What follows is the Executive Summary of SembraMedia’s Inflection Point International study of 200+ digital native media, with findings and recommendations on their impact, innovation, threats, business models, and teams. Read the full report here–also in Spanish and Portuguese. It is republished under Creative Commons 4.0 ShareAlike international license (Disclosure: I am treasurer of SembraMedia and participated in the editing of the report.)
Concerned about how this crisis had affected the independent digital native media that we work with at SembraMedia, we embarked on a large-scale research project at the beginning of 2021 to see how these relatively new media players had fared, and what had changed since our first Inflection Point study in 2016.
We were relieved to find that the majority of the 200+ digital native media included in this expanded study did not suffer the huge financial losses reported by traditional media players. Our analysis suggests this is primarily because they are not overly dependent on advertising, and because grant funding for media increased in 2020.
In our first Inflection Point study, we interviewed 100 digital native media entrepreneurs in Argentina, Brazil, Colombia, and Mexico. For this report, in addition to conducting 100 interviews in those same four countries in Latin America, we added eight more countries, interviewing media leaders from 49 digital media organizations in Africa: from Ghana, Kenya, Nigeria, and South Africa; and 52 in Southeast Asia: from Indonesia, Philippines, Malaysia, and Thailand.
With a team of 23 local researchers, led by regional managers, we conducted interviews in the local languages in each country. The interviews lasted 2 to 3 hours and included 500 questions that covered journalistic content and impact, media freedom and journalist safety, revenue sources and expenses, team structure and experience, social media use, and technology and innovation.
As you might expect, there were regional differences among the digital news media in Africa, Southeast Asia, and Latin America, which we include in this report. But what struck us most as we reviewed the data were the similarities that emerged among these news organizations as they strive to cover their communities and build sustainable business models.
Although most operate with relatively small budgets, they have an impact that punches above their weight when compared to the size of their teams and resources. Many specialize in investigative and data journalism, and more than 50% have won national or international awards for their work.
Inflection Point International represents the deepest and broadest research ever done into the state of digital native media in Latin America, Southeast Asia, and Africa. As with so many things in our not-quite-post-pandemic world, what we discovered was a mix of alarming threats and inspiring breakthroughs.
The digital news outlets in this study were built by determined media founders, willing to take on corrupt governments and violent international cartels despite limited resources. Too many of them risk their livelihoods—and in the worst cases, their lives.
But this report is not a cry for help or a desperate plea to bail out a group of media that are in trouble—not the least because many of the media founders we interviewed are reluctant to ask for help at all.
Our goal in the pages that follow is to shine a light on these increasingly important media players who are just starting to get the recognition that they deserve. Many of the digital native media in this study have produced stories that had significant real-world repercussions, from protecting endangered species, to championing gender equality, to forcing corrupt government officials to resign in disgrace.
We share our findings and recommendations because these media leaders deserve not just our help to keep them safe as they fight powerful forces, but also financial support to build more resilient media organizations. Our goal is to empower entrepreneurial journalists and other social entrepreneurs to work with independence as they serve their communities—and democracies—for years to come.
These new media ventures face many of the same challenges typical of startups, but they often operate under conditions that other business founders would find unthinkable—from online attacks to physical violence.
Across all three regions, 51% of the media organizations in this study said they were the victim of digital attacks, and 40% said they had been threatened for their work—often on a weekly if not daily basis.
Online harassment has become so prevalent that many of the organizations we interviewed said they were subjected to near-constant trolling and other types of online abuse and harassment—primarily via social media.
To better understand how digital native media were doing before and during the pandemic, we asked detailed questions about revenue sources and expenses for both 2019 and 2020.
Throughout this report, we use data from 2019 to avoid potentially temporary anomalies caused by the COVID-19 pandemic. We included findings from 2020 only when there were notable differences.
We should note that not all of the media in this study were able to answer all our revenue and finance questions, and a few declined to answer, despite our assurances about privacy. As a result, the financial numbers presented in this report are based on what we learned from 141 of the 201 media leaders we interviewed. To better compare these findings, revenue and expenses were converted to U.S. dollars, using average conversion rates for the year reported.
Across all of the media in all three regions in this study, the top revenue categories were: grants, advertising, consulting services, content services, and reader revenue, in that order, for both years.
The high level of grant funding stood out because it was not a significant source of revenue among the media we studied in Latin America in 2016, when grant funding was reported by only 16% of media included in our first study.
In 2019, grant support across all of the media in all three regions in this study represented 28% of total revenue, ticking up to 31% in 2020. Grant support was even higher in Latin America.
In private conversations, we’ve heard donors and foundations increasingly worry that independent media are becoming over-reliant on grant funding, and we share those concerns. However, there is reason to believe that increased donor support and philanthropic investment is part of what helped these digital entrepreneurs weather the storm during the “pandemic crash.”
To put this finding in perspective, it’s important to note that because they have such small budgets to start with, a little funding can go a long way.
More than 60% of the digital native media organizations in this study reported making less than $50,000 in total revenue in 2019, and 8% reported no revenue at all, meaning they depend entirely on volunteers.
But they are not all that small. Across all three regions in 2019, more than 36% reported annual revenue above $100,000, and 15% reported median annual revenue above $1 million.
We also found that nearly 25% finished 2019 with at least some profit after expenses.
Advertising income was a close second as the most important revenue category.
To better understand how media at different stages of development build business models, we created a list of 30 different types of revenue sources, which we explore in detail in the chapter on Building Business Models.
We’ve long championed diversifying revenue sources for greater independence and sustainability, but when we compared how many sources each media had and how that affected their annual revenue, we found that more is not always better, and two to six revenue sources was optimal.
Those that reported more than six sources did not necessarily earn more, a finding we attribute to a common challenge among many entrepreneurs: taking on too many projects at once can impede success.
One of the most dramatic findings from our first study of these primarily journalist-led media organizations was the impact of adding at least one dedicated sales or business development person to their teams.
In this expanded study, we found this applied to all three regions. Those who reported having a paid salesperson on staff earned six to nine times more revenue in 2019 than those who did not.
This time, we also asked how much they paid them and found that salaries for sales and business development positions ranged from $200 to $2,000 a month, with a global median of $733.
Given the dramatic impact of having a paid staff member dedicated to driving revenue, and the relatively low cost of labor in these markets, investing in sales and business staff continues to be one of our top recommendations.
Among other new findings, media organizations that had a dedicated tech or innovation lead reported three times higher revenue—even when they didn’t have a sales person on the team.
One of the most impressive findings from our first Inflection Point report was that women represented 38% of all the media founders among the 100 digital natives we interviewed in Argentina, Brazil, Colombia, and Mexico.
This finding was groundbreaking because it showed that many more women had a seat at the owner’s table of these relatively new media organizations than newspapers and television stations in their markets, where ownership by women is as low as 1%.
In this study, we found that 32% of all the founders of the 201 companies we studied were women, although the numbers varied by region and were significantly lower in Africa.
We also found that 25% said that at least one of their founders represented a minority community in their country: nearly 30% in Latin America, 25% in Southeast Asia, and 20% in Africa.
We share the findings in this report with the goal of helping digital media entrepreneurs, but traditional media leaders may also benefit from these insights, as digital innovation continues to erode traditional media business models.
We are keenly aware that we are publishing this report at yet another “inflection point” in the relatively short history of digital native media. As they fight misinformation and work to inform their communities, they must also grapple with the post-pandemic economic crises in their countries, all while facing a barrage of threats and attacks.
We hope that the insights, recommendations, and best practices in this report empower media leaders, funders, academics, and others who share our mission to help them grow, innovate, and ultimately better inform their communities in ways that strengthen their democracies.
Photo from data2021.sembramedia