On the morning of my second-to-last day as the editor of The Washington Independent, I was surprisingly nervous waiting for my boss to walk across the newsroom to meet me for what I pitched to him as an “exit interview” for my new job at the Nieman Journalism Lab.  At 10:33 a.m. an email popped into my inbox titled, “I’m giving David the ‘wrap it up’ signal”; it was from my boss’ secretary, who sat just out of my view in our D.C. office. David S. Bennahum, CEO of the nonprofit Center for Independent Media, which publishes TWI and five other news sites around the country, is on the phone talking with a potential donor about his recent coup: a $352,000 grant from the Knight Foundation to launch his seventh news website, The Florida Independent, with two local foundations.

I’m not surprised by the delay (or the grant). Bennahum spends hours on back-to-back phone calls, which usually sound like conversations with an old friend. He strolls on a walk station at .8 miles an hour as he describes his sites’ successes, like the 16.4 million pageviews the network drew in 2009. Bennahum’s calls, plus in-person meetings all over the country and dozens of grant proposals, have paid off. Since CIM’s launch in May 2006, he’s raised close to $11.5 million, making CIM one of the largest nonprofit publishers in the country. In this economic environment — and at a time when the nonprofit journalism world is getting a lot more crowded — that’s no small achievement.

Bennahum employs 31 reporters, editors, and publishing-side staff. Network wide, the annual budget is around $2.3 million. He expects to hire three more reporters and an editor for the Florida site in the next few months. He’s also launching The American Independent in March, which will be part of a larger strategy of rebranding the organization as the American Independent News Network. The American Independent will be a hub for state-based political reporting for the 2010 cycle, employing a full-time editor who will commission work from freelance writers.

Times aren’t perfect: CIM went through a round of layoffs at the end of 2008, and editors were warned this month that there would be additional cutbacks on the horizon. Bennahum points out that despite the cutbacks he’s been able to keep all his sites up and running. The Independent sites in Colorado, Iowa, Michigan, Minnesota, New Mexico have two to five reporters and editors each. In Washington, the team included eight reporters and editors until I left (my old job is still open).

In a long conversation about the organization, I made sure to press him on how his financial model has succeeded in one of the worst economic climates since the Great Depression. Here are a few of the highlights, and below that is an edited version what he had to say.

— Running a network of sites makes fundraising easier. “You have far more widgets to work with from a sales point. There’s seven different conversations that can be had, with foundations and others.”

— Nonprofit news outlets are either wholesalers or retailers. “[T]he archetype of a wholesaler is ProPublica…we are a retailer, we speak directly to the consumer.”

— You have to care about the size of your audience. “I think as this nonprofit news sector begins to mature, it’s going to become critical. It’s a waste to spend money on a site that nobody reads, what’s the point really?”

— In-person events are potential money-makers. “In New Mexico, for example we’re doing in-person events with thought leaders around the state legislative session. We’re going to do one every other week.”

Running a nonprofit like a business

I run this place like a business. My background is as a journalist. I was a magazine journalist from 1994 to 1999; I was a writer at Wired, I wrote for The Economist, I published a couple of books…but my sector was the dotcom sector. My beat was the Internet. And my personal background, I learned how to program computers at 12. I wrote a book about that. I think it’s instrumental in understanding this organization’s success, those threads, because, that background in technology and journalism allowed me to go into advertising. I was the creative director for the digital side [at what is now Lowe and Partners]…responsible for tens of millions of dollars in billings for the agency. Then from there [I went] into private equity with the CEO of the agency, whose name is Martin Puris. We worked together for two and a half years on new-media-related investments. I was on the board of observers for Daily Candy … the advisory board of Mediabistro. When it came time to start CIM, I had a journalistic principle that came from not only my experience as a journalist, but as a news consumer, but I also had real know-how in terms of how you run something.

The publisher’s role: CEO vs. editor

I serve the role of CEO and essentially publisher, which means I have three core responsibilities: I have to set the strategy overall, I have to ensure we have sufficient income to implement that strategy, and I have to ensure we have a senior team, meaning editors and other professionals who can actually implement the strategy. None of those responsibilities includes editing stories. I think that division of labor, when I look at a lot of other nonprofit sort of news things that are happening here, a lot of them are run by people who in fact may come out of the editorial side, meaning they’re former editors. And that’s fine. I don’t want to conjecture, but I’m not that person. I never was an editor in my entire life. I’m really very clear that you have to delegate authority. Everyone has to be specialized in what they do. I am committed to ensuring this organization has sufficient financial support to fulfill its mission. I understand, that is my job.

Building a network as a fundraising strategy

We constructed the organization as modular Lego blocks [referring to his seven sites], each with its own profit and loss. It creates a much more elevated degree of flexibility in terms of fundraising. You have far more widgets to work with from a sales point. There’s seven different conversations that can be had, with foundations and others.

From a financial standpoint, we’re able to do things at a lower cost than other nonprofits, so foundation support we receive goes further, more of it goes to journalism, less of it goes to overhead as a percentage. This is a clear distinction between ourselves and all the other nonprofits, the fixed costs with operating a news organization are distributed across the network. You have certain costs that are just fixed when you’re running a nonprofit with a budget of several million dollars a year.  You can’t get around the fact that fundraising is going to cost a couple hundred thousand dollars a year. It might cost you the same to raise $1 million, $5 million, or even $10 million. Technology is the same thing. In 2008, we spent tens of thousands of dollars at the time on a redesign, but it was distributed across six sites.

Nonprofit publishers as “wholesalers” or “retailers”

There’s a big divergence in the nonprofit news world right now between what I’d call the wholesalers — the archetype of a wholesaler is ProPublica, their model is to produce news which will be distributed through retailers, like the Los Angeles Times. That model is fine. In terms of retailers, you have Voice of San Diego, MinnPost and we are a retailer, we speak directly to the consumer. When you look at these distinctions, you are a retailer and you’re part of a news network, it turns out those distinctions are unique.

People wonder why we are having success at fundraising, we provide a lot of value. Because we’re part of a network, we’re creating synergy. We’re creating network effects. This is classic marketing knowledge. Over time, the collection of these sites under the brand of the Independent, which is associated with a certain product, is self-reinforcing. It’s easier to talk about. We have a much larger pool of interested parties who would want to support us compared to supporters, or people in one single location. There are only so many people who want to support a nonprofit site in say, Wyoming or Indiana. It’s obvious. We understand that too. But when you’re in a whole series of states, there are national funders who will come in and support state work, local work because it’s part of a broad network. In aggregate, that whole network is a national conversation of interest.

Nonprofit news reaching an audience

The other dimension is we actually care about traffic. On top of impact, whether our work is creating consequences in the real world, we care about traffic. I think too many nonprofit news organizations are insufficiently focused on whether anyone is reading their sites. I think it’s a problem if you have raised money and ultimately at the end of the month, 15,000 people came to your site. No funder has ever asked us, please provide us with your Google Analytics. I think as this nonprofit news sector begins to mature, it’s going to become critical. It’s a waste to spend money on a site that nobody reads, what’s the point really?

Long-term business model plans

I think no matter what, the future lies for us in a hybrid. In the foreseeable future, over 50 percent of our financing will come from grants, but some other percentage will be earned income. In 2009, we made $40,000 in ads, up from $7,000 in 2008. Forecasting for 2010, we hope to do $100,000. In addition to that, there are about a half dozen other money-making products we’re beta testing. In New Mexico, for example we’re doing in-person events with thought leaders around the state legislative session. We’re going to do one every other week. The local PBS affiliate will be partnering with us on some events and broadcasting them. We understand that if we are successful in these events, sponsorships will be an opportunity down the line.

Is the nonprofit model the answer to journalism’s problems?

I think it’s sustainable for a limited number of organizations. It’s not sustainable if you’re thinking, oh, we’re going to have the nonprofit equivalent of 1,500 daily newspapers. That’s not sustainable. But, there is some sustainability around half a dozen, or a dozen. There is some number there that is sustainable. There is sufficient philanthropy in this country for that.