||Ad Dollars Are Hard to Come by for Hyperlocal News Websites
When AOL Chief Executive Tim Armstrong fired an employee while he was on a conference call with company staffers last Friday, he wasn't exactly following the rule book for how to be a great CEO.
But Armstrong is hardly the first person to be thrown off his game by the travails of establishing a hyperlocal news enterprise. It is a seductive pursuit that has broken many hearts. The reason: After a decade and a half of experimentation, a business model remains elusive. In other words, it's a very tough place to make a buck.
Hyperlocal is like a lovely river whose dazzling, sun-drenched surface gives no inkling of the rocks below and the danger of shipwreck.
Armstrong discharged Abel Lenz, creative director of AOL's network of community news websites, while the big boss was telling more than 1,000 staffers on the call about major and imminent cutbacks. Lenz's sin? He had the temerity to snap a picture of the CEO. (Armstrong later apologized.)
AOL's Patch operation has news outlets in 900 towns around the nation -- today. Armstrong plans to shut down or find partners for 400 of them that are struggling.
Armstrong has made content a major part of his strategy in his effort to turn around the once-mighty dial-up service. Hence, AOL's acquisition of The Huffington Post. But few things are closer to his heart than Patch, which he launched before he joined AOL and later brought into the fold.
Profits, however, have remained elusive, and Armstrong has been under fire from investors for the hundreds of millions he has spent on his beloved Patch. He has promised it will break even by the fourth quarter of this year, an ambitious goal indeed in spite of the looming retrenchment and layoffs.
Armstrong has plenty of company when it comes to experiencing the difficulty of pulling off a hyperlocal triumph.
The idea behind hyperlocal sounds entirely sensible. People like neighborhood news. Small merchants need a place in which to advertise where they can target their home audience and not pay the freight for an ad in a major metro daily. And as those dailies cut back, there's an underserved market.
- Backfence, which ultimately consisted of 13 local news websites around the country, was launched with great fanfare and high hopes in 2005. One of its founders was Mark Potts, a highly regarded journalist who had co-founded The Washington Post's digital division. By 2007, Backfence was gone.
- In 2007, The Washington Post tried its hand at the game. Under much-traveled hyperlocal guru Rob Curley, it launched LoudounExtra in D.C.'s Virginia exurbs. "If the project is successful, The Post Co. plans to build similar sites for the rest of Northern Virginia, Maryland and the District," the Post's story on the debut said. LoudounExtra lasted two years.
- Launched by data wunderkind Adrian Holovaty in Chicago in 2008, EveryBlock ultimately took root in 19 cities. Heavy on mapping, the sites featured local-local news on crime, home sales, restaurant closings and the like. Acquired by MSNBC.com in 2009, it was shut down by NBC in February.
- There were great expectations when Allbritton Communications, parent company of political news dynamo Politico, launched TBD.com in the Washington, D.C., area in 2010. Top digital journalist Jim Brady, a former executive editor of washingtonpost.com, was at the helm of the hybrid site that covered the region but also featured a collection of neighborhood blogs and news targeted toward ZIP codes of individual users. It, too, was short-lived.
- In May, the Daily Voice, a network of local news sites in Connecticut and suburban New York, filed for bankruptcy, two months after shuttering its sites in Massachusetts. The Voice's backers include financier and liberal benefactor George Soros.
- Gannett, which owns USA TODAY, started up and shut down 17 hyperlocal websites in New Jersey.
Problem is, as is so often the case on the Internet, there just aren't enough digital ad dollars to make the numbers work.
Of course, circumstances vary widely in the cases mentioned above. At TBD.com, for example, political infighting and too little patience were part of the equation. Plenty of one- and two-person outposts remain afloat. Billionaire Joe Ricketts is trying hard to show hyperlocal can work with his ambitious DNAinfo.com operations in New York City and Chicago. And just because the terrain is treacherous now doesn't mean it will be so in the future.
In the case of Patch, media analyst Ken Doctor of Outsell thinks part of the problem is that the network grew too large too quickly. The downsizing, he says, "is basically an acknowledgment of failure, but in part a noble failure," adding that in 2011-12 Patch hired more journalists than anyone else in the country.
As for hyperlocal generally, Doctor says, "The economic model still doesn't work after 15 years."
In 2007, Paul Farhi, who covers the news media for The Washington Post, wrote a prescient piece for American Journalism Review about the dim financial prospects for hyperlocal. So what does he think today? Farhi points out that such sites aren't the only digital entities having trouble making money, "Just about everyone -- big, small and in between -- is still struggling to figure out a profitable formula for selling original journalism on the Web," he says.
We'll give the last word to Steven Jacobs, deputy editor of Street Fight, which covers hyperlocal for a living. He thinks it's important not to lose sight of the successful smaller sites, such as the Batavian in Batavia, N.Y. And he sums up succinctly where we are.
"We're still trying to figure out what works in hyperlocal," he says.
(Source: USA Today, 08/15/13)
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