Bay Citizen Failing, Spent $11.4 million, On Life Support

Regular followers of my blog will remember my constant criticisms of The Bay Citizen, the online news organization that started with a $5 million investment from the now sadly passed on Warren Hellman.

Now, after Hellman’s passing in December, the publication finds itself about just over a year from going out of business.

Over it’s life time, according to sources, the organization spent $11.4 million, and the Wall Street Journal reports that it spent $3.6 million in 2010 while raising a total of $17.5 million. That means, assuming it spent the same $3.6 million in 2011, it’s just about $2 million from going broke by the end of 2012.

It’s sad, but I predicted this was going to happen in June 17, 2010, even as I went with my friend Patsy to check out the luncheon held in Berkeley by Sylvia Paul to introduce then-new CEO Lisa Frazier to the public.

The main problem with the Bay Citizen rests on its “Hyper Local” focus – that strategy of focusing only on local news, and no sports, is a guaranteed money loser. The second problem was the ultra-high salaries paid to its top executives. Lisa made $400,000 annually, and Editor-In-Chief Jonathan Weber was set for took in $250,000 (Frazier got $457,000 and Weber $261,000 in 2010).

If you think about it, that’s almost three-quarters of a million off the top and for two people who were not responsible for generating monetizable content. Then add staff, the cost of living in the Bay Area, and soon you’re spending a ton of money. Lisa was taking in the same level of income as the World head of the IMF.

That for a new organization that, by its design, was working to draw its online audience from a small part of the giant State of California, the San Francisco Bay Area. In other words, The Bay Citizen was larger than its revenue carrying capacity from day one.

Web traffic for the site consistently sucked. According to Alexa.com, 56 percent of its traffic generated one page view. It was lucky to get past 300,000 visitors for a month; it needed to clear 1.5 million visitors per month (by my calculations) to really make money to sustain itself. And, whereas the San Francisco Chronicle Website can be found if one does a search for “san francisco,” the number one keyword under which the Bay Citizen was found was “Bay Citizen.” That’s the best example of the online publications problems.

To make up for that, the managers didn’t focus on a city keyword, instead, they tried to increase the brand recognition of the online publication. In effect, they did this by treating it as if it was an offline product, like a car or a retail store or a true newspaper that you can buy on the street. The Bay Citizen managers bought ad space at bus stops, but with a serious execution problem I explained in this video:

Can Phil Bronstein Save The Bay Citizen?

This year, legendary San Francisco Chronicle and Hearst Corporation Executive Vice President Phil Bronstein was asked to come in and fill the leadership void created by Mr. Hellman’s passing. He retired from his post, and went over to the Center For Investigative Reporting (CIR). He then embarked on a plan to merge the Center with The Bay Citizen. A deal that is still under consideration, to be announced “Yea” or “No,” on or after March 8th.

While it’s a good move for The Bay Citizen itself, I don’t think it’s a good move for Phil or CIR. The moment Phil told the Wall Street Journal “We’ve been doing this long enough so we know what to do, and we have a pretty good sense of what not to do. Just watch and see what we do” I said to myself, “I’ll give it two years at best.”

I don’t say that to be flip. I learned a lot about how Phil thinks in two long interviews, one of them I present here:

Phil doesn’t realize that in the online World it’s not how long you’ve played the game, but how disruptive your product can be. The Bay Citizen’s not a disruptive, game-changing publication, and what Phil plans to do will not make it into that kind of creation. That’s not a slam against Phil at all, as I admire what he’s done over the years, but a cold recognition of the way Phil’s used to doing Digital Media, which is not by himself, but by calling on other people who also don’t have a day-to-day handle on what to do.

You can’t just think Digital Media, you have to do Digital Media.

That’s all I’ll say.

Stay tuned.