Behind the Hyperlocal Hype

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Article ImageHometown newspapers may be on the decline, but we all have an inherent desire (and legitimate need) to know what's going on in our local communities-whether it is the latest goings on at town hall or to see if we recognize any of the names in the police log-and plenty of content providers have taken note. The recent focus on hyperlocal news-from companies large and small-has yet to produce a single highly successful blueprint for success (or business model). Some hyperlocal publications are surviving on funding from donors, sponsors, and grants. Others focus on advertising to make revenue and, as a result, have struggled (think AOL's Patch).

One thing those in the industry can agree on, however, is the necessity of local news. "I think people care about what goes on in their communities and there is a need for local news," says Melissa Bailey, managing editor of the New Haven Independent, a hyperlocal news site that covers New Haven, Conn. "People want to read about what's going on on their block, in their neighborhood, and in their city."

Yet, despite its lack of one clear path to success, why do so many large companies think hyperlocal is the place to be? "Local targeting is a significant part of future targeting, so the big ad and adtech companies are placing bets there as well," explains news industry analyst Ken Doctor, the author of Newsonomics: Twelve New Trends That Will Shape the News You Get and publisher of Newsonomics.com.

Doctor points out, however, that the ad technology is still too "immature," and that has held hyperlocal sites, such as Patch, back. He explains, "In terms of hyperlcoal advertising either web or mobile, that technology has been slower. There's a lot of infrastructure that needs to be built out both in knowing [the] audience, [and] being able to deliver ads essentially on the fly to the right person with the right profile at the right time in the right geography. And, even though there has been a lot of work done, it's not ready for prime time."

A big mistake that struggling hyperlocal chains such as Patch and The Daily Voice have made is "thinking too big too fast," writes Jeff Jarvis, associate professor and director of the Tow-Knight Center for Entrepreneurial Journalism at the City University of New York's Graduate School of Journalism, on his blog, BuzzMachine. "Before they nailed the business and knew what worked, they multiplied the model and thus the mistakes, which only threw accelerant on their burns."

Patch Problems

AOL's Patch, the most high-profile, corporate-owned hyperlocal news entity, has struggled mightily, and, in August, AOL announced it would lay off about a third of Patch's workforce-shedding 350 of 1,100 employees with plans to lay off another 150 in subsequent months, according to The Wall Street Journal. AOL also announced it would close 150 websites and seek "partners" for another 150; those 300 sites account for a third of Patch's 900 total sites. Despite the fact that Patch more than doubled its ad sales in 2012 to just under $35 million, its yearly costs far exceeded the revenue, ranging between $126 million to $162 million, reports Bloomberg.

"Patch, as we have seen, has sort of popped up in certain cities and then disappeared in large part, I believe, because they don't have the strong grassroots support of the community; it's sort of a cookie cutter model," says Bailey, who adds that corporate sites such as Patch "will never replace independent grassroots reporting."

When it first started out, Patch sought to "build an audience and monetize that audience through targeted, hyper-local advertising," says Doctor. So what went wrong?

"On the advertising side it's been very immature and the advertising side has not been robust; they've had all sorts of problems with sales organization, [and] sales execution," explains Doctor. He notes that Patch sites typically have two kinds of ads, and neither is particularly effective. "They have national ads for companies like Pepsi and Reebok and those ads are campaigns and they're sold on the basis of Patch having a very affluent, suburban audience; and so they're selling an audience overall, but they're not selling targeting beyond an affluent, suburban audience."

"And then some of their sites have four to eight local ads but these tend to be not very targeted or interactive ads; they're basically billboard ads, display ads for medical centers or childcare centers or community institutions," he adds.

On the audience side, "[T]hey're up to about 11 million unique [visitors]; they've built a good audience but they run into the problem that any new site will run into-it's hard to develop a new ‘Patch habit' among readers," says Doctor.

In developing that habit, Doctor points out that readers need to seek out Patch. "You have to go to it," he says. "There are alerts; they do a decent job with alerts but you think of the old newspaper model, and it's national, international news, sports and business news, local news, all rolled into one. It was a logical place to go for local news but with Patch you have to go to it to find it. And even when it is useful, and they have produced lots of useful information that local newspapers haven't, it's hard to build and keep an audience."

An Independent Success

Unlike Patch and other for-profit hyper-local news ventures, the nonprofit hyperlocal news site New Haven Independent has had no problem thriving in the harsh world of hyperlocal.

The Independent got its start 8 years ago when Paul Bass, its managing editor, grew frustrated with the coverage (or lack of coverage) corporate media was giving his city. "He was disillusioned with the effect of corporate media in New Haven," explains Bailey. "[Corporations] had basically eviscerated newsrooms in New Haven so much that there was very little coverage of what was going on in our schools, in our government, and our neighborhoods."

The Independent went live in August 2005, and, 8 years later, Bailey calls it "a survivor in the industry of hyperlocal news" when asked if independent hyperlocal publications are better suited to survive in the long run than their corporate counterparts. "I think it's largely because we are not-for-profit and we have seen a fair number of for-profit news sites start and then fold because the advertising revenue just isn't there, and in some cases, because the grassroots commitment isn't there," she adds.

Not surprisingly, the Independent does not see ad revenue as being a big part of its business model going forward. "We don't see that as a sustainable model for us," says Bailey. "We find that you're chasing dollars-expending a lot of energy chasing down small amounts of money. With the decline of print media, there is a hole to be filled and I think some folks see it as an area for ad revenue, but we have found that ad revenue alone is not enough to sustain the kind of independent, quality journalism that people rely on to inform themselves about what's going on in their cities," adds Bailey. 

Instead of relying on ad revenue, the Independent uses a National Public Radio model. "We have a mix of grants from larger foundations, ongoing sponsorships from institutions and small donors who agree to pay 10 bucks or 18 bucks a month to support us. Our content is always free but we have people who believe in journalism as a public good," she explains.

In a little more than 8 years, the Independent has grown significantly from its humble beginnings. "When we started out we had no idea the site would be around for so long and would grow to such a size; Paul started out and it was basically him and a blog," recalls Bailey, who joined the news site in March 2006. "Now, we have a staff of four full-time reporters in New Haven and we have two associated sites in [nearby] Branford and the Naugatuck Valley; they're under the umbrella of our not-for-profit and we helped them get started and we oversee them." Between the three sites, the Independent averages 130,000 unique monthly visitors.

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