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Why the EveryBlock Sale Matters: Chicago Foundations Pass the Buck on Sustainability

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Mike Doyle

Since 2005 scribe of the local blog, Chicago Carless. I invite you to visit.

everyblock&msnbcAs widely reported this week, Chicago-based hyperlocal newsfeed aggregator EveryBlock.com was bought out by MSNBC for an undisclosed sum likely in the millions. At a time when Windy City foundations are posturing to be the nonprofit saviors of online local news, the surprise sale may point to a different future for popular sites. Is there money to be made in the online local news sphere after all?

EveryBlock founder Adrian Holovaty originally funded the site through a two-year, $1 million grant from the Knight Foundation that ran out on June 30 of this year. The money allowed Holovaty and Co. to build the first successful aggregator of news and data feeds keyed to individual street addresses. Visit the EveryBlock site and enter an address, ZIP code, or neighborhood in any one of 15 cities including Chicago, and you're presented with map-keyed links to relevant breaking news, crime statistics, flickr feeds, municipal data, blog entries, and any other geographically coded web content with a feed attached to it.

Holovaty told Crain's Chicago Business today he's relieved to be off the foundation and potential venture-capital roller coaster, saying:

"I've just heard too many horror stories about VC [venture capital] funding. I talked with several VCs, including some particularly nice ones whom I would now count as friends, but I also talked with several startups about the ups and downs of their funding experiences."

[Ed. Note: Tthe article notes Holovaty's stress at knowing his Knight grant was about to expire, but Holovaty doesn't specifically express relief at leaving grant funding behind. --mtd]

He vows life will go on as usual at the company he no longer heads, and that MSNBC's intention to keep the feeling of a startup culture intact makes it a good fit.

What you should glean from the above is not EveryBlock's success, however. It it the fact that Knight let its funding of the obviously highly useful and scalable site run dry. That's emblematic of the traditional (read: outdated) thinking of Chicago's foundation community in general: fund a project to see if it can grow, then abandon it to its own resources to sink or swim.

Foundations walk away because they try to spread their money around communities to widen the scope of the financial impact of their grant monies. They crow about their grantees when they're funding them, but rarely discuss the disasters that happen when they choose to walk away.

A wiser approach might be to lern from the well-known City Year "Starfish Story". A man asks a young girl walking along the beach why she's picking up stranded starfish and throwing them back in the water. "You can't save them all," he tells her. "No," she replies. "But I saved that one."

Knight can surely take credit for helping EveryBlock grow. But if they distribute a release claiming to have brought Holovaty's site to the verge of the MSNBC sale, read it with a grain of salt. Random good fortune like that is rarely the result of financial abandonment.

In fact, on the Knight Foundation Blog, Journalism Program director Gary Kebbel says of the sale, "We always hope that innovations Knight Foundation funds are supported by the marketplace." Translation: We're glad someone else saved you, because we weren't going to.

Now the Windy City's foundation community wants to ride in and save local news in general. As I noted here and here on Chicagosphere, this year's foundation-sponsored Making Media Connections and grassroots Chicago Media Future conferences both underscored the declining print space given to Chicago local news and the need for community-based online sites to take up the slack. With that in mind, this month, the Chicago Community Trust in partnership with the Knight Foundation announced a grant program for online news initiatives.

It's called Community News Matters (with no kudos due to Trust/Knight for stating the obvious), and calls for web-based ideas that "increase the flow of truthful, accurate and insightful local news and information in the region" that can be sustainable in the future. In the release announcing the grant program, Trust president and CEO Terry Mazany said:

"Now, with traditional news media struggling, we seek to ensure that citizens in the Chicago metropolitan area have a robust flow of high-quality, relevant information available to them."

Bu given Knight's track record with EveryBlock, for how long is anybody's guess. Until a magic funding formula arises or a national media empire with deep pockets swoops down from the sky, checkbook in hand?

Moreover, the grant program--announced in August--has a proposal deadline of September 15th.  Not much more than a month for potential grantees to come up with ideas to save the future of online local news. Anyone else think Trust/Knight already had their winning grantees well in mind before they announced such a ludicrous time frame?

Chicago foundations, for all the good they do in other domains, are simply out of their element in the online sphere. I appreciate Trust/Knight saying they want to fund the next best scalable idea. But they obviously have no clue what that idea might be on their own, and worse, no awareness that their own track record doesn't suggest they know how to foster online sustainability.

Well-meaning community news sites written by foundation technocrats, run by insiders, with meager means of community engagement (I've already written about two of these: Community Beat and Pilsen Portal) aren't going to save local news. Yet they're the initiatives currently funded by Chicago foundations. Meanwhile, truly successful, engaging, and scalable local and niche news sites like Gapers Block, Beachwood Reporter, Windy Citizen, and (once its grants also run dry) Chitown Daily News are left to wave in the wind.

If Chicago foundations want to be of any use in the online sphere, they'd do better to understand how it works in the first place--and who's already at work there. If any potential grantees had a silver bullet for sustainability, they'd already be using it. For Trust/Knight to be placing the entire sustainability onus on grantees, themselves, at this point is no help at all.

The real moral of the EveryBlock sale? There's still money to be made--and sustainable futures to be had--in the telling of online local news. But as far as Chicago foundations are concerned, at the moment, you're still on your own to find them.

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10 Comments

Patrick Barry said:

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Oh Mike. Your commentaries would be more effective if you didn't act so damn cocksure while getting things wrong or out of context.

1. Knight is not a Chicago foundation. It's based in Miami.
2. The Chicago Community Trust grant opportunity isn't rushed at all. Most of the active bloggers in Chicago have had fundable ideas rolling around for some time, just nowhere to make a grant request. I assure you they are working on their proposals now.
3. Those "well-meaning community news sites written by foundation technocrats?" Geez, I thought Jaime Guzman set you straight on that in his comments on your PilsenPortal.org posting. As for the LISC sites including Community Beat, they are largely written by former journalists with pretty serious professional resumes. There's not a foundation writer among them.

And one more thing. I'm glad EveryBlock found a buyer, but let's not overstate its value. It's a dry, data-heavy, context-less site that shows the value of data-mining but isn't a fully realized "hyper-local" news site. At this point it is simply a demonstration of what might become important in a larger context. Something that MSNBC might just show us.

Mike Doyle said:

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Patrick:

1.) When it partners with the Chicago Community Trust to fund Chicago local online news initiatives--as it is currently doing--that's about as Chicago as Knight gets.

2.) Entirely my point. The Trust and Knight have been in backdoor discussions with bloggers for months. Which means their grandstanding "we want to find new ideas to save local media" is full of it. They know who they want to fund and the new grant program they've announced with much pomp and circumstance is nothing but required window dressing to hide the grantees they've already chosen. No one outside this clandestine process likely has a chance at this funding. That's pretty bogus.

3.) Yes, you and Guzman both have professed that your foundation-sponsored sites are all about community engagement. And that still remains to be proven. Time will tell. Considering the content producers (for both sites) are largely drawn from LISC NCP or Resurrection Project staff and other foundation insiders, that's not a ringing endorsement of community-generated content.

And one more response. MSNBC's multi-million dollar purchase of EveryBlock was not made because MSNBC wanted to piss its money down a sewer. Maybe, just maybe, they know something you and Knight don't. Like, perhaps such a nontraditional news site is the wave of the future, instead of an easy target for misguided media traditionalists.

Andrew Huff said:

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Mike, your assumption seems to be that without continued grant money, EveryBlock was destined for immediate collapse. That's a huge, rather unfounded assumption -- especially since it assumes that EveryBlock even asked for more money from the Knight Foundation.

When I spoke to Adrian Holovaty for my Chicago magazine story, he said, and I quote, "You could think of the Knight Foundation grant as our 'angel round,' so now we're either looking for an A round investor or acquisition, or maybe another grant." So a grant was one of the options for the future, but evidently not one they decided to pursue. Holovaty saw the Knight grant as seed capital -- a one-time investment.

When EveryBlock was formed, Holovaty consciously chose to make it a for-profit company instead of a non-profit. That's rather telling: their intent from the start has been for it to be a business. He also acknowledged to me -- and in many other interviews -- that they were keenly aware of when the Knight grant would run out, and had spent cautiously to make sure it lasted and left them in a position from which they could reach a sustainable business plan.

In your post, you claim Holovaty is relieved to be "off the foundation and potential venture-capital rollercoaster," but in the Crain's interview, he makes no mention of foundations -- only VC. You've put words in his mouth to support your premise. (You also say that Holovaty no longer leads the company, despite every statement from both EveryBlock and MSNBC.com stating that he in fact does. Are you confusing ownership with leadership?)

The Knight Foundation can't be accused of "abandoning" Everyblock if they were never asked for additional money. In fact, even if they did turn down an additional grant application (and there's no evidence that they did), it's hyperbolic to call it abandonment. The grant -- which is a contract, not some abstract handshake agreement -- was written with clear firm guidelines that included an end point. Both parties agreed to the terms, and both fulfilled them to completion. Where is the abandonment? $1.2 million is a significant investment, one with very clear time limits, and one that clearly positioned EveryBlock for the success it has enjoyed. Are you saying the Knight Foundation should just continue to fund EveryBlock forever? Wouldn't that be more like ownership, not grant funding?

This entire article seems to come from some deeply cynical and skeptical place. I'm not sure what spurred that cynicism, and I certainly don't share it. Gapers Block plans to submit at least one proposal to the Community News Matters RFP, and I don't see the deadline as being unfair, nor as an indication that the jury is rigged. You claim to have some inside information you're basing wild claim on -- please elucidate. Give us a name or two from these back door discussions. And exactly how has Gapers Block been "left to wave in the wind" when we have made no requests for aid? Please don't drag us into your conspiracy theory.

AbeMaslow said:

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Just FYI, MSNBC isn't buying EveryBlock, but msnbc.com is.

They're half-sisters.

MSNBC is the cable TV company, owned by NBC, based in New York, while msnbc.com is the news Web site, owned by Microsoft and NBC, based in Redmond, Wash. It's the Web site that's buying EveryBlock.

Mike Doyle said:

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Andrew, you're right, I stand corrected: Holovaty did not specifically address foundations when he made his comments about VC funding. Beyond the passage below, stress related to VC funding is not addressed. The post has been amended to reflect this:

"The sale is the culmination of many months of soul-searching as Mr. Holovaty, who knew his grant money would run out in July, grappled with what to do with his baby. EveryBlock had minimal revenue, so he either needed to raise money and go it alone or find a buyer. "

However, my contention regarding the mistaken emphasis of foundation funding for Chicago new media ventures stands. A foundation can provide venture capital or operating funding. Saying you want to help support the continued existence of an entire sector of online media in one breath, while placing random temporal restrictions on funding are two messages working at cross-purposes to each other.

It's not hyperbolic, much less a conspiracy theory, in any way to say the way foundations are approaching new media in Chicago isn't working. Who says one year or two years is the magic funding timeframe for an online local news site to reach financial viability? Where are the metrics on that? That timeframe comes from the traditional way foundations do business.

That legacy way of doing things is what I am saying is not helpful in the online sphere--at least not when you're trying to keep local news from dying out on the Internet. You can't say we want you to succeed and then cut the purse strings halfway in just because that's they way your foundation has always done things. That is abandonment, and there's no good reason for it other than procedural inertia.

All that time frame does is allow a foundation to take credit for funding a website before it walks away to fund another venture. If the Trust, Knight, or anyone else really wants to give local media an online future in Chicago, they have to take the whole time-limited funding marriage out of their vocabulary and stick around as long as it takes to make sure the individual sites and initiatives they fund achieve the sustainability they're seeking for the sector as a whole.

Andrew Huff said:

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It's far too early to declare that the way foundations are funding media innovation in Chicago isn't working, considering how few projects have been funded and the fact that the Community News Matters grants haven't even closed the RFP round yet, let alone been awarded. EveryBlock is most definitely a success story. As was pointed out over on WindyCitizen, EveryBlock had a hand in determining the duration of its grant, and they have acknowledged that they treated the grant as an angel investment. They approached it as any start-up technology firm would -- as money to grow on, with no expectation that more would be forthcoming. "Financial viability" was not a condition of the grant. Your insistence that Knight "cut the purse strings" or somehow abandoned them is just plain false.

Your mindset seems to be that the CCT and Knight Foundation ought to support their grantees for however long it takes for the project to become self-sufficient, providing additional funding until that time comes. Setting aside the infeasibility of such open-ended generosity -- generosity which no venture capitalist or private investor would ever offer -- what happens when a grantee proves unsuccessful? When do you cut off a failure under your scenario? If you remove the time factor, there's no accountability, little incentive to reach sustainability. Why succeed if that means the money's goes away?

To suggest that by giving an idea a little money, a foundation should be on the hook till the end is simply preposterous.

nick petticrew said:

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Great article, I just saw a report about the Every Block on 'Chicago Tonight' interviewing Adrian Holovaty. MSNBC is trying to reach the 'local' community and we'll see if they get anywhere. I think they'll probably just end up scaling/expanding the Every Block approach and see where it will go.

Vivian Vahlberg said:

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Mike—
Before being so quick to condemn foundations and Knight Foundation in particular, you should realize that no foundation in the country has invested more in the future of news than Knight, over a long period of time – and that no foundation has done more to raise awareness among other foundations about the need for foundations to support news during this perilous period of change for news and information.

When I was directing McCormick Foundation’s journalism program from 1992-2005, foundations that funded journalism were few and far between – largely foundations tied to the news business or foundations that wanted to use media as a megaphone for their issues. Since then, there’s been an enormous turnaround – thanks in large measure to bold and quiet efforts by Knight to raise awareness among funders of the vital necessity of good quality information to communities. As J-Lab reported recently, at least 180 foundations nationwide have contributed nearly $128 million in grants to news and information initiatives in the US since 2005; that’s a sea change.

Another example is Knight’s Community Information Challenge, designed to interest community foundations like the Chicago Community Trust in caring about, and funding, more media related efforts in their community. Knight’s challenge spurred the Trust to greatly expand its funding of news and information beyond the Trust’s stalwart, 20-year support for the Chicago Matters series.

The Trust competed for and won a Knight challenge grant, which the Trust has matched with its own money – which will result in more than $400,000 in new money flowing into the Chicago media landscape through the Trust’s Community News Matters initiative, for which I am the project director. We are will try to interest other funders in adding money to the fund. Far from being something to lament, this is really good news!

Another thing; I think you’re thinking about foundation funding of media in the wrong way. Community News Matters is designed as bridge funding – to help news and information projects of all types crop up and stay afloat while people figure out a sustainable business model for news going forward. That’s a more appropriate role for foundations than endless subsidies. Practically speaking, foundation funding can never become a substitute for what was generated by a fully-functioning, commercially-supported media; at best it can be a supplement. News is just too expensive. Even if all the country's foundations used all their money to subsidize media, it wouldn’t generate as much as commercially viable media does. And the fact is, foundations would never do that; their funding is needed in so many other areas – from helping with basic human needs like food, shelter and education to working to change policies that affect people and communities.

I see Everyblock as a success – a victory for both Knight and the news and information sector. Like venture capitalists do for high-profit-potential businesses, Knight provided the seed capital for a good idea -- to enable Adrian to develop and perfect his idea to see if it could fly. He has succeeded, and now will have the money to be able to take his brilliant ideas to a much higher level and greater scale than if he were just subsidized by a foundation. And this is what news needs – new ways to generate money that can pay for the news and information citizens need. The old business model that produced lots of funds for journalism is broken. No one has yet figured out the new model --- but scores and scores of people are working to crack that nut. Knight and the Trust are providing funds to help them experiment and grow – with the expectation that the successful ones will find a way to support themselves and the ones that don’t will fade away. No, the amount of money will never be enough – but thank goodness that foundations have started to be willing to step in and help.

Finally, you say if Chicago foundations want to be of any use, they’d better understand the sector and who’s already at work there. That’s why the Trust convened an expert advisory committee when it received the Knight grant and why it commissioned the “New News” report which (albeit imperfect) is the most extensive mapping done to date of the online media sector in Chicago. As a result of educating itself, the Trust had the guts to change its plans – moving from the idea of creating an information Web site of its own to the current plan of providing grants and contracts to local innovators already in the sphere. Yes, the switch resulted in short deadlines for proposals; the Knight grant was only a one year grant (but we are applying now for funding for additional years). But we know that lots of people already have plenty of ideas in their heads for what they would do if only the money were available. So I hope you and everyone else interested in the subject will come to the information session about Community News Matters from 10 a.m. to noon in the 26th floor conference room at the Trust’s office at 111 East Wacker Drive and take a look at our request for proposals at www.cct.org/page10004548.cfm. (Please RSVP for the info session to janicep@cct.org.)You might find that these developments are something to be excited about, not to lament.

Finally, the Trust didn’t have deep media expertise when it got the Knight Challenge grant. It recognized that it needed more, so it brought me on board. My entire career has been all about news – and about trying to ensure a vibrant future for it. I’ve been a Washington correspondent for a major daily paper, executive director of Society of Professional Journalists, Journalism Program Director at McCormick Foundation and both Digital Director and Managing Director of Media Management Center.

Vivian Vahlberg
Project Director, Community News Matters
vivian@cct.org

Vivian Vahlberg said:

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FYI, the Chicago Community Trust does not already know who we want to fund. We may end up funding some people we already know -- but if that's all we wanted to do, we could have just done that without going to all the work of soliciting and judging what we hope will be scores and scores of different proposals. When Thom Clark surveyed the online scene, many people in Chicago were surprised at how many interesting online ventures he found. But we also learned there were many more good ones that didn't get included. We want to know about them. We're very excited to see what comes in. FYI, I've judged McCormick Foundation and J-Lab's New Media Women's Entrepreneurship Project for the last two years -- and it has been absolutely astounding and energizing to see how many smart people have really promising ideas. So I recommended to the Trust that we do something similar here.

As for "secret" meetings: yes, in the course of developing the program plan, we had meetings with some people we knew and respected to sound them out about ideas and approaches and needs. It was all part of educating ourselves -- which you rightly pointed out was important to do. But it wasn't any kind of pre-selection process; it was just fact-finding.

One more thing: we hope this program will end up benefiting all those who apply, not just those who receive awards. Part of our plan is to host a "learning community" of Chicago media innovators -- with periodic sessions where award winners and anyone else who is interested and involved can learn from each other, share ideas and help each other. If that group identifies research that might help the sector (like the New News report), we're open to funding that as well.
Vivian Vahlberg, Project Director, Community News Matters
vivian@cct.org

Mike Doyle said:

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Andrew, I'm not saying Knight didn't fulfill the terms of the grant. I'm saying they could have stuck around financially beyond them, and I'm criticizing the assumption that that's not a reasonable option.

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