News startups prosper in Latin America

Despite threats, sector is growing and setting the news agenda

A new study of 100 digital news startups in Latin America by SembraMedia in partnership with Omidyar Network — Inflection Point — offers many clues to achieving the elusive goal of sustainability.

Extensive interviews with the founders — 25 each from Argentina, Brazil, Colombia, and Mexico — produced data that clarified the elements of successful business models and showed the best places to invest resources and training.

Janine Warner, co-founder of SembraMedia and an ICFJ Knight Fellow, directed the study, which was managed by her co-founder, Mijal Iastebner. (Disclosure: I participated in the study as an editor.) Among the insights:

  • You don’t need a lot of money to get started. 71% of the media in this study had startup capital of less than $10,000, but a tenth of those now generate at least $500,000 in revenues (p. 8).
  • Those that focus on business development do best. Those with at least one sales person reported median annual revenues of $117,000; those with no sales staff had a median of $3,900 (p. 9).
  • Women are playing a key role in development of new digital media in a region where men traditionally have held almost exclusive control of the industry: 62% of the 100 organizations had at least one woman founder, and women represented 38% of the total founders of all the media (p. 41).
  • Differentiation is key. In terms of content, technology, distribution, or style, these media positioned themselves as offering something different from traditional media and independent of political or business interference. In some cases, they exposed the cozy relationships between big media, politicians, and business (p. 25).
  • Even a small organization can have big impact nationally and internationally. Although these organizations had median staff size of 13 employees, 72% have had their stories picked up by national news media in their home countries and 66% by international media (graphic above).

Four groups at different stages

The study grouped the media into tiers based on 84 of the media that provided financial data confidentially.

The most successful organizations tended to be older, with significantly more traffic (p. 28).

The top tier, those bringing in $500,000 or more in 2016, generated a median of 3.8 million sessions (visits) per month, usually with coverage of politics, entertainment, or both. In this top tier, the study found, “Their main sources of revenue are advertising related, and they demonstrate a sophisticated use of traffic monetization technologies, participating in programmatic display and native ad exchanges, and making use of revenue optimization and analytics platforms” (p. 29).

In the second tier, those with revenues from $100,000 to $499,000 in 2016, the coverage areas vary more widely, and revenue sources are more varied to include consulting, training, and grants. “Of note, the three ventures with the lowest traffic in this category were also the only ones to report grants as their top revenue source” (p. 29).

In the third tier, where revenue ranges from $20,000 to $99,999, the revenue mix is even less advertising-dependent and includes crowdfunding and events. Traffic was much lower: a median of 46,000 sessions a month. More journalists in this tier focused on “human rights, environmental issues, indigenous populations, gender, and the LGBTQIA community” (p. 29).

In the fourth tier, with revenues of $100 to $19,999, a third of the total, staff size is small (median of six employees), and median traffic was 10,000 visits a month. Notably, five of the sites generate more than 100,000 visits a month, which suggests that they have a good product but need training in how to sell it (p. 30).

Seventeen percent generate no revenues. The study notes that many journalists view their work as a public service and do it whether they are getting paid for their work or not. Of course, these sites are very vulnerable to the loss of a founder or key employee.

Revenue sources

These media reported more than 15 different revenue sources (p. 31). The percentage of media organizations reporting various sources was:

  • Banner ads 31%
  • Native ads or branded content 28%
  • Consulting services 28%
  • Programmatic banners 21%
  • Training services 19%
  • Grants 16%
  • Content syndication 16%
  • Crowdfunding and donations 15%
  • Google AdSense 15%
  • Government ads or funding 12%
  • Events 9%
  • Product sales 8%
  • Programmatic advertising 7%
  • Subscriptions or memberships 5%
  • Influencer sponsorship 5%

To be clear, this is not the percentage of revenues generated by each category but the percentage of media that listed these revenue sources as part of their mix. The total revenue of the media that shared figures was $15 million, with Mexico accounting for just over half of the total (p. 37). To put that total in perspective, it is slightly less than the 2016 revenues of ProPublica — $17.2 million.

Missing legs

A healthy digital news organization needs a stool with three legs to thrive — journalism, technology, and business. Many of the organizations in the study lack two of the three. The educational or professional experience of the founders of these organizations was:

  • 53% journalism, communication, or content production
  • 20% business, marketing, or administration
  • 12% humanities, literature, or social sciences
  • 11% web technology
  • 4% audiovisual production, design

Clearly, there is a training opportunity here.

Vulnerability

Telling truth to power has its price. The study found that these sites have been “sued, threatened, attacked, and smeared” (p. 22).

“More than 45% have been subject to threats or violence because of their reporting, and many respondents said intimidation and physical threats had led to self-censorship. More than 20% of the organizations admitted that they avoided covering certain topics, people, and institutions because of threats and intimidation. . . . In Mexico and Argentina, a favorite government tactic has been to initiate a seemingly unending tax audit of a publication” (p. 23).

The video animation below dramatizes how agents of a drug cartel kidnapped and tortured Mexican photojournalist Luis Cardona, who reported on the disappearances of 15 young men involved in the drug trade. The video was produced for the website Pie de Página, one of the media in this study.

Recommendations

The study concludes by making a number of recommendations aimed at developing this sector of independent digital news media in Latin America. Among them:

  • Connect them with organizations that can provide them with legal protection as well as technical advice to shield them from cyber attacks.
  • Create online courses in technology, business, marketing, administration and other skills missing from the teams of the media startups. Supplement this with in-person training and events.
  • Provide training in ad placement, ad exchanges, search optimization, and analytics so that these organizations can effectively monetize their audiences.
  • Provide grants to support business development and sales teams.
  • Connect women in media with the many organizations around the world providing grants and training for women entrepreneurs.
  • Negotiate group discounts for tech services and hosting.
  • Encourage more collaboration between large media organizations and startups, with the former offering greater distribution and the latter offering unique, valuable content.
  • Encourage more collaboration among digital media on transnational projects, such as the Stolen Memories project about looted Latin American art treasures sold to museums in Europe and the U.S. (p. 52).

Reflecting on the study she directed, Warner commented:

“After years of working with entrepreneurial journalists in Latin America, I knew their work was increasingly important, but I didn’t realize how much of an impact they were having, or how vulnerable they were, until we completed this study. Digital media entrepreneurs are deeply transforming the way that journalism is conducted in Latin America. They are generators of change, promoting better laws, defending human rights, exposing corruption, and fighting abuses of power. They are driven to produce independent news in countries that are highly politically polarized — and some of them are paying a high price for it.”

Felipe Estefan, investment principal at Omidyar Network, which partnered with SembraMedia to produce the study, said: “The breadth, depth, and scale of the challenges to democracy, openness, and accountability at play across the region is deeply concerning. This makes the role of independent media more important than ever. Funders, investors, and civil society need to support these organizations to ensure their continued ability to drive real impacts, build sustainable businesses, and act as inspiring models for others across Latin America and beyond.”

The methodology of the study details how the media were selected, background of the interviewers, the interview process, calculation of exchange rates, sources of data, etc. It is also on p. 60 of the PDF version of the report.

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Originally published at newsentrepreneurs.blogspot.com on July 22, 2017.