In Hyperlocal News, Mom-and-Pop Shops Will Win

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In last week’s column I alluded to my belief that the best model for hyperlocal news may well be the old mom-and-pop newspaper operation. This time, I’d like to get into more detail and discuss an example.

One big reason  hyperlocal news is going to revert to old-school biz models is the technology: It’s now cheap—no, make that free. WordPress and a number of other content management systems can easily compete with the websites of big news organizations. Site development is as simple as downloading a plug-in.

Then there’s the issue of operating margins. Larger organizations have more mouths to feed. From the CEO to the VP of operations to the regional editor on down, everyone needs a paycheck. In hyperlocal, margins will be razor thin due to insane competition and lower-than-print ad rates. In an environment of thin margins, organizations with fewer layers and comparable technology are at an advantage.

Another way of saying this is, economies of scale do not apply in hyperlocal news. Rather than going up with scale, CPMs not only go down—they disappear. If Gap buys an ad across a network of hyperlocal sites, the CPM will likely be lower than if a local store advertises, because the Gap can buy that region from any number of sources. Conversely, the corner grocer will pay a comparatively premium CPM when they know for sure their ads show up in the right place.

Finally, the local advertising sales is truly about relationships. Small merchants want to support businesses and people they like. Patch knows this, but is struggling to make headway because of the amount of territory it assigns to each of its reps.

My favorite hyperlocal example is West Seattle Blog, the effort of husband-and-wife team Tracy Record (editorial) and Patrick Sand (ad sales). They pulled in a whopping 961,000 pageviews in June. For perspective, consider that 68 Patch sites in Southern California attracted less than half that number of pageviews in November 2010. In the entire country, there may be no other organization that has so completely nailed the hyperlocal news category. West Seattle has a plain-vanilla blog design that probably cost very little to create. It also has plain-vanilla forums. There is no real flash—just endless amounts of high-quality coverage with as many as 20 or more items posted daily, most by Tracy herself.

On the ad side, Patrick sure appears to know the local businesses, because every single ad slot is taken up by a mom-and-pop. On July 13, I counted 75 ads (West Seattle calls them sponsorships) in the right column.  My (still nascent) experience running the newly hyperlocalized travel blog Hawaiirama implies that local advertisers (I’ve been talking to a number of them) are willing to pay $100 to $200 per month or so for slots like that. That translates into minimum monthly revenues for West Seattle of $7,500 or so. It’s not silly money but it’s enough to live on in Seattle, for sure—especially considering the overhead of running West Seattle Blog (less than $500/month). How a larger chain of hyper-locals could take a slice of that relatively meager revenue stream and still pay Patrick and Tracy decent salaries is a mystery to me, ergo my assertion that the mom-and-pop hyperlocal will prevail.

Of course, none of this would be possible without Tracy and Patrick and their prodigious talents. But here’s the kicker: They are now an essential part of their community, just like small town papers used to be (and still are, in some parts of the country). This type of commitment to a community engenders trust, acceptance and a willingness to support an organization because it does more than just deliver news.

Chains may try to replicate that type of karma but they will likely struggle to do so for one simple reason: Soul can’t be captured in a business plan. It doesn’t scale well, either.

Alex Salkever’s Personal Fight column appears every Friday on Street Fight.