Getting Local Online Ad Dollars to Flow Into Hyperlocal News

Hyperlocal news sites are turning up everywhere, but ad dollars aren’t following them nearly as fast. Many news sites gross in “the $100,000 to $150,000 range,” some even less, says Gordon Borrell, CEO of Borrell Associates, which recently produced a report on the surge of revenue to the local digital space – showing that dollars are flowing everywhere except to hyperlocal news.

“Advertisers don’t want to be around local news,” Borrell told Street Fight. “The model for local news is probably NPR or PBS where there are member fees and corporate sponsorships” to pay the bills.

I went to several people building business models around hyperlocal news to find out how they are planning to turn the tables on Borrell’s assessment.

Gary Cowan, as SVP of product and marketing at middleman DataSphere, oversees the sales programs for 1,900 community sites operated by a hundred TV stations, including many in Top 20 markets. Here’s Cowan on DataSphere’s strategy to bring in ad revenue:

“DataSphere has built up a specialized sales and ad operations team that is optimized to reach small businesses with small budgets. This is a significant challenge and requires a dedicated effort since the payoff from a sale is much lower than for larger regional or national advertising sales and so costs need to be kept in line.

“[Our strategy] requires substantial scale and the capability to invest in the infrastructure needed to reach the necessary efficiencies. This extends not only to front end sales activities but also fulfillment, customer support, account management and the myriad other activities associated with managing a large and diverse base of customers.

“By working with a range of major media partners, DataSphere is able to make these investments and deliver results that would be very difficult and expensive for these partners to achieve on a standalone basis. We help them to bring some of the scale and proactive local business outreach capabilities of a Groupon-like organization.

“Specific services we offer are sponsorship of local neighborhood sites (business featured in various placements on the neighborhood site, a business profile page to serve as the business’ web presence (or supplement an existing presence), the ability to quickly and easily create relevant coupons and have them exposed as part of the sponsorship but also across a broad range of additional outlets such as Coupons.com and Yowza!!. We also create promotional videos for our advertisers and offer them the option to gain exposure on the main media company website through an ad placement targeted at visitors from specific neighborhoods.”

Okay, but does all this produce enough ad revenue to make the TV-created community sites sustainable, I asked Cowan. His answer: “With reasonable cost assumptions, we do believe that the current revenue generated does make the community sites sustainable.”

Ben Ilfeld is COO of the Sacramento Press, which, as an independent is almost at the opposite end of the hyperlocal spectrum. But the SacPress is appealing to business in much the same way as DataSphere. Here’s Ilfeld:

“We provide social media support for our best business partners and we strategically leverage our ‘daily deal’ platform for businesses, non-profits and community events. If we want to grow we must think about how to delight our community – not just annoy it a little less than we used to. The ad content can’t just be good, it must be targeted, beautiful and transactional. We need to build ways for advertisers to engage our community directly. And those supporters need to feel a part of the community. We must first align the interests of advertisers and publishers with engaging platforms. Then we need to model better relationships with our communities.”

Ilfeld also says “your relationship with your audience [in those communities] is changing. Rather than selling their attention on your web site, you can now leverage your relationship on social media, email, on site and in person to the benefit of the businesses who support that community. And your community will thank you. For example, we occasionally hold events for our top contributors at local business partners’ restaurants.”

It looks to be working. SacPress revenue for the first four months of 2012 was a very strong $139,929, well above Borrell’s average numbers for hyperlocal news sites.

Finally, I asked Howard Owens, founder, editor and publisher of the independent The Batavian in upstate New York how small sites like his – lacking a major regional market like SacPress – coped:

“The typical locally owned small, consumer-facing business is eager and hungry for online marketing, marketing of all types. The local news site that has garnered tremendous audience growth and respect in the local community (what you might call engagement, but I find it a rather meaningless term) is well positioned to grab revenue opportunities in providing services and online products to local businesses.

“The problem is, the chains, such as Patch, can’t achieve the necessary local market momentum; the legacy locals can’t right their sinking ships with current personnel; and the indie sites, which are doing the best of connecting with their communities, don’t have the resources to grow revenue commensurate with the opportunity.

“Over the past 18 to 24 months, if I had the staff to provide social media marketing, web site development, news letter management, mobile tools, etc., The Batavian could have achieved tremendous growth.  I get way more demands for our help in the online world than I can even begin to hope to fulfill.

“The opportunity is there, but nobody has put all the pieces together yet.”

But it’s not hopeless, even in smaller markets, despite the Borrell numbers, a product of extensive interviewing among publishers. “We end most months with a positive cash flow balance,” Owens said of The Batavian, which attentively serves both its users and existing and potential advertisers. “All of that money is reinvested in the company in one way or another.”

Daily deal purveyors like Groupon and even niche sites like Weddings.com have bigger and perhaps more receptive audiences, but news hyperlocals don’t have to settle for dribbles as ad dollars flood to local’s non-news digital space. The stories of Cowan, Ilfeld and Owens tell me otherwise.

Tom Grubisich authors The New News column for Street Fight. He is editorial director of LocalAmerica, which is partnering with InstantAtlas to develop sites built around how communities rate in livability. Local America was recently featured on Reynolds Journalism Institute’s Pivot Point site.