Inflection Point - Impacts, Threats and Sustainability: A Study of Latin American Digital Media Entrepreneurs

"Our goal in producing this study is to foster and strengthen the growing digital media ecosystem in Latin America and help bring journalism entrepreneurs the attention and credit they deserve."

This study was conducted by SembraMedia, a nonprofit organisation dedicated to increasing the diversity of voices and quality content in Spanish by helping digital media entrepreneurs become more sustainable and successful. It is designed to help the founders of digital media startups better understand the trends, threats, and best practices that affect them. It is also intended to help investors, foundations, and journalism organisations appreciate the vulnerability and value of this fast-growing media ecosystem through an examination of: the impact digital media entrepreneurs are having, the risks they face, and "whether a viable business model has emerged for quality, independent, digital journalism."

To conduct this research, SembraMedia, with the support of Omidyar Network, commissioned a team to study 100 digital news startups, 25 each in Argentina, Brazil, Colombia, and Mexico. In 2-hour interviews with founders or directors, the researchers asked more than 130 questions about management and innovation, challenges and opportunities, audience size and engagement, and income and expenses.

The report begins by highlighting the impact of digital news enterprises in Latin America, citing specific examples. The main finding is that "digital media entrepreneurs are deeply transforming the way that journalism is conducted and consumed in Latin America. They are not just producing news - 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."

The report then shares further insights of the study related to a number of factors: vulnerability, business models, the composition of teams, growing audiences, and innovation. The findings, in summary, are as follows:

Entrepreneurial journalists pay a high price for publishing independent news - Digital producers of independent news who work in countries that are highly politically polarised may pay a high price for it. Nearly half the journalists interviewed for this study reported threats and physical attacks in response to their coverage. More than 20% of the founders and directors interviewed admitted that they avoided covering certain topics, people, and institutions because of threats and intimidation. Others face punitive lawsuits, cyber-attacks, never-ending audits, and the loss of advertising revenues in retaliation for their coverage. In addition, news ownership is highly concentrated in these countries, and government advertising is frequently used to reward compliant media outlets.

Digital natives are building sustainable (and even profitable) businesses - Even in the face of legal, financial, and physical threats, entrepreneurial journalists are building sustainable businesses around quality journalism. The advent of social media and easy-to-use web design tools has made it possible to launch a digital media venture almost entirely on sweat equity. More than 70% of the ventures in this study started with less than US$10,000, and more than 10% of those now bring in at least a half million dollars a year in revenues.

After analysing data on traffic, finances, revenue sources, staffing, and years in business, the study identified four distinct tiers of business development - startups & stagnant, struggling & steady, steadfast & striving, and stars & standouts.

Diversified revenue is key to success - The study found that diversified revenue was key to success, especially in the mid tiers, and identified more than 15 distinct revenue sources, including events, training, membership, crowdfunding, and native advertising. More than 65% reported they were earning revenue in at least three ways. In the top tier, where audiences reach more than 20 million visits per month, advertising is the top revenue source, but not the only one. In the mid ranges, there is no dominant business model, and diversified revenue sources that combine advertising with audience-driven sources, such as events and crowdfunding, are crucial for sustainability.

When analysing the lower tiers, the study found many opportunities for improvement. Despite their dedication to quality journalism, more than 30% brought in less than US$10,000 in total revenues in 2016.

Journalism-focused entrepreneurs under-invest in business - The study found that the majority of digital entrepreneurs underinvest in sales and marketing, even when they have high enough traffic to drive significant ad revenue. Many complain that they don't have the money to hire sales staff, but the ones who do are reaping the benefits. When the study compared the median revenues of those who do have sales staff with those that don't, the difference was dramatic. Those with at least one sales person reported more than US$117,000 in annual revenues; those with no sales staff reported less than US$3,900.

Record numbers of women are going around the glass ceiling - Of the 100 digital natives studied, 62% had at least one woman among the founders. Women also play a significant role in the executive and management teams. In the context of Latin America, where traditional media is dominated by men, this finding is even more significant.

Audience-driven innovation plays a key role - From training citizen journalists to crowd-voicing, digital media entrepreneurs are extending the way news is produced and consumed. Many of the innovative ideas in this study were fueled by the closeness of these journalists to the audiences they serve.

Social media extends news audiences - Among the examples provided is that of Brazil's Papo de Homem [Men Talk], which started as an email group about masculinity; having transitioned also to Facebook, the group leveraged their relationship with more than 500,000 followers on social media to collect 20,000 responses to a survey on gender.

With the goal of helping the community of digital media startups evolve into an even more robust ecosystem, the report offers a number of recommendations to address their vulnerability and strengthen their businesses models, teams, innovation, and alliances. These include:

• Connect digital natives with organisations that protect and defend journalists with legal and technical support.
• Foster sustainability with grants, investment, and an accelerator focused on strengthening management teams, growing audiences, and diversifying revenues.
• Provide business training that includes best practices and real-world examples of diversified revenue models and the latest advertising models.
• Build bridges and alliances to extend their audiences and share resources.

Click here to download this 69-page report in English in PDF format.
Click here to download this 70-page report in Portuguese in PDF format.
Click here to download this 69-page report in Spanish in PDF format.