Clay Graham is a guest author. To submit a guest post, click here.
There is a system in which people discover businesses that they love. It existed way before there was an Internet, and it’s also the foundation of local advertising.
Let’s take going out for dinner as an example. A dining patron can either go with what they already know or attempt to discover something new. Every business wants to be the go-to place that people already know, and they commonly pay to be an available choice when someone is looking for something new. Patrons don’t want to go to sources they don’t trust, though — they want an honest and sincere referral because if an authority loves a place, they are more likely to love it too. I call this dynamic of patronage, trust and referral “The Local Referral Value Chain.”
The Vanguards of Local
I’m not a journalist, I’m a technology startup founder — and that fact infects my thinking on this issue. I look at hyperlocal as a businesses problem that has some pain points as well as incredible opportunity. In the startup world, we have some bibles and stars that we use as guides. One of them is Eric Ries, who wrote a book called The Lean Startup. His ideology of efficiency, slow burn, passion, independence, and tenacity reminds me very much of the hyperlocal journalism movement.
Indie journalists covering local news are also very hands-on and trusted in their communities, which in my mind gives them a distinct channel advantage over the larger counterparts. When it comes to creating large business plans or “rolling up the revenues” they sometimes prefer to rely on their dominance and presence in the markets where they maintain control via direct relationships and boots on the ground.
“Sustainable business model? Please. Authentically local news sites don’t need a sugar daddy. Our costs are a whisper of our print predecessors and corporately owned hyperlocals, and our connections to the communities we report on is infinitely stronger. We haven’t been parachuted in to cover the school board meetings; we have kids the schools. We know our readers by first name, some of them since kindergarten. That will sustain us just fine.” – Virginia Citrano, Editor, myveronanj.com
While the indies dominate in trust, they are faced with some basic monetization barriers that any sales manager at Groupon or Yelp is already intimately familiar with. Getting mom&pop businesses connected to the referral chain is one of the biggest challenges facing the hyperlocal journalist who needs income. If you want your local referral site to thrive on more than your commitment to community, you have to find some way to monetize.
This part isn’t easy. Hyperlocal blogs can’t use Google Adwords — national keyword-based advertising is a bad fit for their audience. For advertising to work on a hyperlocal site, it needs to be from and about the area — the local brands people recognize and resonate emotionally with in a community. Commonly, a hyperlocal site will install an ad server plugin and just hope that businesses will click the “place your ad here” box. Many local journalists and editors don’t see themselves as advertising sales people, they just love writing about their communities. Spending the time convincing the busy local businesses owners, who are juggling chainsaws all day, to engage in a new advertising program without any sense of urgency can be a cost of sales loss leader.
For advertising to work on a hyperlocal site, it needs to be from and about the area — the local brands people recognize and resonate emotionally with in a community.
You Can’t Improve What You Don’t Measure
How would a business know that you had improved their bottom line unless you could prove it? “Feeling” like there are more customers might be attributed to season, or to a new shopping center, or to fewer sunny days, unless there is a clear relationship back to the advertising. Click-throughs are interesting, but a small business owner who pays $400-$1000 per year wants something more tangible.
The real promise of LBS (Location-Based Systems) such as Foursquare is that they create clear metrics through which businesses can understand the relationship between the referrer and the act of actually going to the business itself. Groupon also has a powerful impact in measurably, because at the end of the day the stack of coupons tells you exactly how much you made (or lost) with the program. The only problem is that those two companies are not actually local, and have little or nothing at stake in the success or failure of the communities in which they are extracting their commission. As well, neither is providing a complete solution for measurably. I believe that hyperlocal journalists, if they are willing to see themselves as trusted local referral networks and are armed with the right tools, can beat these large companies if they can just provide measurably.
Journalists care about integrity — and they should, because once the readership doubts the sincerity of the referral, it reduces its value. Nobody likes a shill, so how can journalists maintain their integrity but also promote and sell their value as a referrer to an advertiser? To make this work there needs to be a “double blind” process for the advertiser to see the value of the source, traffic and opportunities created by advertising even when the journalist has no idea of how much is actually being spent on advertising and by who on their site. In reality, this is another hard thing to pull off; people usually know who is paying them, but if it’s after the fact, then at least the most basic perception of a firewall between the advertising and journalism can be maintained.
Passion and Profit
It is exciting to see monetization frameworks developing where the readership identifies value such as David Cohn’s Spot.us and ThankThis, but will the readership value be the winner in monetization of hyperlocal? The most likely model in my mind will be the referral advertising model because there is existing money there that is just transforming. There is a ton of opportunity for both for hyperlocal sites and for technology companies that would like to provide a solution for this problem space, because more and more people are seeing local buying as a way to improve their own economies and communities. I believe that if we can take the power tools of referral measurably and journalist integrity and match them with the secret sauce of passion for our communities, then the business model of local referral media may just be the thing we have all been looking for.
Clay Graham is the CEO of Welocally, a software development startup focused on hyperlocal publishing solutions. Clay has also worked as a systems architect and product development advisor in Silicon Valley and the Bay Area.