Blog Insider: Why We Aren’t a Non-Profit [$2 Challenge]

by Latoya Peterson

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On a cold windy night at WBAI, I finally had a chance to catch up with Samhita Mukhopadhyay, the executive editor of Feministing. Late one night, while waiting for Jay Smooth to arrive at the radio station, we were both excited about our plans to take our sites to the next level.

“We’re becoming a non-profit,” said Samhita. (Edited: Feministing is considering becoming a non-profit. They are still exploring. – LDP)

“We’re going for-profit,” I replied.

We both looked at each other for a long second, wondering, “Well, how do you plan to make that work?”

The first time we considered becoming a nonprofit was 2008, with Carmen quickly dismissing the idea. She had some misgivings about the nonprofit model, and said she preferred to work in a different way for social change.

I was inclined to agree. I had worked as a consultant for an environmental nonprofit for about nine months, and the entire experience left a bad taste in my mouth. I had never worked for a non-profit before, so I didn’t know that the board having a dispute with the executive director was a bad sign going in. Within a month, the person who had hired me left for good, leaving a leadership vacuum – all the top level folks had left over the last six months, so most of the remaining staff was junior level. The board had good intentions, but was completely out of touch with reality, and proposed everything from a change in mission and alignment to moving office space to save money. The board also didn’t agree on some very key things, which meant every person who interviewed for the top position came away with different ideas about the organization. Eventually, all the employees were let go, the place was completely reorganized, and as far as I know, they are still limping along.

I decided to reconsider the non-profit model though, when it came time to figure out what to do with this blog. There didn’t appear to be many alternatives for a social justice focused organization. In 2009, I was asked to head to the Poynter Institute, to become a Sense-Making fellow. There, I met some amazing people – Chris Rabb, Shawn Williams, Matt Thompson, Drew Curtis, Keith Woods, and Anna John, to name a just a few. (Every single fellow is awesome.)

All of us were called together to discuss the future of journalism and what Poynter termed “The Fifth Estate,” meaning the online space which allowed certain journalistic activity to occur. The first Sensemaking meeting was fairly free-form, which meant we all sat in a room for five days and just talked to each other. During that time, two people made a really compelling case for a non-profit model. One, Geoff Dougherty, was a newspaper man who was convinced that non-profit journalism would save ailing industry. The other, Kristina Rizga, was running an amazing site called WireTap Magazine, and we spent some time discussing the philosophy behind independent media and content creation.

That year, I talked to Kristina at length about how the non-profit model worked, and she gave me some great advice. She warned that the funding process was no joke, and mentioned to expect anywhere from 18-24 months to pass before you ever see a check for a funder. She talked about being mission focused, and how WireTap wanted to do more outreach in undeserved communities to get people paid and give them writing credits. She talked about how labor intensive the process was, particularly working with people who had never written anything for publication before, and how there was a long process to turn someone’s idea to a finished, print-worthy contribution. However, her eyes always sparkled when she discussed her work, which let me know that despite all the pitfalls, Kristina was going to find a way to work it out.

Poynter reconvened us all (plus a few others) in 2010, and there was a huge shock waiting for us. WireTap Magazine had been defunded by the Tides Center, and Kristina was scrambling to keep her site afloat and locate new sources for revenue. Kristina is a fighter, and she was all about new opportunities when I saw her again. But I know how much that had to hurt.

Geoff’s story went quickly as well. When I asked him how the non-profit model worked out for him, he simply said, “It didn’t.” After struggling for a few months to break even, Geoff chucked the nonprofit model and refocused on hyperlocal news and politics in Chicago, as a supplemental section to another paper. The new for profit venture is doing well.

I realized then that non-profits had a lot of advantages, but there were a whole lot of disadvantages, particularly surrounding control. So we aren’t going to form as a non-profit for three main reasons:

1. Not enough flexibility for a changing industry

The publishing industry is currently freaking out at the decline of their advertising budgets, as advertisers want to pay less for more options and rights. Online advertising, which was undercut in its infancy by media companies who devalued the online space, simply will not be enough to support paying multiple writers anything close to a living wage. Even folks at the top of the heap, like Gawker media, are struggling against the shifting tide of the internet:

Fast-forward four years and the page view figures for Gawker Media’s network of sites have risen impressively: they attract some 17 million unique users a month in the United States and about 450 million page views. Ben reports that Gawker Media’s revenues are now “on the order of fifteen to twenty million dollars a year.” Being (like Denton) something of a skeptic, I will take the lower figure as the more accurate one and work from there. Now, in the world of online publishing, $15 million per annum isn’t exactly puny, but it isn’t exactly gonzo, either. Reuters blogger Felix Salmon says it is “lower than I would have expected,” given Gawker’s rapid growth, and the FT’s John Gapper says it “indicates the difficulty for media businesses in garnering significant revenues purely from online advertising.”

This is particularly frightening when looked at in context – the web is moving from an independent, decentralized space into a corporate controlled space. Wired explains why the web may be dying and quotes Russian investor Yuri Millner, explaining:

According to Compete, a Web analytics company, the top 10 Web sites accounted for 31 percent of US pageviews in 2001, 40 percent in 2006, and about 75 percent in 2010. “Big sucks the traffic out of small,” Milner says. “In theory you can have a few very successful individuals controlling hundreds of millions of people. You can become big fast, and that favors the domination of strong people.”

This is bad news for independent publishers and content creators, but not a death sentence. However, nonprofits have a lot of rules they want you to follow. And succeeding in digital space often means breaking some rules and doing things unconventionally. I do not want to tie Racialicious into a tax structure that requires so much administration that we can’t focus on our mission. I don’t want to pay people tiny amounts of money for huge amounts of work. I don’t want a board that has the power to hijack our mission. I need the freedom to take a look at where we are a business, and have the power to change course without being tied in red-tape.

And I won’t lie – it scared the hell out of me to see Kristina’s love, passion, and vision be snatched away from her by the whim of a few funders. My work with the PMC has taught me that serving the community, and what funders think is serving the community can be very different things. I would feel like I was putting Racialicious at risk if I were to turn over everything we had built in return for a lump infusion of cash. We’ve been broke this long – another year or two of growing slowly won’t kill us.


2. Endless cycle of asks

Initially, we weren’t going to do this $2 dollar challenge. Carmen once told me that she’d rather just have people pay for services and not deal with all the associated problems, and I agree. When you earn money, you can spend it as you will. When you are gifted money, there is a different dynamic at play.

But as I started working out my thoughts in May, commenter @BuChanda asked a question that put it all in perspective: how much money would we raise if everyone gave two dollars?

Enough for seed money, I replied. So here we are, with $2,484.19 in contributions from 272 people, which has really been a big help with the legal and equipment expenses. However, as some readers have pointed out (thanks Tiffany and Snarky’s Machine!), we have not optimized this fund raising drive at all – not enough asks, asking for too little money, not continually thanking the donors, reinforcing the dollar amount, explaining the end goal, comparing to other things like cups of coffee.

This is basically because I suck at fund raising. Luckily for me, I’m pretty good at earning money through selling services. So I’ll be back on stable ground in January, when I can focus my efforts on the ways I think Racialicious can earn money. Until then, I’m trying to carve out the time to fund raise properly.

But trust me, this will probably be our first and last fund raising drive.

I can’t even think of how wound up I would be if this was an annual or ongoing process.

3. Too many cash flow restrictions

In some ways, we have the same issues with nonprofits as we would have with venture capital – we don’t want someone else telling us how to use our funds. For one thing, part of the reason we want to earn money is to support other projects that we believe in that wouldn’t get funding. Just to illustrate that point, Racialicious probably wouldn’t be funded in its current state. We are trying to talk to too many people and span too many issues. I had a similar discussion on a list-serv, where a friend told me I needed to think of ways to narrow in and focus on what would make us more attractive to investors. I wrote in response:

For those of us with a social justice lean, we were never going to be attractive to investors anyway. What I do isn’t the same as just a news site – it isn’t going to have broad appeal, even across our clearly defined niche. With a paper, you assume that of x residents in an area, some subset of that number will be interested in news with your type of spin. But for us, we are building (1) a community, (2) of people who need spaces to discuss racism, (3) combined with a heavy interest in culture, particularly pop culture, (4) that believe in anti-oppressive organizing and coalition building across racial and ethnic groups.

Or, to put it another way, we cater to a subgroup of a subgroup of a subgroup, with some mainstream overlap.

This is the exact reason we decided to self fund – you’re totally right. If we were profit first, trust me, things would be a lot different. Just by looking at the most popular things we do, we would:

* Change the name from Racialicious to interracialdating.com, or interracialsex.com
* Explore topics like “10 Reasons Why XXXX Group Can’t Get a Date” or “7 Things to NEVER Say to an XXX” person
* Offer diversity training complete with certifications to companies and individuals caught in racist gaffes (We certify Dr. Laura is totally NOT RACIST! That will be $1099.95 please!)
* Create apps around the sexiest mixed race celebrities and hot girl slide shows, along with pics of mixed race babies
* Stop all discussions of indigenous issues, structural racism, GLBTQ issues, and other boring, not sexy things that cater to small demographics
* Change our television and film coverage from serious cultural critique to playing “count the minorities”
* Stop moderating the community

All of these are things investors would want to do to increase profit margins and potential revenue. We’ve turned down all of these things before, because they violate our core principles. And we are fine with slow growth and sustainable profits. We’re basically trying to win a war of ideas, of culture – that’s not something that has a simple monetization strategy.

Nonprofits wouldn’t be that strict, but there are other issues to consider. I love Bitch Magazine and have a special place in my heart for them – they provided one of my first published clips I’ve read the mag for years. Lisa Jervis has also been awesome to me – she put my name out there when I was just starting out and got me some critical first assignments. But Bitch is always operating with so little money, it can be a pain to write for them. I currently owe them some outstanding blog posts which I plan to finish before the end of the year. But since they pay such a teeny amount of money (I literally charge 5 – 10x more than what they pay for blogging) I had to deprioritize them to make sure that my higher paying clients were happy and satisfied.

This is an ongoing problem with social justice oriented media – we are broke, therefore we pay very little and traffic in favors. However, it happens with black owned media as well. The only black focused publication I’ve written for that pays close to/on par with equivalent white magazines or outlets is Essence. Everyone else, there is a huge gap. I appreciate Bitch paying writers anything at all – I’ve some other, heavily funded, bigger name feminist organizations ask me to blog for them with no expectation of compensation. But whooo – if we are going to start rectifying some of these issues of representation and publishing, we’ve got to start paying people a decent wage.

If we were a non-profit, it would be difficult to do so. One, the lack of funds is always an issue – Kristina was probably generous to a fault in paying WireTappers $100 – $150 a piece. But there are also tax designations that restrict how much you can pay people. I’m sure those requirements were put in for good reason – but when I was at the eco-organization, I wondered why the majority of the employees were making around $28,000 per year, with no hope of a raise any time soon. The accountant informed me that people are classified differently for tax reasons, depending on how much income they make, and you can hire many more people at that under 30K level than you can hire at, say 45K.

One of my hopes with building Racialicious into a media company is to be able to pay people, and pay them decently. I don’t think anyone on the team expects to get rich – but some of these restrictions are a nightmare.

I also pursued the idea of a hybrid organization, but even those are on shaky ground. The New York Times recently published a piece on hybrid model non-profits, and the issues they face:

In late 2008, GlobalGiving converted its loans into ownership of the company, paying Ms. Kuraishi and Mr. Whittle just $12,000 for their stakes.

They had invested $1.4 million. “I lost a large majority of my net worth doing this,” Mr. Whittle said. “It’s been personally very painful.”

GlobalGiving is one of the most prominent examples of the hybrid model of social enterprise that married a profit-making business to a nonprofit organization. Such dual-mission companies have sprouted over the last decade as a means of addressing the financing difficulties faced by many nonprofit groups, particularly as they need capital to expand. “It is virtually impossible to grow a social enterprise in any significant way relying wholly on donated money, earned revenue and debt financing, which are the only sources of financing available to nonprofits,” said Allen Bromberger, a lawyer with extensive experience in nonprofit financing. “These hybrid structures allow social enterprises to tap conventional investors interested in making profits while continuing to pursue their social missions.”

But like Dr. Dolittle’s pushmi-pullyu, the animal that had trouble moving because its two heads could not agree on a single direction, the hybrid model for nonprofits is proving problematic. On occasion, the need to generate returns for investors overwhelms the social mission. In other cases, the business falters altogether and cannot support the nonprofit.

While I am not ruling out the idea of a hybrid organization, many of these entities are very new, and it is difficult to know how the IRS/Federal Government will treat these businesses. And since there are no large funders on the horizon, I don’t see a need to go down that road.

For now, we’re going to keep to the plan. This isn’t to say that for-profits are free of problems (they are not), but we essentially made the decision to maximize our options at the outset. I’ll explain a bit more of that in the next post, which will be about turning Racialicious from a blog to a media company and how that will work.

Can you help us shape the future of minority media? Your two dollar donation would go a long way.