Media industry analyst and consultant Ken Doctor has been watching the local news space for decades, long before “hyperlocal” was coined. He spent 21 years at Knight Ridder, where he first observed that consumers are willing to pay for local content — and contends that they are doing so even now, as they pick up their local paper. Doctor, an analyst for Outsell, a global research and advisory firm, and for his own firm, Content Bridges, frequently appears at conferences about the transformation of the news industry, and writes regular columns both on his own Newsonomics blog and for Harvard University’s Nieman Journalism Lab. He is non-plussed by hyperlocal efforts like EveryBlock and Topix but sees potential in AOL’s Patch, and envisions success for a product that would aggregate local content for tablet computers. He elaborated on these thoughts recently in a conversation with Street Fight.
What does “hyperlocal” mean these days? What is the idea and where has it evolved?
There’s still people highly confused about what’s local and hyperlocal. I’ve seen people talk about hyperlocal down to the homeowners’ district… and, almost, what people could see if they looked out from their front lawn. I think clearly that’s part of the issue here. There’s a continuum for each of us. What’s really our block, our neighborhood, our shopping area, our school area — and what’s local? We keep on trying to put categories on that, and classifications on that, and that’s not how human beings work. So, I think that “hyperlocal”… the problem with the name is part of the problem of the definition of who are serving what and when.
Everybody wants to get in the pockets of people who are spending local dollars — that’s clear. It seems to me one of the very interesting issues here is how much local spend is going to be connected to local content, or not. We come out of a world where we assume that media is there to mediate that commercial transaction as well as that information transaction. But a phenomenon like Groupon, say, well, you don’t really need any context. You just need a deal and the ability to smartly share it and it has no context. It doesn’t need Patch. It doesn’t need the local newspaper, or anybody else. Right?
So, it’s clear what people want. They want advertising dollars out of those communities but the whole nature of buying and selling is different and it’s not at all clear that you really need local media to do that buying and selling on a hyperlocal basis or any other kind of basis.
People who are selling things need media less to mediate the transaction than they used to in the old world.
If you don’t need local media to do that, then is there a better way to get to those local dollars online? Is local media just going to lose out to daily deals sites?
Well, I don’t think it’s an either/or. I think that clearly people who are selling things need media less to mediate the transaction than they used to in the old world. We’re seeing both things happening. We’re seeing lots of direct-to-consumer marketing at every level.
One of the companies I do work with is Outsell. We have measured marketing – the amount of dollars in the U.S. that companies spend on their own marketing — and that’s now up to $63 billion a year overall. It was only $22 billion in 2006. So, companies are spending — it looks to us like 50% of their overall marketing spend on their own direct marketing, their websites, their mobile sites, their marketing, their production, following through on their business, that kind of thing. So that’s a profound change, but that’s 50%. That still leaves, largely, 50% of their marketing spend that they are spending on external media.
On the one hand, you have to recognize how they’re going to react and try to understand how they’re going to react and whether there’s a role for media there, and then also understand to a large degree that money is gone and how do you get to the other 50%?
Do you think that any companies are “winning” hyperlocal?
My sense is that what they are doing — and different for each one of course — is interesting and may fit into something else. But that on its own as a standalone is going to have a hard time making it. EveryBlock is really good at data and data is something that we want to get to, but it’s not something that we’re going to go to on an everyday basis. It seems to me that EveryBlock is an intel-inside play where when you want your school data, when you want your crime data, it is there within the context of where you expect to find it. There’s a question of where that context is, but that’s EveryBlock.
Topix? In truth I’ve never understood Topix all that well. (Read Street Fight‘s interview with Topix CEO Chris Tolles.) You know, they tried to do the local aggregation like in the early Outside.in way, to some degree. It is just kind of an underwhelming product and then they went strongly to local, local content and comments. It just seems to be an afterthought. I rarely run into anybody who talks about using Topix. Patch… Patch is really interesting — it’s really a question of AOL’s staying power.
Its staying power with Patch, or AOL’s staying power generally?
Well, for both. Given their ad performance — which has got to be the key to their future — we’ll see whether [Tim] Armstrong can turn that around. Secondly, as they make choices, even if they climb that mountain on advertising and turn that company around in terms of revenue, they’re going to have to make strategic choices. They’re going to say, “Okay, Arianna [Huffington] is opening up a London bureau. We’ve got finance, sports — and Patch. Where are we going to put money? Where are we going to continue to cut?” Patch is one of the longer-term investments I think they have. It’s going to take a while to prove out and to see where is that revenue mix that is going to turn that profitable. How much of that is going to be local at what cost of sales? And how much is going to be national? And how much of it is a traffic play that brings people into the AOL network? All of those things have value, but some combination of those have to get bigger for it to be a profitable, sustainable, enterprise for AOL.
Do you think that people would pay for local news — either in the form of aggregated feeds, or personalized news, or some other format?
Well, I guess I’d put it this way. People are paying for that content. What are they doing? They’re paying for the local newspaper. So, what’s happening now is that — especially over the next year — we’ll see a lot of these local dailies charging. They’ll either say, “You get it for free if you’re a print subscriber. Or we’ll charge you per month or per year to get it locally, to get it online, and through your mobile devices.” I think that’s likely to happen, because it’s a question of scale. I can’t imagine people paying for Patch, for instance, because it’s like, “Well, there’s nice feature stuff on there. It’s nice they send me an email every day, but why would I pay for that?”
I think an aggregated product that would include… to me, the play would be especially for mobile devices and tablets. If you could combine the best local news sources — which would include local newspaper, local broadcast, public radio, best local bloggers — into an easy to use format, essentially a local briefing — and a tablet is a perfect platform for it — I think people would pay something for that.
Now, that might turn out to be an extension of a newspaper and a newspaper could transform itself into being that on a tablet. Somebody else could do it. A broadcaster who has the big megaphone of promotion could do it, though they might do it with a sponsorship rather than with a subscription. Yeah, third parties could do it, but the trick is getting big enough.
You could look at Outside.in for instance. You could say, “Well, you know, great algorithm.” You can bring all kinds of content. Most people don’t want to just look at a bunch of links. They want a fuller presentation. And of course video is going to be so important, especially in a 4G world that doesn’t just list headlines. It is an experience. I think people will pay for that.
And it’s possible, going back to Backfence and to what Patch is today, Patch could do that. Others could do it. Newspapers could do it, broadcast could do it — and you could do it in a templated way that had local editing but get the benefits of a network. It could work. But I think it has to be a big enough product.
The other way I think it can work is — we’re doing these experiments with the metro sites in the Bay Area in Texas and Chicago. Well, on the tablet product — I suggested this to the [New York] Times. I said: “You know, giving me six stories from Bay Citizen is nice, but it’s essentially meaningless. If you want to give me a Bay Area report so that I’m reading New York Times as my daily download of news, but I’m also getting a real good sense of the type of things in the Bay Area, that could work and that could work on a tablet.”
(This interview has been edited for length and clarity.)