Fund-Raising Planning Study Final Report (PDF)

In the summer of 2009, the Knight Foundation made a three-year grant of just over $1 million to ProPublica to support the creation of a sustainable business model for the organization (Grant 2009-0073).  The grant was made, we understood, not only to support ProPublica, which had then been publishing for only one year, but also to help blaze a path for the new class of non-profit journalism initiatives then (and still) springing up around the country in the wake of the collapse of the business model that had supported much reporting, and nearly all of investigative journalism, in recent decades.

In the largest sense, the grant was intended to help ProPublica lead in building a new sort of cultural institution.  Just as it is well understood in this country that communities are responsible for maintaining their own civic life—and that communities of interest are responsible for our leading national institutions—in such fields as symphonies, theater companies, art museums, history museums, universities, private hospitals and clinics, ballet companies, opera and more, so we need it to begin to be understood that we can sustain quality journalism in this country only if those who value it most highly—and are fortunate in their circumstances– will step forward.

In economic terms, what this means is that some kinds of quality journalism, certainly including investigative journalism, have become a public good, which is to say that it will no longer be adequately supplied by the profit motive and the free market.  We can sell advertising and sponsorships, and we will.  We can sell content in some cases, and we will where we can.  But the bulk of what we need has come, and will need to continue to come, from philanthropy—in small amounts and large.  Sustainability does not mean profitability.

In the second half of 2009, with support from the Knight grant, ProPublica commissioned a fund-raising planning study from CCS that has served as the basis for ProPublica’s development planning.  The CCS study included specific targets, by amount and potential donors, that were proprietary to ProPublica.  But a version of the CCS report was also prepared at the time which redacted these confidential details, and this version of the report was made available by Knight for the use of other grantees.

This note is intended, two years later, as a complement to the Knight-grantee version of the CCS report.  It traces what ProPublica has learned in two years of work pursuant to, and in evolution from, the CCS report.  ProPublica has also submitted to Knight a detailed (and again confidential) report detailing where it stands in all aspects of its progress toward sustainability.  But much has been learned, we believe, and can be shared that omits principally names and precise numbers.

Major Findings and Key Observations  

Among the key points with respect to the CCS study and our own experience after two years would be these:

•  The report was generally correct that the case for ProPublica would be compelling to donors, and would permit funding of ProPublica’s budget at roughly $10 million beginning in 2010, even as we broadened our funding base beyond our founding donors.

•  The report was also correct that major gifts would prove the heart of ProPublica’s drive to sustainability. 

• In 2009, ProPublica raised $1 million (18% of the total raised) from donors other than its founding donor, the Sandler Foundation.  This came from just over 100 donors, but 97% of that came from eight donors who contributed $10,000 or more.
• In 2010, ProPublica raised $3.8 million (39% of the total raised) from donors other than its founders.  In the first full year operating under the CCS plan and the Knight grant, this money came from more than 1300 donors.  While smaller donations increased dramatically (to more than $200,000 from less than $25,000), they still accounted for only five percent of the $3.8 million, with about 25 donors providing the rest.
• In 2011, it is ProPublica’s plan and goal to raise at least $5 million (and more than half of the total raised) from donors other than our founders.  We believe we are on track toward these goals, although the fact that much giving occurs at year-end will always add an element of uncertainty at mid-year.  Through August 31, ProPublica has had more than 1500 donors in 2011, and has received five-figure donations from more donors than in all of 2010.  The proportion of smaller gifts as part of the total is, to date, roughly in line with our 2010 experience.
• It is worth noting that one element of ProPublica’s efforts to raise money from smaller donors online has been through the Press+ service offered by Journalism Online.  ProPublica’s employment of Press+ has been underwritten by a grant from Knight to Journalism Online.  ProPublica began raising money online through direct means (web site and email appeals) beginning in April 2009; our use of Press+ was added in late November 2010.  Through the first eight months of 2011, roughly one quarter of the gifts received online this year have come via Press+, with the average Press+ gift about 75% as large as the average direct gift.

•  Board development and expansion is a critical component of our development work.  Two new directors were successfully recruited in 2010, one has been already in 2011, and more are to come.  We continue to plan for a Board of at least 10-12 members, with all Board members actively involved in ProPublica’s philanthropic program.

•  The Business Advisory Council created in 2009 has been successful in bringing business and technology expertise to ProPublica, and serving as an important element of our fund-raising efforts as well.  The Council has grown from fewer than 10 members at its launch to nearly 20 today, with active recruitment continuing.

•  As planned, we hired a development chief in 2010.  Debby Goldberg joined ProPublica as vice president, development from the Center for American Progress and has professionalized and significantly accelerated ProPublica’s work with major gifts prospects.  Debby is an alumna of CCS, and has largely followed its proposed approach to cultivation of potential donors.  The rest of ProPublica’s top management, and especially editor-in-chief and CEO Paul Steiger, have been intimately and persistently involved in fund-raising work.  Active communication with donors and prospective donors has been established and maintained.  ProPublica began thrice-yearly reporting to stakeholders in May 2010, and produced its first annual report at the end of the year.

Surprises and Lessons Learned

Of course, not everything goes as planned.  Among the surprises we’ve experienced, and lessons we think we’ve learned, are the following:

•  While gifts at all funding levels, including at the seven-figure level, have been successfully solicited and continue to be sought, ProPublica’s experience to date seems to indicate that fewer very large gifts and grants, and more major gifts at lower levels, are likely to comprise ProPublica’s funding mix.  As a consequence, ProPublica needs, has assembled, and is continuing to develop a larger list of prospects.  One bit of good news in this connection is increasing recognition, throughout the country, of both the need for groups like ProPublica, as well as ProPublica’s own particular success.   The two Pulitzer Prizes, three George Polk Awards, one National Magazine Award and three Emmy nominations garnered by ProPublica since the grant was made have contributed significantly in this regard.  Even more important, and influential with donors, has been ProPublica’s demonstrated impact in cases ranging from police violence in New Orleans to regulation of nursing in California to scrutiny of natural gas drilling.

•  It has, to date, proved easier to attract general support for ProPublica than to craft program support proposals that match both ProPublica’s interests and those of funders.  That said, however, we continue to believe in the eventual attractiveness to funders of support for senior reporters, for internships, and perhaps for coverage of broad subject areas.  Much of non-profit development work is, of course, a long-term effort, and we continue to pursue what we believe are innovative ideas for project funding.

•  We have not yet found it necessary to add further to the development staff, but continue to expect to do so in the future.  Prospect research and administrative support for development has been available from existing support staff.  CCS indicated that ProPublica should spend far less on development than the 20 cents on the dollar spent by many other non-profits, and targeted a rate of six cents on the dollar.  Using only direct costs (rather than allocated costs of executives whose responsibilities range well beyond development), ProPublica’s development spending has been running between 6 and 7 cents on each dollar raised from donors other than our founders.  Even with allocated costs included, this figure has been running at only about 9 cents on the dollar.

Concluding Thoughts—and Implicit Premises

The CCS report concluded (admittedly implicitly) that essentially all of ProPublica’s needed revenue would come from donations, whether large or small.  In fact, it had always been ProPublica’s plan to seek earned income as well, and initial steps in this direction have been taken since the grant was made. 

Yet, it is even clearer today than it was when the business crisis in publishing caused ProPublica to be created in 2007 that earned income will likely never sustain ProPublica—or any entity like it.  Strong renewed evidence of this came in just the last few weeks: Slate, one of the largest and best-established original publishers of online content, was forced to lay off key staff.  A Wall Street Journal analysis of that move quoted Google’s new head of news products as opining that “it is difficult for a news site with a professional staff to turn a profit with fewer than 10 million monthly unique visitors.”  ProPublica, one of the most heavily-trafficked of the new non-profits, has recently averaged 300,000 unique monthly visitors—roughly twice the figure at the time the grant was made, but only three percent of the ten million user threshold. 

ProPublica began accepting advertising at the beginning of 2011, and has also this year begun developing a promising source of revenue in the publication of ebooks such as Amazon’s Kindle Singles. E-publishing to date actually significantly outstrips advertising as a source of revenue, and is believed to have greater potential. ProPublica is, so far, ahead of others in its field in exploiting this new opportunity.  Yet, it is almost impossible to see how either e-publishing or advertising, or even the two combined, could, on a net basis (i.e. after deducting related expenses) comprise even 5% of ProPublica’s revenues in the near term.   Even selling out the one advertising unit per page on the ProPublica site at an extremely robust net CPM of $10 would yield only about $125,000 annually at current traffic levels, or less than two percent of budgeted revenue.  Actual advertising revenue to date is a small fraction of this amount.

Other non-profit newsrooms have had success with events as a source of income (though such events can be expensive to stage, and a focus on net rather than gross revenue is important).  But ProPublica, situated in the hyper-competitive New York market, may have less opportunity in this space.  To date, ProPublica’s events, the first in partnership with the New School, the second a series in partnership with the Lower East Side Tenement Museum, have been designed to raise visibility but not to generate revenue. 

One factor, to be sure, could change this overall calculus with respect to earned revenue: a shift in the willingness of readers to pay for content.  ProPublica continues to monitor developments in this area closely, but even the modest early take-up of the New York Times’s online meter provides no cause, in our view, for general optimism on this subject.

That brings us to philanthropy.  The recent staff report for the FCC on “The Information Needs of Communities” cited ProPublica no fewer than eight times—for our “significant contributions” overall, our initial funding, our statement of the problem of investigative journalism today, our collaborations specifically with television, our Pulitzer Prizes, our data applications, our investigative reporting, and our collaborations generally with for-profit publishers.  Moreover, the staff made clear their view that support for ProPublica and similar organizations at the local level around the country is increasingly critical.  A couple of key excerpts:

“Ensuring that communities have a healthy media system is not in conflict with foundation efforts to other important goals; it’s a prerequisite for them to meet those needs. Foundations or philanthropists that focus on particular issues should be conscious of the role of media in a) educating the public and b) holding officials and the institutions that oversee reforms accountable. Spending money on a cause without ensuring that there are reporters to analyze the problem, and the proposed solutions, makes it more likely the money will be wasted.”

“If Americans spent one percent of their charitable giving on nonprofit media, that would generate $2.7 billion per year…. We hope that the foundation sector will consider year-over-year increases in the funding of accountability reporting and we hope that each year more individuals will do the same.”

No foundation of which we know is more closely aligned with this insight and approach than the Knight Foundation, and ProPublica is deeply grateful for its support.  For readers of this document beyond Knight, however, we want to point out that, insofar as the $2.7 billion figured mentioned by the FCC staff is concerned, the total cost of public radio and public television—the stations themselves and all of the programming, from NPR to the NewsHour to Frontline and including all of the public broadcasting entertainment programming, comes to perhaps $1.7 billion.  That would leave enough—from just one percent of what Americans give each year—to fund one hundred ProPublicas.

That is a worthy goal for us as a society.  We think we’ve made significant strides toward it in the last four years, since ProPublica’s creation was announced, and especially in the first two years under our grant from Knight.  We believe, ultimately, that we are demonstrating that concerned citizens, knowing the value of investigative reporting for our democracy, will do what is financially necessary to make sure it continues to be published.  ProPublica will do as much as we can to encourage that result.