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

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.

  1. July 15, 2011

    Thanks! I don’t have time to e-mail this because it’s 6:30 am and Patrick is out at a SWAT standoff while I’m covering it from the desk. But his last name is Sand, no “s.” And I had just tweeted last night … we are on a pace for a million pageviews this month, up from that record 961K you mention. – Tracy

    1. July 17, 2011

      Thanks, Tracy. Fixing Patrick right now. Would love to chat off the records about revenues / expenses so I can better understand the biz. If you are comfortable with that. It’s so new that its really all about learning what markets will really bear. 

  2. July 15, 2011

    I couldn’t agree more that the passion it takes to create a labor of love cannot be ‘hired’ it must be owned.

  3. Suzy
    July 15, 2011

    Alex: Local direst sales ad can earn much more than $100/month. It’s all about what the market will bear and varies from market to market.

    1. July 17, 2011

      Would love to chat about it if you have time. What’s best way to contact you?

    July 15, 2011

    Tracy is embedded in the community, works like a dog and has an historic view of her market. The McSites will never be able to achieve any of those things.

    July 15, 2011

    Tracy is embedded in the community, works like a dog and has an historic view of her market. The McSites will never be able to achieve any of those things.

  6. Anonymous
    July 15, 2011

    Cue the Main Street Connect guy bragging about how he’s got the whole chain thing figured out, with news-worthy gems like this:

  7. July 15, 2011

    “Economies of scale do not apply in hyperlocal news.” Couldn’t have put it better myself, Alex. 

    One of the great surprises of our InJersey surprises was that trying to operate at “scale” probably hurt us more than it helped. Having a sales team that sells across a network of sites simply doesn’t work as well as one person selling one town, and totally immersed in the community. As Howard Owens put it in one comment: “If you don’t have a “hyperlocal” approach to advertising, you will fail.” You might well conclude that even having a dedicates salesperson doesn’t even make sense in smaller communities and hyperlocal sites, and that you actually need the site editor to also be out making sales calls (as I think is the case for Owens). 

    I’m not sure whether they mom-and-pop operations and lone proprietors are the only way to make hyperlocal work, but for now, sites like West Seattle Blog are among the few success stories — especially from an journalistic standpoint.

    1. July 17, 2011

      So what are you going to do for an encore, Ted? 🙂

  8. The conceit that “(s)ite development is as simple as downloading a plug-in” is perhaps even more silly than the “anybody with a laptop can report the news” idea. 

    If your business is based entirely on online infrastructure, you’d better be damn certain that it’s going to bear a monetizable level of traffic, that it’s secure and won’t be hacked, that both your content and structure have enough SEO that you’ll be found in the first place, and that your user experience keeps people on your site.I know I wouldn’t trust my business to buggy WordPress plugins that are riddled with security holes. Sure, there’s plenty of FOSS out there that’s good. There’s also much that’ll break the hell out of a website. 

    Running a website takes certain skills, just as interviewing or combing through records does. 

    1. July 17, 2011

      Dylan, there are some skills involved, no doubt – but a lot less than you may think are necessary. Ted Mann launched InNewJersey on a $3,000 WP site that was customized. There are lots of crappy plug-ins, security holes, etc. There are also lots of very savvy Word Press folks who can quickly customize a template, get you set up with good operating templates / plug-ins and away you go. As for SEO – I think what you are saying is crazy. SEO is for people who don’t get inbound links. If you run a decent news Web site, you get inbound links. Then you will be found. Simple as that. You can tweak it around a bit and but LOTS of WP templates come with pretty good SEO optimization baked in.

  9. July 19, 2011

    How can I both agree and disagree at the same time?!

    There are things that do not scale, but a platform like WordPress is actually very necessary to make it work. WordPress only works because it has economies of scale. That is what makes it a cheap tool.

    So the tools that underlie the operations must benefit from economies of scale or else the barriers to entry would be too high.

    On the other hand, local ownership is key to success for many of us. It give us the passion to do the tough work and it inspires our community to contribute. In addition, local advertisers appreciate the face we all live here. If you sell community you have to be IN the community. Simple.

    Finally, there are more efficiencies to find. Independent local operators are in need of more tools and processes to make what we do more profitable. I believe we ought to grow – not just sustain. This may involve technologies, organizations and processes that rely on economies of scale to get funded and be built.

    If we want to grow, then we need to be both locally owned and benefit from economies of scale – indirectly in the lower cost of tools, procedures and support.

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Street Fight Daily: 07.15.11