Journalists continue to search for a viable business model that supports online hyperlocal publications, but they won’t ever reach the threshold of revenues to maintain operations if they rely solely on traditional advertising fees from local merchants. That doesn’t mean local advertising is also poised to fall off a cliff. On the contrary, BIA/Kelsey states the prospects for online local advertising will double by 2015, but much of that growth will come from new mobile applications and daily deals category vendors. Here are five reasons why hyperlocal news faces hurdles to profitability:

1) Hyperlocal audiences are too granular to support traditional revenue models. Local banner ads aren’t economically viable. Traffic to online hyperlocal publications is inherently small due to geography, and total ad revenue based on CPM (cost per thousand views) won’t even cover the costs of the ad sales force.

Report on AOL’s hyperlocal network Patch.com’s traffic sourced from Business Insider “Leaked Reports on Patch traffic”

Article comment:

Chris L on Jun 24, 1:18 PM said:

If their page views really are only 783K for a month in So Cal, that translates to less than $5K in revenue for a month. I doubt they can build a sustainable business on that. Revenue = (783,000/1000)*3*$2 Assumptions: $2 CPM (generous) and 3 ad slots per page.

2. Local advertising alternatives are proliferating. Newspapers lost their classifieds revenue to Craigslist. The growing number of pay for performance business models including paid search, daily deals and the new mobile ad applications are cannibalizing media spending. Advertising options will continue to expand for local merchants, leaving a smaller piece of the pie to hyperlocal news.

3. Hyperlocal media resources are proliferating. Traditional media has relegated the business community to being simply the “advertisers” and not involving them in content sourcing. Yet on the local social media, many committed bloggers are the business owners who want to discuss their industry and community, and by extension market themselves. Traditional media needs to incorporate the business community as journalistic partners instead of trying to sell to them all the time.

New community service business models are developing that focus on engaging the community around local news and providing free advertising to businesses, adding further pressure on traditional ad sales. Facebook and other social networks may also evolve into hyperlocal community platforms that center on community sourced and shared news. In sum, hyperlocal news resources will proliferate as alternatives to traditional local media, simply because it’s easier to build these properties now.

4.  Local merchants are learning how to self market using the social media. Roost reports merchants believing it is four times more effective than paid search. Those merchants that can’t do it will be taught or be serviced by local social media / ad agencies, or even the traditional media publishers themselves. Gannett wisely set up GannettLocal.com to engage with local businesses as their social media marketing educator and partner.

5. There is a visible example of an unworkable local media model. Patch.com, AOL’s effort to build a hyperlocal news network from scratch even when local news revenues were falling, demonstrates and even confirms the high hurdles in building a profitable local ad model.

After a year and $150 million, Patch doesn’t seem to be gaining the revenue traction it needs to warrant further investment, and AOL is working with investment bankers on restructuring. The Patch exercise may shut the door on the idea of building a scalable hyperlocal network based on paid content.

My article “Hyperlocal as Community Service Media” on Streetfight discusses why building local media resources to serve the community makes sense. Creating local media is no longer the province of media companies, curation and aggregation tools make it easy for anybody to develop a simple local media resource that maintains itself 24×7. The disruptive concept behind “community service” media is to scrap the classic advertising business model. Why? Simply for the good will of the community. Business owners, not relegated to being the target of ad salespeople, can now contribute local content topical to their business. Publishers of this new local media can provide access and guidance to any contributor in the community, and make sure that this access does not veer into spam.

I believe the pool of local advertising revenue will continue to slide because more local merchants will realize they can control their brand distribution via social media, and cut their ad buys. Real estate agents, once the cash cow of local classifieds, have cut back drastically because they are learning social media marketing, one of the crazes of current brokerage training. The real estate industry, with its intense focus on community marketing, tends to be the bellwether for local marketing practices.

Free local advertising also puts pressure on traditional local publishers’ fee structures. The comments on the Street Fight article demonstrate how foreign the community service concept is to local publishers who rely on ad revenue, and can’t imagine otherwise. What they miss is hyperlocal media does not necessarily need a traditional business model to thrive as long as the community is engaging in it. There are benefits to providing good will to the community.

The classic, and perhaps only business model supporting hyperlocal journalistic efforts like Patch.com and other local media is local advertising. On StreetFightMag.com last week, Ted Mann, Digital Development Director for Gannett NJ, discusses why Gannett’s hyperlocal experiment InJersey.com failed. The main and obvious reason is simply local advertising cannot adequately cover expenses. So…

What if local media were positioned as a community service without the advertising model?

Can hyperlocal media thrive and engage the community as a good will service?

1. The value of hyperlocal is in the information

I paraphrase from Alex Salkever’s June 24 article Hyperlocal’s Automated Future. The website platform and curation tools now exist for any individual or business to develop local media cheaply. A WordPress blog is an easily customized platform for anchoring the news system. Curation and aggregation tools, plus hyperlocal social applications like See Click Fix can provide a panoply of local interest content.

Although still an immature technology, an automated news aggregation and publication service like paper.li or Twylah can be embedded to display in newsprint “Flipboard” format.

2. It’s not just the website… hyperlocal spans across social and mobile media

A community media service must now span across all social media for hyperlocal engagement. Twitter, a perfect media for broadcasting real time local news, can be used to curate the best local Twitter feeds into lists.

Facebook is becoming the arena where the locals will gather to discuss local news, events, even the Daily Deals around town. (Ted Mann’s point #9 – use Facebook as the local watering hole). The social “metrics” for engagement are high for local news:

3. Partner with everyone

Ted Mann’s #4 recommendation for developing hyperlocal content. Companies developing applications serving hyperlocal audiences, like SeeClickFix above, want to partner with local publishers to gain traction. Local publishers want to partner with new application developers to deliver unique local content to their audience. It’s mutually beneficial to overlay new social content, even social commerce applications across national hyperlocal networks. Even better if there is a business model associated with the application for revenue share opportunities between publisher and application provider. One long term mission of a national community service network is to create exposure for a variety of social hyperlocal applications that would not normally get exposure from traditional media.

4. Support the business community

Local businesses are integral to engaging the community because they have the commercial incentive to create content that helps to publicize their business, directly or indirectly. Local food critics own restaurants, real estate columnists are Realtors. Yet, the classic advertising model forces them on the sidelines because that kind of publicity has tangible dollar value that traditional publishers need to extract. So why not support the business community by embedding the most compelling websites and blogs of local merchants into hyperlocal media as content free of charge?

A full website presence has far greater utility for the featured businesses and for the reader than a tiny banner ad selling at $500-1,000 per month. Engage the business community, and they will make the effort to engage locals because 1) it’s free to them, and 2) it’s their marketing vehicle.

5. What is the business model anyway?

Hyperlocal media systems like Breaking News are easy and cheap (often less than the cost of a one-month banner ad) to develop for individuals and groups wanting to create a community media presence in their city. The business model for the owner is not to make money, but to serve the community and be positioned as a local media star in order to enhance the business development prospects of their “day job”.  It’s the same rationale for serving as a Chamber of Commerce president, or even 50 years ago, starting your own local newspaper; it just helps your career. The owner of the community media service pays it forward.

6. What is the impact of hyperlocal media as community service?

The greater impact of the community media service model may be disruptive. The perpetual discussions revolving around how to monetize local journalism have yet to point to a cashflow positive solution. An automated media model that requires few resources and supports the local business community can put pressure on traditional local publishing models. Yes, the content is curated, aggregated and automated, but it’s real time local information that readers want. In time, the new social local applications now being developed can be easily added to supplement the information stream and generate the local engagement needed to survive, even prosper within the hyperlocal media landscape.

Reference:

Local community news has always been hard to produce profitably with scale. Local news is only relevant to those who live within the community, and it makes cost per thousand based advertising models untenable when readership may log in the hundreds. Without a revenue model to hire editors and writers, the cheapest way to source local news content is either through volunteer reporters, or aggregation of local media by engines .

Problems with Local News Aggregation Technologies

ReadWriteWeb’s Marshall Kirkpatrick recently posed the question “Why haven’t neighborhood news technologies worked out?”

I sure hope someone can nail it. Give me the news about my neighborhood, please... I care about what’s happening in the neighborhood around me and I want to see the fabulous new technologies of open government data, online news syndication, social networking and data mining all put to service to fulfill hyperlocal news wishes and dreams I didn’t even know I had yet.

From the article’s comment stream, it seems news aggregators like Outside.in, Fwix, and EveryBlock have three problems:

1) Local news presented by algorithm isn’t customized to the needs of the reader and therefore, sterile and/or irrelevant.

2) Most local news is inherently uninteresting. Ever watch a local TV station and care about anything about the car wrecks, murders or city council meetings covered? It’s lower grade information that doesn’t enrich or improve our lives as much as the content we generally seek on the web.

3) Aggregated local news lacks the social element, whether it be real reporters or people in the community engaged in local discussions.

1. Local News needs manual curation

The news needs to be right. Fwix often reports irrelevant news; Rocklin is 80 miles north of Modesto, CA (see image)

Engines query for local articles via RSS but they require a human team to identify the best feeds in every city and continually update these feeds. Feeds can be sourced not only from mainstream media, but also blogs, Twitter and other social media links, and eventually Facebook, Yelp, Foursquare and other geo-localized media sources as they attain credibility by reaching critical mass of local participants.

2. Local News needs more content

Again, it’s hard to produce content without somebody paying for it. However, there are new producers of local content that haven’t yet made an imprint as local media sources. Civic organizations, local companies and merchants like Whole Foods have websites and blogs that broadcast timely information people want to know about, but may not have RSS feeds for simple aggregation. Companies like Nozzl Media and DataSift are developing ways to aggregate and filter this kind of content. Finally, locals using Facebook groups, Yelp and Foursquare are documenting what’s happening in their city, and their reviews are starting to be included in sites like EveryBlock. People will eventually find where their friends are congregating and which stores are popular through the aggregation of these geolocational systems (see Checkinmedia image)

3. Local news needs personalization

Although some people may like crime reports for their city, all I really want to know about the 1/2 mile radius around where I live is 1) all the daily deals merchants in my neighborhood are offering, 2) what’s playing at the theaters, 3) the Whole Foods, Trader Joe’s and Safeway circulars, and 4) where all my friends are congregating around San Francisco. That’s it, at least for today. Once the content sources from deals services, supermarket chains and theaters, and geomedia are aggregated, this kind of personalized local portal becomes relevant to daily life.

4. Local News needs to be social

Readers are motivated to participate in social news for two reasons: visibility and content ownership. Just like yesteryear’s “Letters to the Editor”, readers comment frequently on mainstream media news sites like Huffington Post or LATimes simply because they know their input will get read by thousands. News aggregators (like EveryBlock, right image) have a hard time pulling in conversations simply because there is nobody to converse with!

To succeed in gaining participation, hyperlocal news sites need on-the-ground ringleaders in each city to engage their communities and promote participation. But ringleaders need compensation. Fwix and other news aggregators own every city and provide little incentive for others to own and grow content for them. We modeled The Breaking News Network as a kind of franchise that facilitates the creation of a local media resource by individuals and groups in a city, and gives them city/community ownership so they have vested interest to grow their properties.

Patch hires editors for each city who can spur participation in their community, but is currently burdened with a high expense / small revenue model that is under scrutiny by Business Insider among others.

5. Local News needs to be easy to read and digest

The  popular Flipboard for iPad validates the concept that people like reading aggregated and personalized news in a newspaper format. Reading within familiar typeset frames is easier than perusing streams of news that characterize news aggregators like Topix or EveryBlock. There’s opportunities for aggregation and presentation technologies like paper.li to make it easier for news to be curated and read in this more reader-friendly format. For example, BreakingSFNews.com (image below) embeds paper.li as another way to read about SF news.

AOL’s acquisition of the Huffington Post firmly entrenches AOL as a journalistic media endeavor eye-to-eye with Gannett, Murdoch and, gasp, the other newspapers. What is strikingly different about Huffington Post is that content is sourced from celebrities – politicians, actors, college professors, locals – and not from the ivory news desks that still embody the fifth estates of NY Times and WSJ. It’s a schizoid tabloid, with entrepreneurs reporting about Davos right next to a photo of Lady Gaga. The articles are compelling because they are sourced socially from people you may know or want to know, not reporters. They’re like Arianna’s friends.

Reshaping AOL’s local initiative Patch.com

AOL makes a smart move by placing Arianna as head of content to reshape the culture of its local publishing initiative Patch.com. AOL has come under fire for lacking a scalable business model where sparse online traffic for each Patch city are limited by the size of each community. Its critics see Patch as replicating the tired local publishing model by hiring editors, and more difficult, building a local ad revenue base from scratch. HuffPo made content social, and Arianna’s challenge is to re-engineer Patch.com so they are mini-HuffPo’s with news sourced by locals known to the community.

Up to now, deals sites have been strictly deals sites. Patch has the opportunity to create social local news vehicles that engage the community in a way the staid newspaper hasn’t done. Deals via AOL’s deals engine Wow can be integrated as part of this social fabric that will make venturing to a local “deals site”, or even an online newspaper’s coupon zone redundant. This is the best case scenario for AOL’s local play; I frankly think the runway for AOL’s local expansion is too ambitious and capital intensive to see the immediate returns that shareholders wants. There’s already a precedent to locally crowd sourced news in Examiner.com that highlights the problem with sourcing consistent good content at the local level.

The powerful launch of Google Buzz (Mashable | Google Buzz has completely changed the game) last week signals the arrival of the Real Time Web as a truly new media. It’s been well documented that Twitter has established itself a breaking news source. Google Buzz, Facebook and Twitter form a triumvirate channel for sourcing news media that will continue to grow in influence.

The real time web implies that online news will flow more and more through applications, not websites. The problem facing mainstream media is their dependence on traffic through their websites for advertising revenue.

The journalistic media on the other hand continue to try to erect walls that halt traffic flow through their websites, either by charging subscriptions (New York Newsday gets 35 subscribers after three months), by limiting access to their content by aggregators (Murdoch’s gambit with blocking Google from indexing Sky News content), or simply by not providing an RSS feed for syndication (Santa Barbara News Press and many other local publications).

Social media thrives on RSS to find, deliver and syndicate news from journalistic media, and it directs traffic back to the news source.  If the traditional news media continues to ignore social media sourced breaking news, they risk becoming irrelevant to their communities who demand this real time news. People will eventually find that real time news directly from their community via one of their social networks and news aggregation applications.

Based on the web statistics presented in the previous slideshow, I’ve been asked for reasons why breaking local news receives 15+ clickthroughs per tweet across Breaking News Network city sites. With a little analysis, we discovered that the Breaking News sites are generally the first to tweet out a newly published article from local news media sources.

Big media investment into hyperlocal media properties continues with CNN’s partial investment in Outside.in as reported at Paid Content.org. CNN likely plans to leverage Outside.in content to develop local aggregated news for CNN Local editions. My first thought is why does CNN need a content aggregation service when they can do essentially the same thing with local media sources themselves? If it’s for aggregation expediency, what they need is a content management system.

Look at another other big media play into hyperlocal – MSNBC’s August 2009 purchase of Every Block. So far, the most prolific content aggregated by the small Every Block team of 6+ people are police calls. Most are public civic data. The content is impersonal.

BIG MEDIA’S NEED TO SCALE VS. LOCAL MEDIA’S NEED TO ENGAGE COMMUNITY

Big media’s play into hyperlocal only scales if the data aggregation and curation of news sources can be automated from a back office team based in one office building. The weakness in this virtual local news strategy is the impersonality of syndicated content. The key to connecting with the community audience is on-the-ground staffing, who will also support the marketing push and civic outreach.

Huffington Post is filling the void for coordinating local journalist outreach by tapping TV producer Willow Bay as Senior Editor for their new LA edition . Examiner.com recruits local writers. Big media will eventually realize they need to create a lot of local networks, and not rely on a backroom tech operation, to become viable local media. The one-size-fits-all model for templating local news may potentially position them as Media McDonalds. Existing local media in every city now have a window of opportunity to fortify their brand in the face of the potential onslaught of big media’s local plays.

Google Fast Flip launched today to uniformly good reviews because this is an application that should have existed even ten years ago. It’s like a magazine rack display of major press that uses the “like” feature to push the more popular articles up.

So why didn’t the packaging of news into a virtual rackspace take so long? Simply put, the news media have been preoccupied with protecting the idea that content has asset value so they can monetize distribution channels. Google, almost like a neutral party, rounded up the publishers and packaged up their content for ease-of-consumption.

News media-think is still stuck on the older online paradigm of getting the reader to the content / website. With the Fast Flip exercise, it’s simple to see that the future of news media is getting the content to the reader.

Craigslist has become the standard for community classifieds; it’s more efficient reaching a local audience than any other local advertising media, and it’s free. But it does have problems:

1. Craigslist advertisers / posters are generally anonymous, and thus less credible.
2. Craigslist advertisers don’t have track records or eBay feedback ratings.
3. It can take a long time to produce a Craigslist ad, and you need to re-create the ad to get it up to the top of the list a few hours/days later.

Using Twitter to distribute classifieds can address these problems:

1. Twitterers, if they are not purposefully anonymous, have identities that generally tie into other social networks like Facebook or blogs/websites.
2. Twitterers have a track record on the basis of their existing tweet history. Querying the Twitter name and identity on search engines may also uncover reputation problems.
3. It can take as little as 30 seconds to produce a “Tweet” classified, including uploading a picture or video via Twitpic or Twitvid.

The Hurdle to Twitter Adoption:

Twitterers posting classifieds need a relevant local audience to sell to. We’re building the Breaking News Network of hyperlocal Twitter-based community sites to facilitate that local exposure. Later this year, each city in our Breaking New Network will be introducing a localized Tweetslist.com application that will provide local classifieds exposure just like Craigslist.

ilist.micro and #ihave and #iwant

ilist.micro is a Twitter classified service that developed a Twitter hashtag convention used for selling and requesting goods by Tweeting #ihave and #iwant. We’ve incorporated this hashtag convention for the Classifieds section of our San Francisco, Los Angeles, New York City, London and Toronto Breaking News sites.

Related articles:

Building a National Breaking News Network just like a Craigslist