Online News Startups Struggle to Break Even in Western Europe

Posted on June 21, 2012


Subregions of Europe (UN geoscheme)

Subregions of Europe (UN geoscheme) (Photo credit: Wikipedia)

Last year, in a research project titled “The Business of Digital Journalism,” the Columbia University Graduate School of Journalism set out to find digital news outlets that were successfully making money on their own: without being bankrolled by institutional grants or other investors, and without being propped up by profits from a legacy, print-based counterpart. With the exception of big-name blogs like The Huffington Post and Gawker, it didn’t really find any. (Editor’s note: CJR’s Guide to Online News Startups, however, has found several.) Unfortunately, the situation appears to be even bleaker in Western Europe than it is here.

While online news websites in Western Europe are showing a lot of growth and experimentation, most of them cannot yet cover their operating costs, and none of them are making a profit. These are the gloomy new findings of a report just released by the Reuters Institute for the Study of Journalism at Oxford University, aptly named “Survival is Success.” The report, written by RISJ fellow Dr. Rasmus Kleis Nielsen and journalist Nicola Bruno, is the first of its kind to systematically evaluate the region’s online-only news websites that are not connected to traditional legacy news organizations.

Nielsen and Bruno analyzed case studies of nine online-only news outlets from Germany, France, and Italy. What they found was that, out of these nine sites, only two of them broke even, while the other seven operated at a loss. Significantly, even the two that managed to stay afloat did not so through online advertising: France’s Mediapart supports itself with a paywall around its more niche, heavily investigative content, and Germany’s Perlentaucher has a “highly diversified business model” (read: curating content from elsewhere, and selling stuff). Of the other seven sites they looked at, one has since shut down, another has been acquired by a news magazine, and the rest continue to run at a loss while surviving at the behest of external investors.

In the case of these startups, says the report, the entrepreneurial spirit is there, as is the enthusiasm from both the public and the industry, but the money just isn’t. The obstacles to sustainability that these online news sites seem to be facing in Western Europe are the very same challenges that startups have to contend with here in the U.S. As an Oxford University press release for the report summarizes, “firstly, the market for online news continues to be dominated by legacy media organizations like newspapers and broadcasters; secondly, the market for online advertising is dominated by a few very large players like Google, which undermines the ability of small and medium-size players to generate significant revenues.”

Towards the end of the report, the authors look at some successful news websites in the U.S. to see what lessons they could learn. They note that The Huffington Post and the Gawker network are hugely profitable, as is Politico (though part of that profit, in Politico’s case, comes from a glossy print edition).

They conclude, though, that these American models wouldn’t necessarily work in smaller European countries, where there is less potential for huge national ad buys. Legacy media in these West European countries also tend to be healthier than in the U.S. at the moment, so there is less of a gap in news coverage left for a startup to fill, and it is harder to compete with big newsrooms and established brands. For these reasons, trying to simply imitate American sites’ models in smaller European media markets would be a mistake.

“Arguing that one is launching the ‘Huffington Post of country X’ may guarantee some media coverage of the new venture, but it does not ensure business success if several legacy players with strong online presences already cater to the affluent, liberal-leaning, well-educated audience the Huffington Post’s U.S. success is built around,” the report argues.

Rather, what online news startups in countries like Germany, France, and Italy need to focus on instead, the report finds, is keeping everything small and efficient. The successful Western European sites have the same qualities in common that would spell success for startups here in the U.S.: low start-up costs, diversified revenue sources, and a closely focused niche audience.

Spelling out a formula for success is one thing; actually following it in a sustainable way is a bigger challenge, of course. The report concludes: “That is why, at this stage, survival in itself must be recognized as a form of success, a precondition for whatever else new journalistic initiatives want to achieve.”

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