We’ve got a problem at The Daily Orange: our ad revenue is shrinking.

Sound familiar? A newspaper that’s having trouble making ends meet!?

We were having such difficulty balancing our budget, that we cut our print Friday edition (we still publish online).

The Daily Orange is an independent student newspaper. “Independent” means that we receive no money from the academic institution that we cover (well… they don’t charge us rent; but, that’s the only help we get). We pay a heavy price for the freedom to set our editorial content – we rely on print advertising for nearly all of our income.

This is a problem. As we’re forced to slowly transition toward an online newsroom, we risk abandoning the money making print edition. This scares our business manager to death. It frightens our board. We all know that the internet is the future, but can’t see a way to monetize online content.

Some choose to bury their heads: we receive roughly half of our daily eyeballs from our website, the other half from the print. That’s means we’ve beat the 10% problem. (Though we don’t come close to the average online revenue percentage of 10%.) Why is it that we seem to be bucking the national trend? I’ve got three guesses.

1. College newspapers are freesheets. The freesheet experiment has been going on for a while now in Europe, and is getting another serious look in the US. The internet has gotten people use to the idea of getting their news for free. The freesheet model gives them this access in hardcopy. Since college newspapers already use this model, they might already have a leg up. At the very least, a high subscription cost is not problem.
2. Colleges represent a niche market. If the internet is leading to a need for hyperlocal news coverage, college newspapers have already mastered the skill. This is a perhaps the one area where we’re ahead of the curve.
3. College students work for cheap. I’d imagine that most college papers pay at least some of their staff (we pay just our editors), but that payroll is extremely small. Therefore our expenses are much less than a professional papers that must pay a living wage.

But, this trend can’t possibly last. Like I already mentioned, we’ve seen ad revenue slip. It’s going to continue to do so unless we come up with an online revenue model.

On a macro level, there are three ways a newspaper can make money.

1. Advertising. Both online and in print.
2. Subscriptions. Charging for the print product, or following the freemium model and charging for premium content online.
3. Donations. From the public (i.e. spot.us) or from a foundation (like ProPublica or a college newspaper).

A part of my job over the last 4 months has been to blend these sources of revenue to generate new income. While I don’t claim to have come up with a solution, here are some thoughts:

• Experiment. Leading off with the most important point. Yes, budgets are tight. Yes, it costs money to experiment. Do it anyway. No one is really sure how to “do” online news. Chances are your budget is only going to get tighter before it gets figured out. Spend the money now ’cause you won’t have it later.
• Video doesn’t make much money. Ouch. Yea, I know it stings. Video takes a lot more effort from the staff, and requires a lot more infrastructure. Translation: it’s expensive. It also doesn’t really pay for itself … yet. But, video is hot. People like it; it’s an area that demands experimentation. We’ve started a few video podcast shows with our sports department. My pitch to convince them to do it? “You guys sit around and talk about sports anyway, just do it in front of a camera.”
• We’re not in the newspaper business, we’re in the media information business. This is the scary part that no bean counter wants to hear. But recognize the truth: if you’re producing online content, you’re not trying to sell a paper. You’ve got a different product all together. A newspaper’s biggest asset is its reporters. They’re experts in their field and have information that the public wants access to. A video podcast may be a good way of distributing that information, but if it doesn’t have a means of monetization it’s not a good business decision. In the same way you wouldn’t print an insert for your paper without selling ads, don’t produce new content online without a plan to make money.
• It’s all about the version 1. If you’re a perfectionist, take a step back a breath, you’re not going to like this one. Experimenting means getting some things wrong. Which means perfecting a new feature before you launch it, is a waste of time. We can’t afford a video camera (yet). So we’ve been shooting nearly all of our video podcasts on the iSight built into our laptops. No, the video quality isn’t great. But, it was affordable, and it gives us an all digital workflow. Not having to transfer video off tapes saves us a lot of time every night. Getting something out the door at 80% is more important than holding it to achieve perfection. Plan on getting better as you do more. You’ll be learning by doing. By the time you get around to version 2, you’ll be ready to tackle the harder stuff. It’s more important that you can deliver regular, ‘just okay’ content, than amazing content that you can only pull off once a year.
• Online publishing doesn’t mean a smaller staff. For small organizations like college papers, you’re going to need just as many people to publish online as you will in print. Trade your designers in for developers, teach your editors how to use your CMS, and get some reporters to blog. Publishing online is cheaper not because you can cut payroll expense, but because you don’t have to pay for newsprint.
• The link economy works. The copy-paste website method that most papers practice isn’t going to cut it in a web-centered newsroom. In order to be a first-class web citizen, we’ve got to start linking out in our stories. Abandon any rules you have about only linking internally. Link to as many places as you can. Google is the number one way people enter our site. Which means SEO is the name of the game. All of this means more site impressions, more impressions translates to more ad dollars. It’s worth your time to train staff on how to embed links because it directly affects your ad revenue.
• Local advertisers need to have incentive to buy online ads. The majority of our site traffic comes from parents and alumni, so local advertising doesn’t make sense. Or, they don’t have websites to advertise.Offer them alternatives to banner ads. Consumers generally find online ads annoying where print ads are seen as informative. Since print ads are usually coupons or notifications of sales, bring those kinds of ads to your site. Students will gladly to to your site to print a buy-one-get-one-free coupon for a local business. Even if that’s all they visit your site for, it’s still a win for all involved.
• Use the free stuff. There’s lots of good, free sites out there that can make your life easier. Vimeo or Blip.tv will gladly host your (HD) video content. Google Calendar will gladly host your community calendar. WordPress will host blogs for you. You can almost run a website for free! Furthermore, putting your content on web 2.0 sites gives you access to a social network greater than your own. This will get your content noticed by an audience that might otherwise have never seen your hard work (especially true for videos). Web 2.0 is your friend!
• Consider alternative forms of online revenue. Some newspapers have setup sites that help students find housing. Sites like this can help replace/supplement classified revenue that newspapers are struggling to account for. This is also a great opportunity to use the freemium model. One idea: let users post one housing listing for free. But charge for more than one listing (landlords with multiple properties).

Producing online content now will prepare your newsroom for the eventual day when online, instead of print, is their daily grind. It takes a while to setup an infrastructure, and with your cash flow unlikely to increase in the near future, now is the time.

Update: Link added to show that coupons are in demand.

Update2: There’s now a page on the wiki about this topic, but it does need to be expanded. Go go crowdsourcing! (Dec 4, 08; 18:10 EST)

Update3: Added alternative forms link. Added “One idea:” (Dec 5 08;, 00:58 EST)