Embarcadero Media, the parent company of Palo Alto Online, Palo Alto Weekly and several other publications in the Bay Area, will transition from a for-profit company to a nonprofit organization at the start of 2024 because of the drop in advertising revenue.

Executive Chairman of Embarcadero Media Bill Johnson, who founded Palo Alto Weekly, said the Weekly is one of many news publications struggling to remain profitable under a for-profit model.

“All over the country, news organizations are failing or on the verge of failure, primarily due to the steady decline in advertising revenue that has stemmed from the use of digital media,” Johnson said.

Embarcadero Media’s vice president of sales Gina Channell Wilcox said the company has seen a significant drop in revenue since 2019.

“Across our three newspapers and special publications, we’ve seen our print revenue decline by more than 42% since the end of 2019,” Wilcox said. “Revenue across our entire operation, including print, our seven news websites and three newsletters, has declined by 32%.”

Wilcox said the pandemic exacerbated this drop because of the closure of local businesses.

“More than 75% of our revenue still comes from advertising, and starting with the pandemic in 2020, many local businesses that advertised with us have closed,” Wilcox said. “Since 2019, we’ve experienced a 45% erosion of real estate advertising, our largest advertising category.”

In order to ensure the publications stay profitable, Embarcadero Media Chief Executive Officer Adam Dawes said he hopes the transition to non-profit status will allow his company to survive with funding from public foundations and community members.

“(We knew) it will be difficult to get significant additional advertising dollars, and we need to look for new sources of revenue,” Dawes said. “Looking at different options around, we decided that the best path forward is to see if we can tap into some of the generosity and philanthropic resources in the community. Becoming a nonprofit allows us to tap into that.”

Dawes also said the smooth transition to a nonprofit organization will help transform the company’s relationship with the community.

“We essentially become owned by the community instead of owned by our shareholders,” Dawes said. 

And Johnson said this new relationship will force the publications owned by Embarcadero Media to become even more responsive to the community.

“If publications are increasingly dependent on community financial support, they need to work extra hard to connect with the community in more ways,” Johnson said. “Part of this is a shift towards how we cover the community and how we are out in the community seeking feedback, input participation, engagement.” 

Johnson also said the community focus will be reflected in the type of reporting their journalists do. 

“Our journalists are going to be more cognizant of the issues that people care about in the community,” Johnson said. “As a nonprofit, we’ll be more proactive and less reactive to news.”

Johnson said he hopes this new model will also help his publications expand their coverage to previously underrepresented areas. 

“There are categories of coverage that are important if we had more resources to expand,” Johnson said. “(We want to cover) issues facing underserved communities, those that are unhoused, service workers. Part of the role of local journalism is to make sure those voices are heard.” 

Johnson said the biggest challenge of transitioning to a non-profit will likely be helping people understand their role in supporting local journalism.

“People tend to have no idea how expensive it is to have people working to cover these stories,” Johnson said. “The challenge is the messaging, of having people understand that everybody needs to contribute a relatively small amount to maintain this type of coverage. It’s going to be whether people understand what life would be like in our communities without local journalism.”

In order for the transition to work, Johnson said the key is getting more people to subscribe to Embarcadero Media publications and become sustaining members.

“We already have built something like 5,000 (members) in Palo Alto, and that’s a lot, and we really appreciate the support that we get from those people,” Johnson said. “But, we’ve got to double or triple that in order to have the reliable cash flow that enables us to stabilize.” 

Dawes agrees, and said he encourages the Palo Alto community to contribute to local journalism.

“Supporting community journalism makes our communities healthier,” Dawes said. “And that community needs to help support and keep that news gathering capacity alive and strong.”