Nieman Foundation at Harvard
Unless you live in Santa Cruz (or root for the Banana Slugs from a distance), you likely haven’t paid too much attention to what Ken and his colleagues have built — a digital-only news organization whose editorial resources outgun the local newspaper. The Lookout model isn’t to supplement to the hometown daily, to be a second read for the most engaged — it’s to supplant it as the biggest news source in town. And by some measures, Lookout Santa Cruz has done just that. (It has 10 full-time newsroom staffers; the Santa Cruz Sentinel, owned by the vulturous hedge fund Alden Global Capital, lists 7.)
Yes, there are a few other digital news companies that can claim to be the news leader in their communities. But what’s exciting about Lookout is its ambition to repeat its Santa Cruz success in other markets. There are so many American cities whose once-respectable daily newspapers have been hollowed out by plundering chains. If Lookout succeeds, it’ll have created a model that can help fill those voids at scale.
For Eugene-Springfield, Lookout is hiring a 20-person staff, 15 in the newsroom. (Are you, Nieman Lab reader, the perfect candidate to be executive editor or publisher? Ken wants to hear from you.) That’s the sort of journalistic heft you don’t see often for a digital news site in a smallish (pop. 380,000) metro area. And the company has committed to launching at least three more Lookout cities by the end of 2026.
Eugene and Springfield, that’s an interesting story in itself. Eugene’s a university town, with the University of Oregon, and Springfield was a mill town. I don’t know how much you’ve read Ken Kesey over the years, but Kesey [who grew up in Springfield] captured the place, beyond the counterculture stuff. He captured old Oregon, which was all about resources, mainly timber, carried on the rivers, and then fisheries on the coast.
The Eugene paper [The Register-Guard] was a good family-owned paper until it was sold to GateHouse [now Gannett] in 2018. Peter Laufer, a professor at the journalism school at Oregon, wrote me and said he’d like to come visit. This is spring of last year, 2023. He said The Register-Guard is a shadow of itself — it’s terrible. People feel awful about it. There’s not a good source of trusted community news. And he was thinking of trying to buy it cheap from Gannett, maybe for $1, and turning into a sort of teaching hospital, where journalism students at the university would run it. They have a big School of Journalism and Communication with hundreds of journalism students.
I told him I don’t think it’s a great model. It’s great to involve students via internships and residencies as much as you can, but readers need a professionally reported, professionally edited publication, just like they always have. So we ended up talking for two hours. That got it going. He arranged a meeting with some people at the j-school, and since then, I’ve been up there 10 or 11 times. I’ve probably spoken to 400 or 500 people — over dining room tables, living rooms, small group gatherings, bigger group gatherings, winery happy hours, that kind of stuff — to push it all forward in, basically, a year of work.
I feel a real sense of responsibility. We’re taking people’s money and plowing it all into making it work. A few people say: Well, what if it doesn’t work as well here? It will work, given enough time and money. But what’s the alternative? We are going to hire locally, run it locally, and put the stake in the ground that we plan to add three more of these by the end of 2026. It’s totally doable and necessary.
And then you have community engagement models, event models, the advertising model, and, of course, the reader revenue model. All of these playbooks are at least partially written. You sometimes hear people say, “Nobody’s figured it out yet.” But this is all about execution. The two main sources of revenue are advertising and reader revenue — you may as well call it circulation. That was true a long time ago and it’s still true.
In terms of reach, we figure we’re now reaching 50% to 60% of all adults in Santa Cruz County in any given month. We got about 340,000 pageviews a month and about 170,000, 180,000 unique visitors. Those are still going up some month to month.
The revenue split varies. Advertising took off first, which we knew would happen. We had five good advertisers — we call them marketing partners — at the beginning. We’ve now had literally hundreds of advertisers and that is a good, steady business. Reader revenue, by the nature of it, is an annuity business. We had a number of technology problems there as we went from Pico, which was a disaster, to Piano, which is overly complex, to Newspack’s reader activation system, which essentially manages our paywall and which has been great, absolutely great. I think two or three years from now, membership will solidly eclipse advertising, because it’s an annuity, and it continues to grow as long as you keep your churn low.
In terms of where we stand, we have had quarters where we are at 75 to 80% earned revenue from just advertising and reader revenue. If we add in other recurring revenue, so money that we know is coming, it has hit 100% or break even. It’s not consistently there yet, but it is getting closer and closer each quarter. I’m very satisfied with where we are — we’re essentially on track of where we need to be, and we continue to get some supplemental philanthropy.
It’s about continuing to invest. Fifteen full-time people, you know, in an area as small as Santa Cruz County, that’s a lot. It’s got to be one of the largest newsrooms per capita in the country. We could be quote-unquote “profitable” if we had fewer people in the newsroom. But the right thing to do, as long as we can gain the funding, is to invest — which, of course, turns that flywheel of more stories, which means more pageviews, which means more advertising revenue, which means more membership revenue.
And then the big thing I think really held us back was Pico, was the paywall. I think about all that I wrote about paywalls over the years and the necessity of having flexible paywalls — in terms of time, in article provision, all that kind of stuff. Well, that’s fine if you have a huge development staff at the Post or the Times or the Journal. But if you’re a startup, you don’t have those resources. We worked with Pico at the beginning, and that did not work out for us or other small publishers. They were just not ready to serve the needs of publishers. But it took us a good year to figure that out, because everything was brand new. [Pico renamed itself Hype last year and pivoted away from publishers toward online creators.]
We end up moving to Piano, and we ended up doing two years with Piano. Piano is widely used — it’s the primary paywall system in the industry. It is robust and it can work very well, but it’s also highly complex for a small news organization that doesn’t have development resources. When we talked with Newspack, they were more mission-oriented, which makes a huge difference. They would ask: What are the features you need? What are you trying to do? We moved our system to Newspack on March 15 and it has worked wonderfully. It’s removed friction. It’s very user friendly, for us as a staff and for the people who are trying to become members. So the technology lessons are significant — we have a very clear tech stack we like that we can take to Eugene and any other community.
A second area of lessons, I would say, is people. We had significant turnover that first year. We launched in November 2020, so we were hiring during covid, hiring by Zoom. We were not as rigorous as we should have been in terms of the fit, whether that’s skills or culture. We’re really trying to build a modern 2020s culture of how a news company operates, which is very engaged and fairly flat. We have a hierarchy in the newsroom to make news decisions, but it’s otherwise a fairly flat organization of mission-oriented, collegial people who actually work in an office. So we are much more rigorous in the interviewing process to try to make sure that’s right fit.
And I think the third area of lessons would be product. It’s a set of products. We do seven newsletters throughout, throughout the week. We do email alerts. We do text alerts. Events have become more and more important to us — tracking which members come to which events in our CRM, knowing that that’s going to be helpful in retention and pricing over time. We’re going to launch an app — the target date right now is mid-October.
And we’re beta testing right now a project called Neighborhood Briefs, which, like a lot of this, is kind of a blast from the past, like the weekly neighborhood sections that metro newspapers used to print. Those basically got washed away in the 1990s and 2000s. Now there’s no staff for them, they’re too expensive, there’s not targeted advertising. But people still want local neighborhood news. So this Neighborhood Briefs email product will cover 10 areas of Santa Cruz County — roughly 20,000 or 25,000 people in each. Give them local news, local weather, local crime and safety, school meetings, events, local news — whatever’s tagged appropriately for that area. We asked for beta testers and we’re getting 70% open rates on these things consistently. And they’re good! You have an idea, it’s low cost, you try it, and then you see if it works.
In terms of impact, I think they adhere to the tried-and-true model. They’ll report from city council meetings, county meetings, some other city councils in the area. They’ll report a lot on courts and justice and crime. They have not really expanded what they’ve done in terms of impactful journalism, investigative journalism, of the kind we’ve taken on. We’ve done a lot of stories that hold local governments accountable. I’m proud of what we’ve done, and we want to add to that over the next several years.
There are some similarities with Berkeleyside, which started The Oaklandside and then Richmondside.
We’re not going in and competing with anybody who is mission-oriented. But there are plenty of communities, like Eugene, that have these tired, fatigued dailies that have been bled dry — and with our model, on a relatively small amount of capital, you can go there and succeed, because it’s not really expensive to do.
