One issue dear to every editor’s heart–or close to the bone–is how to survive when journalism is going through a tectonic shift, the nature of which is far from clear.

The shift from print to online is obvious, but the business plan behind it isn’t. From the publisher’s standpoint when you trade print ads for web ads, you’re trading dollars for dimes. This is important to print journalists, since they’re the ones getting laid off when magazine ad revenues plummet—yours truly being among them.

Advertisers are happy that online ads are much cheaper than print ones, since they aren’t encumbered with printing and distribution costs. Unlike print ads–which, despite occasional links to special landing pages, are essentially a broadcast medium–you can measure how effective your online ad campaign is by measuring the number of impressions and the click-through rate (CTR).

If you offer premium content like interesting white papers, you can get readers to register their contact information, which generates leads for advertisers. Knowing that someone is really interested in your white paper on A/D converters is a lot more valuable than the fact that they subscribe to a magazine where they may or may not see your ad, and they may not care in any case. Advertising is all about sales, and online ads provide a feedback loop for leads that print ads lack. Advertisers can carefully tailor their ads to a wide range of long-tail, well targeted web sites like Low-Power Design and quickly change their message or offerings to optimize the results.

The downside of online ads is that they’re a dime a dozen, and everyone suffers to some extent from “banner burnout.” The result is you need a really catchy ad in a well-targeted outlet to rise above the noise level. The explosion of web ads has also resulted in a race to the bottom on ad pricing, making it nearly impossible for publishers to survive on online ad revenues alone. That business model may work for small publishers, but it won’t support a corporate overhead. Some combination of revenue streams is necessary in order to pay journalists a living wage.

The Texas Tribune

The New York Times recently ran an article on the Texas Tribune, a new 12-person Web-based newsroom had its debut as a nonprofit covering state government. The Tribune is a nonprofit attempt to use a mix of donations, sponsorships, premium content and revenue from conferences to come up with a sustainable model for journalism that neither depends on nor requires a print product.

The Tribune is a niche site with a very narrow focus—Texas government, including education, financing, lobbying, immigration, bureaucratic priorities and the machinations of the various legislators. So far the Tribune has raised $3.7 million from individuals, venture capitalists and non-profit foundations. The Tribune has a wide range of blogs and an impressive array of databases. But as the Times notes, “What really sets the Tribune apart is not a workable design and good intentions, but its effort to build a durable model for journalism in the future.”

The decision to go non-profit was radical—and practical. According to John Thornton, an Austin venture capitalist and former McKinsey consultant who has invested $1 million in The Tribune,

“I was initially looking to profit on the misery in the industry, but it was clear after even a little investigation that there was not the kind of venture returns that you would need. I began to see journalism as a public good, like national defense or clean air.”

The theory, according to the Times, is that a group of well-compensated editors and writers will create valuable reporting shared by citizens and other news media outlets, a kind of digital version of public radio.

Non-Profit—Are You Serious?!

Will the “whining for dollars” approach of NPR work for a niche web site? How do you work a phone bank when your bank balance tanks? I could see a campaign for contributions using PayPal with a little thermometer in a sidebar showing progress to date. That would be more entertaining than the Google ads that appear in the other sidebar.

You could also throw a black tie—or, this being Texas, black Stetson—fund raiser, that if sufficiently over the top could make it to the A-List and become a must-attend annual event. This is a little hard to imagine for tech web sites, but with a little imagination and a well targeted mailing list, it could be successful from both a financial and PR standpoint. Isn’t that what the annual EDN and EETimes awards dinners are, anyway?

Going non-profit—intentionally, not because you can’t make a profit—could work perfectly well if you can find someone with patient money willing to invest in your venture. Good luck with that. Demand for money will always outstrip supply, and VCs are notoriously skeptical of funding web startups since the VC-funded Internet bubble burst. Foundations are even more conservative. In short, unless you’ve got great connections and a great story, it ain’t gonna happen.

Premium Content

Charging for premium content is a possible revenue stream. The Wall Street Journal was the first to make this work, though it’s hard to pull it off. The New York Times tried charging extra to read their opinion page columnists but later gave it up. You need a world-class newsroom that generates a steady stream of exclusives for people to part with money when there are so many excellent, free news sources. Small tech sites aren’t in that category. Even the large sites have to give it away, though some insist that you register so they can build their mailing lists, which they in turn rent out. Their premium content isn’t quite free, since the price you pay is more spam in your inbox.

You can make a good case for free premium content, but since it’s free the business case is hardly obvious. Tech sites frequently offer interesting white papers that you can download once you register. You can be sure that your email address makes it back to the vendor who supplied the white paper. If you were interested in a white paper on data conversion, the vendor will send you information on their latest A/D or D/A converters. Since you’ve demonstrated your interest in the subject, these emails are well targeted, they’re not spam. I’ve clicked through on many of them to see what’s on offer. Tech sites usually charge vendors to post white papers, though they may offer free posting as an incentive to sign on as a sponsor.

Sponsorships

Corporate sponsorships provide a middle path between starving to death on ad revenues and finding that elusive Yeti known as the foundation that will free you from the tyranny of the marketplace. Corporate sponsors provide the ‘patient money’ that gives start-up tech sites the room to breath and develop their nascent business plans.

The journalistic landscape is changing in unpredictable ways, and there quite a number of good tech editors who are trying to find a sustainable way forward. Forward-looking corporate sponsors are placing bets on some of them, hoping that they succeed. If they do, it was a bet well placed, and a risk worth taking in any case. If the sites succeed in creating a real community, sponsors will necessarily have a high profile in that community due to their identification with the site. Whether the site succeeds or not, for a small investment sponsors gets both good will and good exposure either way.

Becoming a sponsor for the ‘free’ or cheap advertising makes no sense. Start-ups can’t be expected to deliver the same number of eyeballs as their larger competitors, and once the bean counting starts, they lose. OTOH the click-through rate (CTR) of well-targeted sites carrying well-targeted advertising can and should be much higher than for larger, horizontal publications. So cost-effective advertising on niche sites can work well, but it’s not a compelling reason to be a sponsor. Wanting to help tech journalism find its way forward is.

Conferences

Years ago when I was managing editor at EDN Asia Reed Business International, which owned EDN, bought a leather show in Hong Kong, a move I found to be bizarre. It was explained to me that the money wasn’t in magazines, it was in shows, and Reed had no intention of bringing over any more magazines. Shortly thereafter they bought a local jewelry show.

That was back in the early ‘90s when there was still good money to be made in trade magazines. Trade shows since then have become a shakier proposition. First Comdex imploded, to everyone’s shock. The world’s largest computer show—poof! Penton’s long-running Portable by Design shows also disappeared. CES has gotten outrageously expensive, relegating all but the big dogs to demos in hotel suites. DAC went through a scare last year, though this year it looks more like a survivor. IDF is hanging in there has expanded to Asia. The ESC franchise keeps growing, thanks in large part to their Asian shows. Vendors are more and more either pulling out of the big shows or cutting back on their presence. Vendor-specific shows are now all the rage, with TI, Freescale, Mentor Graphics and a host of others running a string of road shows.

Shows are a great way for vendors to communicate with customers and to get feedback from the field. But for large shows the ROI is the pits, which is why tabletop shows are becoming so popular. When I was at Cypress we analyzed our return in terms of live sales leads on our investment in large trade shows, magazine advertising and online advertising. Online ads came in first and trade shows came in dead last—and by a wide margin. Trade show organizers love them because they make a lot of money. For vendors it’s not such an easy call.

Techinsights has an interesting spin on all of this with their virtual trade shows, which include keynotes, a ‘show floor’ with interactive vendor booths, multiple webcast panels, chat rooms, a resource room and more. [Full disclosure: I’m co-chairing one of these in January with my predecessor in interest at Portable Design, Rich Nass.] I have no idea what participation on one of these things costs, but by its nature it has to be a lot less money and hassle than erecting and manning a booth at a show in a distant venue.

Virtual trade shows will eat away at the low end of the trade show market, just as table top shows have taken a bite out of the big shows. Clever as they are, it’s still not the same as meeting someone in person at a trade show and sharing a beer with them when the show floor closes.

If a vendor’s main aim is to sell products, putting ads on targeted niche sites costs a lot less per lead than money spent on a trade show. Support your local tech journalists!

What Does It All Mean?

Going back to the Texas Tribune example for a minute, diversified revenue streams are what small sites need to survive. The Tribune people have some big money behind them that won’t be available to lone tech journalists. But a combination of web ads, sponsorships and even events is. The most doable events would be small tabletop shows and conferences in a hotel venue. Partner with other independent journalists to put on the show, gaining credibility and sharing the cost.

If you can build up your site enough and show a consistent profit, one of the larger pubs may offer to either partner with you or buy you out. Or you can tell them to buzz off and continue to have fun. Either way quality tech journalism will live on and continue to find its way forward.

Despite all of the hullabaloo about health care reform, I propose that the number one problem we’re facing right now is jobs—rather, the lack of them.

According to the U.S. Department of Labor, the unemployment rate in August was 9.7 percent, with 216,000 net jobs vanishing that month. That doesn’t count 9.1 million people “working part time for economic reasons” or 2.3 million people “marginally attached to the labor force.” When you factor in people who have just plain given up, the real unemployment rate is easily in the mid-teens.

No industry sector is unaffected, including high tech. According to the Semiconductor Industry Association (SIA), worldwide chip sales amounted to $51.7 billion, a 17-percent increase from the first quarter. SIA president George Scalise is encouraged “to believe that the sequential increase in quarterly sales represents a gradual recovery of demand.” Recovery, or dead-cat bounce? At this point it’s too early to tell.

In either case, this looks to be a jobless recovery, like the one we all went through after the Tech Crash of 2001-3. I managed to stay employed in Silicon Valley during those years and watched the new thinking that emerged during that recession. “If you lay off half your people and work the remaining half twice as hard, you wind up with the same output and much lower cost.” What MBAs call a no-brainer!

Semiconductor companies have also responded to the recession by cutting costs either by going fabless or by moving production offshore. Here in Austin AMD, Freescale and Applied Materials have cut roughly 2,000 manufacturing jobs in the past year. Cypress has closed Fab 4, Samsung is about to close Fab 1, AMD has closed a fab, and Samsung has announced it plans to lay off a third of its Austin work force. Applied Materials, among others, is shifting its production to Asia to be closer to its customers and to cut costs. Dell closed its last PC factory in Austin last year, for the same reasons. Even when the economy recovers, these manufacturing jobs aren’t coming back.

Austin’s response is the same as what I’ve seen in Silicon Valley—focus on being a design center and nurture an entrepreneurial infrastructure. The real value in any product—from chip to box—is the innovative design that goes into it. But how do you realize that value if you have a great idea but no employer to pay you to develop it?

Go into business for yourself.

Incubate to Innovate

Being talented at engineering doesn’t correlate directly—or even closely—with being talented at doing business. Even if you think you have a knack for business, you still need to complete your R&D, build a prototype, prepare a marketing plan and a business plan, put together a team and stay alive until you can find the money to fund all your plans.

That’s where technology incubators come into play. Incubators exist to provide technical and business management training; access to capital; professional and business networking opportunities; technology transfer assistance; and a host of other supporting activities to help minimize the risk for budding entrepreneurs trying get their ideas from concept to market.

The National Business Incubator Association (NBIA) defines a business incubator as “a comprehensive business assistance program that helps start-up and early-stage firms, with the goal of improving their chances to grow into healthy, sustainable companies.” Companies graduating from incubator programs have a far higher success rate than the average start-up. The U.S. Small Business Administration has found that after four years, only 44 percent of firms remain in business. Contrast that with what NBIA historically has found about incubator graduates: among incubation programs whose average age was nearly ten years, 87 percent of graduate firms were still in business.

Part of that success rate is due to screening, part to culling and part—the part that NBIA prefers to emphasize—is due to mentoring.

On the screening side, entry into most tech incubators is competitive. You have to explain your product and defend your proposed business plan—however preliminary it may be—to the incubator’s screening committee. This may be just the incubator manager, but more often it will consist of a group of experts familiar with your technology and your markets. This can be a real trial by fire, though it also forces you to think through important assumptions that you may not have really examined.

The TiE That Binds

I recently went to a local meeting of TiE—The Indus Entrepreneurs, the world’s largest entrepreneurial network—which served as a boot camp for would-be startups getting ready to pitch the intake committee at the Austin Technology Incubator (ATI). The grilling, while friendly, was relentless, especially on the marketing assumptions that the presenter had made. He left with a long check list of ideas that needed further research and reflection.

On the culling side, individuals or companies that make it into an incubator program are presented with a list of ‘graduation requirements’. If you’ve got enough customers that you look to be self-sustaining or you’ve grown to take up too much space in the incubator, it’s time for you to leave. Tech companies are typically given 2-3 years in an incubator before either being graduated or—if they seem to be chronically just spinning their wheels—forced out. The former companies usually succeed; the latter, rarely.

Mentoring and support is what incubators are all about. The incubator manager can connect you with a network of experts in marketing, business, accounting, law, IT—whatever support services you need to get off the ground. They also offer access to local networks of Angel investors and venture capitalists, to whom they can provide valuable introductions.

The incubator itself typically supplies all the services of an office suite arrangement, but at a much lower price. Non-profit incubators may offer below-market rent, for-profit ones probably market rate. Both provide packages of services, which may or may not be subsidized. There are no free lunches, but with all the support and services they provide, incubators are a real bargain.

Check It Out

So if you’re looking for a job—or are insecure in your current one—consider creating one for yourself. Check the NBIA web site, then look for an incubator near you. Go visit one and talk with the incubator manager. This may or may not be the road you should take, but it’s one you should consider. In either case you’ll come away from the meeting with a better idea of the direction you want to take.

You’ll also come away with a serious appreciation of the role of technology incubators, which I certainly share.