Likewise on the domestic front, the Kaiser Family Foundation, a longtime provider of high-quality healthcare data, last year launched Kaiser Health News as a response to a decline in mainstream reporting on healthcare policy.

Other nonprofits with less expertise or commitment to journalism might be equally interested in filling society’s need for high-quality reporting, Schiller said. But the public radio community, including NPR, has not done a very good job of making what is known in the fundraising business as the case for philanthropy. To date, the appeal has been largely transactional, he said. It goes something like this: If you liked what you heard on “Morning Edition,” please send us a contribution.

The pitch is not without its successes. In 2008, NPR collected $57.7 million in grants, contributions and sponsorships, or about 34 percent of its total revenues, according to the organization’s most recent Form 990 report. But going forward, Schiller said, it might sound more like: “How do we use this incredibly powerful news and cultural organization to serve the country more powerfully?”

Are the nation’s major foundations ready to take on the task? Less than a year ago, Chuck Lewis and Bruce Sievers wrote an article in The Chronicle of Philanthropy called on foundations to pitch in. They wrote:

Philanthropy is in a unique position to take the initiative because it can move quickly and deliver significant resources to key players in the news media, while taking a hands-off stance toward content. Yet, with a few notable exceptions by some of the nation’s biggest grant makers…foundations have not become involved in this arena of public life.

Today, Schiller is optimistic that more grant-making organizations will be open to the idea of supporting journalism. What is needed is more education of potential donors and a message that makes the case compelling, Schiller said.

That might sound a lot like a traditional, university-style giving campaign, and Schiller doesn’t discourage the idea that NPR might launch that kind of effort. Much of his time, he said, is occupied in strategic planning with his counterparts at NPR’s 300 member stations to coordinate a national message while preserving their ability to meet local needs.

“We have a special time right now when the need for good information in the media is out there,” Schiller said in an interview at NPR offices in Washington. “In every community now, this is on people’s minds.”

Photo of Schiller by Dan Dry/University of Chicago.

December 14 2009

16:30

Are news nonprofits doomed to reliance on big gifts? A study in fundraising — and sustainability

I’ve been studying journalism nonprofits one way or another for about five years now, and I confess that in all that time, I’ve looked at their business models really as being slightly different iterations of the same species. But now, I’m not so sure.

As part of my graduate studies in nonprofit management at George Washington University, this fall I took a closer look at the finances of a dozen journalism nonprofits, keeping in mind the most pressing question for many: How can they diversify revenues and achieve some level of sustainability?

I acknowledge up front that my method was not perfect — I’ll explain at the end — but I think I’ve discovered what may be two critical distinctions within the group I studied.

First, the six nonprofits that served geographically defined communities — whether they be cities, states or regions — generally did a better job of diversifying their revenue sources than did those that attempted to speak to a national audience.

Second, among these “regionals,” there appeared to be some correlation between bigger budgets and greater diversity in revenues sources. This pattern suggested to me that there is a happy dynamic at work here — a virtuous cycle in which diversity of revenue helps create institutional heft that in turn attracts additional philanthropy in the form of major individual gifts and foundation grants.

What are the diverse sources that these nonprofits are tapping? For lack of a better descriptor, I lumped them together under the heading of “transactional” revenues — advertising, subscriptions, memberships, royalties, event ticket sales, contract research, and anything else that didn’t go under the “direct public support” line on Form 990. Some of these sources are taxable, some are not, and the difference was not always clear. Different nonprofits treated similar revenues in different ways. But I digress.

Regional news nonprofits: With size comes funding diversity

Here’s the graph that shows the correlation between average annual budget and a declining dependence on direct public support:

If this trend holds true, I think it would portend a relatively bright future for the nonprofit model as a major contributor in places like city halls and state capitals where newspaper bureaus have been emptied out. These are the places where the disintegration of the newspaper business model is most obvious to readers — and where for-profit alternatives have a hard time realizing returns on investment. Here, the case for philanthropy is clear — and so is a nonprofit’s potential to supplement its revenues with advertising and other market-driven revenues streams as it scales up its operations.

The trend also suggests a cruel and ironic corollary: The journalism nonprofits that can demonstrate the least dependence on foundations and large gifts may be the most likely to succeed in winning them.

National news nonprofits: Greater dependence on large gifts

At the same time, studying the finances of six “nationals” caused me to look at those organizations in a wholly different light.

Like the regionals, journalism nonprofits with national aspirations are feeling pressure to diversify their revenue base beyond foundations and founding donors. And at least some are looking to the regionals’ success for tactics they can replicate — witness ProPublica’s hiring of Watershed Co., a consultancy with expertise in online and grassroots fundraising. But from what I’ve seen, most depend on major gifts and foundation grants regardless of size. Here’s a graph showing average annual budget and dependence on direct public support:

As I reported here in September, Madeline Stanionis, Watershed’s CEO, pronounced herself “skeptical” of prospects for building a national network of small donors. As Stanionis said at the time, donors to political and other “citizen-powered” campaigns have been conditioned to believe that the candidate or institution that receives their donations will respond directly to their demands. But journalism does not — and should not — operate that way, she said. “I just think trying to force a journalistic endeavor into a hole created by these campaigns is not correct,” she said.

My suspicion is that the “nationals” also suffer from being one too many levels of abstraction from readers’ lives. Their reports, however compelling in their conclusions, don’t explain to the reader why city sewer rates are so high or why the state legislature just slashed school spending. As Mike Worth, my graduate advisor and GW’s former vice president for development, remarked: “The problem with the case (for philanthropy) is that it’s intellectual. Nobody ever died from lack of public journalism.” The latter might be debatable, but I think he’s got it right.

What’s the lesson here? I think there are two, either (or both) of which may be a blinding glimpse of the obvious.

First, the nationals have a solid track record of tapping foundation support and keeping it flowing over a long period. Here, I’m thinking of the Center for Public Integrity, which has relied almost exclusively on foundations and major gifts since Chuck Lewis founded it 20 years ago. Why tamper with success? The only real benefit from the time and effort required to build a grassroots network may be the added credibility of having to answer to an audience. This is doubly true for those such as CPI and ProPublica that specialize in investigative work and also claim to be nonpartisan and/or non-ideological.

The second lesson is that any effort to build a grassroots network at the national level is going to require a lot of refinement. There are simply too many competing news sources and too many requests for support. Breaking through all that background noise is an enormous challenge. Best of luck to those that try.

Except for Mother Jones

Now here’s the big exception to the rule: Mother Jones. Among the nationals, MoJo stood out in its time-tested ability to pull revenue from all kinds of sources — advertising, memberships, events and investment income. Steve Katz, the magazine’s chief fundraiser, tells me that the model is an outgrowth of a deliberate effort to define and serve a particular constituency.

In an email, Steve told me that MoJo has “worked mightily to make the case that you won’t find our kind of point of view anywhere else, and that our journalism is also rooted in a ‘value proposition’ a.k.a. a point of view a.k.a. a politics, and hence our journalism — which must stand on its own as professional grade work — is also about changing the world.”

I’ll buy that. But I also think that if you take Steve’s view to its ultimate conclusion in our current economic and technological environment, it points to a tough road ahead for news organizations trying to replicate the newspaper model of objectivity in the online world. The new national news organizations most likely to prosper are those that already have a built-in constituency — or a primary purpose other than producing journalism.

Here, I am thinking of David Westphal’s reporting on Human Rights Watch and its transformation from journalism source to journalism producer. As David noted in his recent testimony at the Federal Trade Commission: “A key point here is that not all of the new players are news organizations.” This trend raises important questions about governance and process within nonprofits — how they try (if they try at all) to insulate their news-gathering operations from their advocacy, much as newsrooms were separated from advertising departments at newspapers.

Where does it all go from here? In my view, the nonprofit model will shake out into two, three or maybe four discrete models, depending on reach and mission. Like cousins, at first glance, they’ll look somewhat alike and may get together once a year for reunions. But each will have its own distinct direction, habits, inclinations — and contributions to the public debate.

A note on the methodology: How’d I select the 12 nonprofits for my study? Frankly, it wasn’t very scientific; it was more an exercise in putting together a fact pattern. I began by listing the nonprofits I knew that (a) existed primarily to produce journalism and (b) had revenues of $100,000 or more a year, and 3) had filed their Form 990 tax returns someplace where I could find them online.

The list worked out to an even dozen, with six that I considered to be national in reach (ProPublica, Center for Public Integrity, Center for Investigative Reporting, Mother Jones, The Nation, Grist) and six that were primarily regional (Texas Observer, High Country News, MinnPost, Voice of San Diego, Chi-Town Daily News, New Haven Independent).

From there, I assembled all available revenue data from 2002 onward a developed an annual average for each nonprofit’s revenues and the percentage of revenues derived from “direct public support.” Then I plotted them on two graphs, one for regionals and the other for nationals.

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