An upstart online news service has led the way in investigating France's latest political funding scandal, defying President Nicolas Sarkozy's efforts to stamp his influence on the media.

The Mediapart website has published a stream of embarrassing reports of alleged cash donations by France's richest woman, Liliane Bettencourt, to conservative politicians, and meddling in judicial affairs, drawing presidential wrath.

Mediapart's reports have set the agenda on the scandal, forcing the rest of the media to follow, and turning the affair into a major headache for the government.

Mediapart is one of a new breed of muckraking, mostly left-leaning online news outlets that is shaking up the French press, which is reeling after years of sinking circulation and deteriorating ad sales.

Sarkozy's close friendships with traditional media owners and control of state-funded TV and radio outlets have often allowed him to shape news coverage and isolate journalists or editors who displeased him.

Websites like Mediapart, Rue89, and Bakchich.info are less prone to such influence and are attracting readers by putting out scoops with a harder-hitting tone.

Unlike many newspapers, they are not dependent on government subsidies or industrial owners with deep pockets to survive. Yet most remain unprofitable so far, showing how hard it is to find a viable online media business model.

Founded in 2008 by four former investigative journalists on Le Monde, Mediapart says it has 30,000 subscribers who pay 9 euros a month to read its reports on social, political and environmental issues.

CYBER-CABAL

Its president, Edwy Plenel, who made his name by exposing scandals under Socialist president Francois Mitterrand and rose to be editorial director of Le Monde, tells the staff of 25 reporters to focus on scoops instead of routine coverage.

From the beginning, he told us to take the time to investigate, come up with original material, and step out of the logic of the daily news cycle where everyone writes the same thing, said Pierre Puchot, a journalist at Mediapart, who covers the Middle East and Africa.

The government's response has been to blame the Bettencourt scandal on shoddy or partisan Internet journalism.

Sarkozy supporters have fiercely attacked Mediapart as a cyber-cabal that undermines democracy, doesn't check its facts and only aggregates tweets and blogs.

This famous website! exclaimed Industry Minister Christian Estrosi in a radio interview. It reminds me of a certain press of the 1930s, a reference to extreme-right newspapers which denounced France's political class as rotten to the core.

Xavier Bertrand, leader of the ruling UMP party, called Mediapart a site that uses fascist methods. In response, Mediapart has sued Bertrand for defamation and vowed to continue working on the story.

Until now we've been ignored or disdained, but now we have been elevated to the rank of principal adversary to be attacked and demonized, Plenel wrote in an editorial. Our best response is to doggedly pursue our investigation.

For journalism professor Patrick Eveno of Paris' Sorbonne University, Mediapart's leadership on the latest scandal is a sign of a deep malaise among French newspapers.

The traditional press is so asphyxiated by financial problems that it is not doing its job as a check on power, he said. Sites like Mediapart can take more risks because they are independent and don't have to worry about their owners.

Even as they lose readers and advertisers, French papers are saddled with higher salaries, print and distribution costs than in other European countries.

Paid national newspaper circulation fell 4.9 percent in 2009 from a year ago, according to the circulation audit bureau.

Some are on the brink. Le Monde recently moved to sell a controlling stake to a trio of investors to avoid bankruptcy. The owner of mass-market daily Le Parisien is seeking a buyer.

Many dailies have sought refuge in larger industrial groups, often owned by business tycoons with close ties to politicians.

Le Figaro is part of the business empire of Serge Dassault, an aerospace and armaments tycoon and friend of Sarkozy, while Les Echos is owned by Bernard Arnault, chief executive of the LVMH Moët Hennessy Louis Vuitton luxury conglomerate.

Eveno sees the rise of online news outlets as a positive development but wonders whether they will have the staying power to fill the void left by a sinking traditional press.

It's not clear that these sites have figured out a business model that will hold over the long term, said Eveno.

Mediapart hopes to break even by the end of 2012 if it can reach 50,000 subscribers. Muckraking is fuelling its readership: some 1,400 new users signed up for Mediapart on Tuesday alone and subscriptions have jumped 20 percent this month.

(editing by Paul Taylor and Charles Dick)

Journalism