Perspectives: Opinions from our network of advisors, investors, operators and analysts on the risks and opportunities they see.

The cannibalization of journalism and digital media sites by major technology companies has undermined the old advertising revenue model, but new business strategies are emerging.

Merrill Brown, CEO of The News Project (TNP), is no stranger to the evolving media landscape. Having started as a reporter at The Washington Post in 1979, he was the founding editor-in-chief of in 1996 and the former senior vice president of RealNetworks’ RealOne Services from August 2002 through August 2003.

Brown is now focused on equipping small to mid-sized news organizations with services and tools to launch or upgrade their products, as well as scale more quickly and efficiently than they might on their own. TNP’s partners include 10upPianoThe Associated Press and Charming Robot, and in January 2019 it received a “significant investment” from enterprise publishing platform VIP.

He spoke with Karma Network Contributing Editor Michael Moran about why ad money isn’t dead, his opposition to Apple’s proposed news-subscription service, and why a paywall is not a one-size-fits-all business model.

Michael Moran: The News Project positioned itself as a SaaS (Software as a Service) that you called “News Business in a Box.” With all the controversies surrounding what large technology companies have done to the traditional journalism model, it’s an interesting time to be doing this. As people sour on the ad-driven model, what are the alternatives that exist between it and a full-on paywall?

Merrill Brown: There are many alternatives. By paywall, I assume you mean an approach where the audience gets six free stories a month, and on the seventh you need to pay. That’s the hard, extreme paywall model. Between that and all-free, you can relax the paywall and make it 20 free stories instead of six, or you could wall off certain stuff like premium content.

There is also membership, asking for donations, and grant funding.

But paywalls are generally wrong for news entrepreneurs and startups, and we are focused on those small publishers.

And remember, what’s right for a site about energy is not likely to be the right route for a site about race relations. What’s right for a site in Cleveland is not going to be the same as one in Austin or San Francisco. It all requires analysis of data and a sophistication which is increasingly a science. There was no body of knowledge or thought leadership on any of this 10 years ago, but there is now. One of the rationales for companies like ours is, we have that pool of knowledge and we can help them sort through these decisions.

Michael Moran: About a decade ago, a number of entrepreneurs pursued the micropayment model as a possible way to make up for declining ad revenue. The idea was that you would click on a story and pay, say, two cents or a penny per click. Where did that go?

Brown: At least in the news and information space, I don’t know of anyone in the U.S. marketplace who’s built a successful model around that. It may be that someone at a think tank like Pew [Research Center] or [The] Poynter [Institute] could point you to one, but I have seen zero evidence of that being successful.

Something different, but also new, is the approach taken by Taboola and Outbrain, whose content feeds you see at the bottom of many sites these days. It’s not quite sponsored content so much as a distribution network that brings revenue to the platform hosting it. I’m not defending or endorsing it one way or another, but that’s relatively new, and it’s an important source of revenue for publishers.

Michael Moran: Let’s talk about advertising for content media in the current environment. The received wisdom seems to be that this is a dead end, that ad models simply will not work any longer as a way to pay for journalism.BuzzFeedVoxHuffPost have all struggled of late. What’s your take on that?

Brown: The layoffs and requests for contributions that Buzzfeed and Vox went through recently, I think, are really a bit exaggerated. BuzzFeed, for instance, is a $250 million business and a large chunk of that is ad revenue. That’s not nothing; they’re just not growing at rates [expected by venture capital funds]. It‘s very tough when you have investors and you have to [earn returns up] to 10 times [their investment]. As soon as you have to go to a venture round and are [not] returning [more than] 3X and 4X, that’s a difficult place.

But the ad money isn’t dead. It’s out there. I have a friend in Providence, Josh Fenton, who runs a site called GoLocalProv, and he’s growing a news site on ad revenue in part because he knows the local merchants and local tastes. In local, at least, he’s one of the few guys who’s good at this.CNN turns over pretty good revenue, too, and I don’t think you can ignore ads. But for a small publisher, or a publisher in a vertical category, you’d better have other revenue sources.

Michael Moran: Where does The News Project fit in? You mentioned your target market includes small publishers, independents, and maybe specialty content.

Brown: Yes, we call it “News Business in a Box.” It’s everything you need to operate a news site, be it from scratch or upgrading an inadequate UX design or platform.

We can provide servers. We have 70 content templates and will be adding more. It’s all built and ready to go. And we’ve built into the platform the services of Piano, the Condé Nast consulting arm that provides revenue services, paywalls, analytics and other business functions. They service CNBC, The Economist and many major outlets, so that’s a world-class service. As I’ve said, this is increasingly a science with a lot of analytics around it. There’s now a lot of data around how to do this, whether it’s font size, colors, or where the graphics go, and we’ll be able to bring all of that to publishers who don’t have the expertise.

Michael Moran: What’s the business and pricing model?

Brown: We’re a SaaS model. There’s an upfront fee to get on the platform, then a monthly fee, as well as upgrades to services. We charge nonprofits $25,000, plus $5,000 a month; for-profits, double that. We’re seeking to work with small newspapers, independent news sites, and the environmental community.

The Institute for Nonprofit News groups approximately 150 of the most important U.S. news sites. It’s an inspiring list, and an example of the size of the potential customer base we can target.

If you look right now, there are regional sites, vertical sites —a big universe of potential customers. And there are still some alternative weeklies, community and small newspapers. We’re not building a product in the initial version will support a large metro daily, but we may get there. So we’re not trying to be Arc, which is the Washington Post’s publishing platform. We’re trying to be in the middle of the pack. But then, we’re also three to five percent of their price.

Michael Moran: Where are you in terms of investors and funding?

Brown: Right now we’re in a seed round, looking for $800,000. In January 2019, we were thrilled to announce an investment from WordPress, which created a good sales pipeline for us. We have some great, reputable investors like Stephen Shepard, founding dean of the City of New York (CUNY) Graduate School of Journalism, and Jonathan Klein, co-founder of Getty Images.

Michael Moran: Let’s talk for a minute about the larger media sector. What do you think of Apple’s new initiative, which proposes to charge Apple users a single monthly fee to read articles from a range of news outlets that would otherwise require separate subscriptions, then pocket half of that subscription revenue? There’s been some pushback in the business.

Brown: I can’t understand their idea that the revenue model will be driven by time spent on given stories and sites. That drives me totally crazy. Think about it: Under that system, a site like TMZ will thrive in a way a business publication will not. I think they did this naively, and I hope they’ll modify it.

Michael Moran: Isn’t this just a continuation of the big tech firms not really understanding – or perhaps owning up to – what they’ve done to journalism?

Brown: Well, they have done some things, perhaps in a superficial sense, and we’ve seen the announcements from Facebook and Google about philanthropic and tech gifts to journalism. With that toe in the water, I suppose it’s an implicit mea culpa.