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.

Related articles:

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

Tim O’Reilly’s comprehensive slideshow makes several points about the accelerating speed and syndication of information:

• The real time functionality of the new information distribution systems, elegantly demonstrated by Twitter, is critical to reporting.
• Social Networks facilitate content distribution, and media brands power content credibility

A key function of a publishing brand is the bestowal of status by what you pay attention to

• Advice to major brands like the New York Times: “build the platform and your customers and partners will build features before you do”. Note how the open source Twitter API spawned a riot of applications. The New York Times API, or other media brand APIs can potentially do the same thing – and leverage the content NYT creates and distributes.

Yes, I would like to see Tim’s narrative accompanying the keynote.

(Charts, of course, not based on actual statistics; for descriptive purposes only)

Consumers are increasingly avoiding newspapers — and books, too — because the text mode is now used so infrequently that it can feel like a burden. People are showing a clear preference for a fully formed video experience that comes ready to play on a screen, requiring nothing but our passive attention.

The video mode has been reinforced by the rise of YouTube. In December, almost 100 million viewers in the United States watched 5.9 billion YouTube videos, according to comScore. Tellingly, YouTube has not cannibalized TV viewership — it has instead carved out another chunk of our leisure time for video on a screen.

Mitch Joel at Twist Image pens a fine article about the newspapers’ inertia to progress on a Web 2.0 model. He points to a New York Times article excerpt to describe the dilemma newspaper publishers face:

“Many current and former Mercury News executives say that a lack of investment by Knight Ridder and MediaNews has given the paper a fairly ordinary website that has been slow to adopt practices that keep readers coming back many times a day, like publishing articles online well before they appear in print, updating them frequently, blogging and posting videos.

‘The answer for newspapers has to lie in building their websites better and better, and promote, promote, promote,’ said Mr. Riggs, who was the Mercury Newspaper publisher under both companies. ‘We haven’t seen that.’

Mr. Butler, the editor, said that with money tight, Web improvements have to wait. ‘Until or unless we see that those things pay for themselves, we make a serious mistake in focusing too much on that,’ he said.”

The recession’s negative impact on advertising and the demise of print due to budget cutting will begin to force publishers to focus on their online presence and connection with their community audience. It’s not only newsprint, local TV and radio are now competing with online print and must also focus on developing their online audience. Radio is particularly vulnerable as their audience discovers that online radio like Last.FM, Pandora and Blip.fm provide a more customized, less commercial listening experience.

So, can embattled media management surrender their 1.0 business model mindset, eliminate print presses and distribution, downsize their news gathering budgets, and rejigger their well known media brand names to become respected online brands? Tall order.

Spending the Greatest Percentage of Total Revenues on Advertising Over the Last 12 Months

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Two types of products/services seem to stand out:

• Big ticket retail – real estate (if you can call it retail), leather goods, furniture (I’m surprised cars aren’t on the list) – isn’t moving as much so it seems ad budgets remained fixed but revenues dropped.
• Business opportunities due to recession – credit services, trade schools, fast food – increased their ad budgets

Conclusions:

• Big ticket retail advertising was a defensive marketing expenditure – companies didn’t cut their ad budgets in anticipation of slow sales, and the ROI from the marginal cost of the ads were likely negligible.
• Recession based businesses were offensive marketing opportunities which benefit from advertising because their message – “save your credit”, “get a better job” – hit on consumer fears.

Advertising does work well when the one-way message is to the consumer is emotional and urgent. With the recession next year, we’ll monitor the trend towards leveraging the social media as a cost-saving marketing strategy.

In June, I published on my sister site a slideshow explaining how MSM is moving from a content generation business (journalism) to a content distribution business (media by definition).How Mass Media is Embracing Social Media

Opening up Twitter Networks

Now, MSM should develop their Twitter network and show their readers which Twitterers are news generators. The NYT is still won’t link out (follow other newsmakers), but the SF Chronicle does:

This will happen soon in the mainstream media…