The Hyperlocal Advertising Business Model – an Illusion?

by Pat Kitano on August 17, 2009

Fast Company’s Michael Gluckstadt’s article “Can Anyone Tap the $100 Billion Potential of Hyperlocal News?” points out the problems when a national advertiser like the New York Times, or local news aggregators like CitySearch, Topix or Outside.In developing “community” try to build a sticky hyperlocal website. Answer: there is little incentive for anybody in the local community to take the lead in building some corporate hyperlocal site. They would rather build their own.

Hyperlocal seems like a can’t-miss proposition. “There is real demand for good information about our neighborhoods, our children’s schools, our streets, our blocks,” says Jay Rosen, an NYU journalism professor and media blogger. Except for one thing: Success remains perpetually around the corner, constantly predicted yet never fulfilled. While different people have named hyperlocal as a trend to watch every year since 2004, “everybody’s groping for a business model,” says Gordon Joseloff, who fits the all-too-typical norm for this space with his popular, distinguished, and unprofitable site in Westport, Connecticut.

The business model problem is twofold:

1) National advertisers ignore the hyperlocal markets because they are too sales labor intensive in their focus on mom & pop SMEs

“Advertisers have no interest in community Web sites,” says Gordon Borrell, CEO of the analyst firm whose statistics are routinely cited as evidence of hyperlocal’s bright future. “They don’t have the type of material advertisers want to be around,” referring to archetypal hyperlocal stories about high school basketball and drug arrests. “Sites are connecting the dots inappropriately.”

2) Hyperlocal networks are much more intimate and require buy-in participation from on-the-ground players within the community. Although national hyperlocal community sites try to attract community conversation, there is no real incentive for somebody in the community to create a stake in the site without any kind of ownership or compensation.

For example, Outside.In showcases BackBay in Boston on their home page:

Outside.In, Topix, etc. are great for aggregating news from local publishers, but they lack community participation, as evidenced by the Back Bay Discussion Board (three entries for 2009):

What Outside.In needs is an About.com-like local monitor to engage the community, but this can become a financial albatross by introducing training and possible compensation of these monitors.

The Hyperlocal Business Model – an Illusion?

A hyperlocal business model requires community participation. The one-way broadcast “newspaper” model of Topix local news + advertising is just a variation on the old Web 1.0 model. ONE THING IS NOT EVEN BEING MENTIONED IN THIS CONVERSATION ABOUT HYPERLOCAL ADVERTISING - Local advertising revenue models may not even be viable once local merchants discover that they can reach and market to their community through Twitter. Free. Of course, this is based on the assumption that Twitter continues its rapid adoption by the masses, which in one form or the other (see Facebook/Friendfeed) should happen.

The Breaking News Network has the ingredients to address the needs of the hyperlocal community – simple Wordpress based sites constructed in a matter of hours and customized to the city or community, and anchored by hubs of the community to market and promote the Breaking News City site.

What’s Missing from Today’s Hyperlocal Sites – Community Leadership May 7, 2009

The Local Merchant’s Guide to Twitter June 16, 2009

Twitter is Destined to Become a Local Advertising Media Platform May 12, 2009

Tagged as: Advertising, Breaking News, citysearch, Hyperlocal, Local advertising, New York Times, outside.in, Social Media, topix, Twitter

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Twitter Trackbacks for The Hyperlocal Advertising Business Model – an Illusion? [mediatransparent.com] on Topsy.com: 08.31.09 at 9:18 pm

{ 9 comments… read them below or add one }

Pat 08.17.09 at 5:35 pm: I understand the twofold problem, but at http://www.WikiCity.com we have gained considerable national advertiser attention & at the same time, we’ve experienced increased traction with local participation. Our model offers built-in incentives for business owners to shamelessly promote themselves, while at the same time, offering a scalable platform for chronicling local history, sharing news, etc.
Pat Kitano 08.17.09 at 6:00 pm: There always has to be a purpose for locals to participate in a hyperlocal website. I think local brand newspapers’ online counterparts should be spearheading the use of Community 2.0, but they have been slow to provide any incentives to participation beyond the “Letters to the Editor” type attraction that article commenting delivers.

Wiki City is on the right track for creating a local social medium for both community purposes and advertising. I did find it hard to find any place on the wiki to list a city business; the problem with wikis is always going to organization.
Chris Tolles 08.18.09 at 10:44 am: Pat:

Nice piece on hyperlocal. So, we agree that it is really difficult to create community locally on a national basis — However, we have over 5,000 cities and towns where there is meaningful interaction daily.

Check out Corbin KY, Paris Tx, Carruthersville MO, Utica NY — where we are the biggest media property by unique visitors and interaction in the those towns.

We have 140k comments pretty much daily on our site and most of those are local, and not just comments about newspaper articles, but user submitted subjects (eg stories).

We have had the local editor model deployed for over 2 years, with over 3,000 editors signed up — but your initial point seems to be correct, and now we are investigating what we will need to do to make this more interesting, given that the commentary is really where the action is with regard to local community.

Chris Tolles
CEO, Topix
Pat Kitano 08.20.09 at 8:21 pm: Thanks Chris, I frankly didn’t see Topix as building much local traction until your response. It seems Topix is proving to be a national property that can attract hyperlocal participation (and I’m pleased). Your 3,000 editors is a great recruitment initiative that can be potentially leveraged to mobilize the communities around them. Craigslist and Yelp have passed a tipping point to become defacto hyperlocal platforms for classifieds and local reviews, and I think Topix could do so with a few “breakout” cities to show communities the potential of Topix as a news and community destination.
Dave Johnson 11.01.09 at 6:37 am: One man’s problem is another man’s opportunity. I publish hyper-local community magazines and the problems you defined are the reasons I am successful. The problem, as I see it, is you are trying to define how hyper local should work within the traditional paradigm. This is exactly why newspapers are failing and why large magazine publishers are falling by the wayside. A new paradigm needs a new perspective and a new strategy. Despite what your article implies, there is a tremendous amount of opportunity in hyper local advertising, be it print, Internet, radio, television or a combination of one or more of the above.
It is true that it is difficult for national advertisers to capitalize on the hyper local advertising movement but, then too, it really isn’t about national advertisers. In fact, we are encouraging our readers to shop and buy locally. As far as viability is concerned, you obviously have never sold advertising at a hyper local level. Merchants are too busy running their businesses. They do not have the time for twitter or Facebook or even updating their own websites for that matter.
As for results, our clients are experiencing unprecedented results. The community has “bought into” our products but with very little effort from us. We are simply giving them what they want “good information about our neighborhoods, our children’s schools, our streets, our blocks”. And, we do it in a positive and uplifting manner which makes our content very appealing to a local world-weary population.
The problem with big business is they don’t know how to operate like and relate with small businesses which is why they will never find success in the hyper local advertising arena.
Pat Kitano 11.01.09 at 9:24 am: Dave, what you say and what you’re doing is consistent with what I believe – national advertisers can’t capitalize on the hyperlocal opportunities.

I agree local merchants will default to the tried and true advertising models in local magazines for presence. I’m saying that social media marketing will eventually reach these merchants as an alternative way to advertise.

You’re a good example of a hyperlocal success story and you’ve implicitly admitted that your business would have a hard time scaling nationally. We’ve worked with a national publishing company that distribute hyperlocal print publications and know that it works. But they are now preparing for the distribution shift when more and more of their information and advertising will be digested online (and it will), so they don’t face what the newspaper industry is going through.

Our perspective is frankly similar; I agree that hyperlocal print won’t go by the wayside because it is a tried and true channel to the local consumer.

And my first job was selling radio time, which I enjoyed very much.
Gabe Barber 11.09.09 at 10:50 am: I just came across this post and thought I would add my two cents. In January I started a “hyperlocal” site devoted to the literary community within Portland, OR. We are now in Seattle, plan to launch a site in Atlanta this week, and continue to look for editors to set up sites in other locations across the country as well.

While I haven’t quite settled on one particular business model, I think our platform can actually work well for national advertisers. Specifically book publishers looking to promote their newest releases. If they have an author on tour they can essentially promote that book and the authors readings at each stop along the way. This will obviously be more effective the more sites we have set up.

I think that rather than focusing on a specific hyperlocal geographic neighborhood (i.e. Back Bay), the hyperlocal models that will prove fruitful will instead focus on a scalable segment within the larger community (i.e. literary). So if books aren’t your thing, why not focus on Portland Beer, Wine, and Coffee? Or maybe Portland Art? This to me is something that the national advertisers would want to be up against, because the community although still geographic is nonetheless nationally relevant.

All the Best,
Gabe Barber
Founder, Reading Local
Patrick Kitano 11.09.09 at 11:35 am: Gabe, I think big box national advertisers – banking, Home Depot, etc. – will have a problem with hyperlocal advertising models because they don’t scale well and may need regional or even neighborhood customization. Niche advertisers like publishers may see venues that specifically target a literary readership like ReadingLocal is a different story, but you’ll still need some traffic numbers to sell them.

ReadingLocal can work as a multi-blog platform by city as you’re developing but the challenge is in finding and maintaining the content providers. There are many options for writers to post content – Examiner.com, their own blog – and they may demand a pre-existing audience. You can position ReadingLocal as an intimate community of readers, but it may put a lid on the online traffic numbers you would require for advertisers.

These are just my pragmatic thoughts on how to build a niche hyperlocal site that gets traffic, and are pessimistic. That said, all the best to your efforts… I always like seeing these initiatives.
ts 11.12.09 at 7:04 pm: http://www.offeretti.com is a great site for hyperlocal advertising for businesses.

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