What you need to know to fund a digital media startup
November 14, 2020
So you have a great idea for a media startup? How do you plan to fund it? Here's a guide to the dos and don'ts of revenue streams, with useful tips from DW Akademie's Handbook for Digital Media Entrepreneurs.
Before launching a digital media startup, one of the first things to think about is funding. DW Akademie Handbook for digital media entrepreneurs is a practical guide based on the experience of many of the pioneers of the digital startup world. Here are some of the main pointers:
Don't rely on donors
During the Arab Spring, interest blossomed from international donors that wanted to support what appeared to be the start of significant democratic reforms in the Middle East and North Africa (MENA). They saw independent journalism as an important part of the mix.
One startup that attracted a lot of donor support at the time was Daraj in Lebanon. But its CEO, Alia Ibrahim, warns that they still can't depend on grants for their business model: "Real independence is in real financial independence," she says.
Startups that have seen mid- to long-term success usually advise against relying on grants, as grants can easily dry up. Donors' interests can shift, as happened when the hopes aroused by the Arab Spring fizzled out ten years ago. Other issues, like the refugee crisis, can suddenly divert their attention to other issues. And donors themselves can encounter challenges, especially in regions like MENA.
When it comes to Western donors, their support can be seen as a tool of foreign policy and can also create a perception of bias. This is why ARIJ, a media startup based in Jordan, only accepted funding from countries like Denmark that had built up a good reputation in the region.
In fact, donors can enter with their own agendas, which they may try to promote over other issues that are more important to audiences. So if you do accept donor funding, ARIJ recommends lowering the outputs you promise, because quality investigative journalism always takes time.
So much for the pitfalls of donor funding. What about advertising revenue? For a start, this is almost all funneled to giant platforms like Google and Facebook.
Advertisers also tend to be cautious about backing independent journalism sites in case these are critical of government or business. In Dubai, Saudi Arabia and Egypt, there are three ad agencies that control the entire market, and all of them are linked to the respective countries’ ruling regimes.
"They won't give us any advertisements, no matter how big our audience is or how much traffic we get," says Kareem Sakka, the publisher of Raseef 22 in Lebanon.
In Iraq meanwhile, media coverage is heavily influenced by advertising finance, resulting in a lack of coverage that is critical the government or giving a voice to the opposition.
A crowdfunding success
The success of the news outlet Hong Kong Free Press in 2015 showed that crowdfunding can pay off. HKFP exceeded expectations, raising about $76,000 (€70,000). But voluntary donations can be very unreliable, especially in a crowded digital news market.
HKFP founder Tom Grundy adopted a two-pronged strategy to stand out against his competitors: He made it as easy as possible to donate while at the same time constantly reminding people that independent news costs money; and he made sure that HKFP never spends any funds beyond its means.
A crowdfunding campaign might not work for every startup, but there are many other ways to move away from dependence on grants. Journalists – even those who are not naturally good at strategic planning or business management – have plenty of skills that can be turned into revenue streams.
Do innovate for the future
Some startups have had success with subscription and membership models. One such example is the Burmese news website Frontier Myanmar, which delivers special services for paying members - as well as delivering free content for everyone.
Rappler in the Philippines has successfully experimented with another revenue stream: It used to rely on advertising as its main income stream. When the free press came under attack and advertising revenue dropped, Rappler came up with a B2B model, i.e. it started collecting data on misinformation networks in the Philippines, and selling it to clients all over the world.
GK, a startup in Ecuador, offers audiovisual content production services to third-party customers. Animal Politico, a news site in Mexico, branched out into communications training to bring in extra funds.
Chequeado, an Argentine fact-checking agency, sells original content to other publishers. It also monetizes its in-house journalism skills by selling services and training, while paid appearances by staff on TV and radio also bring in revenue.
There are many different funding models available to media startups. As DW Akademie discovered through its interviews with entrepreneurs in the field, it's important to have a diverse range of revenue streams in your business plan so that if some parts of the business fail, others will keep it going.