Topix CEO: Hyperlocal Companies Are ‘Staying the Course’

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tolles In the first few weeks after Street Fight launched in April 2011, we ran a series of interviews with prominent luminaries working in hyperlocal, to get their sense of the business landscape and the opportunities that existed. These included Topix CEO Chris Tolles, who raised the hackles of some journalism purists in his initil interview by suggesting that journalism was really just “writing copy” and that Groupon’s writers, with their catchy descriptions of offers, were working in some ways as “journalists.” (Chris Tolles will be speaking at the upcoming Street Fight Summit West 2013.)

A couple of years later, Tolles himself has hired on some professional editors to help shape the discussion on his site, and Topix has continued to chug along, with its user base growing and traffic cresting during the fall 2012 election season.

We recently caught up with Tolles to talk about how the hyperlocal ecosystem is shaking out, how the shift to mobile is affecting publishers’ CPMs, and why the buy side may keep mobile ad formats from becoming more engaging. 

What do you think is the most interesting thing in hyperlocal these days?
One thing is that people have stayed the course, which I’m sort of surprised at. Patch, despite all the criticism, has been continuing on, and their traffic has been pretty good. And the funding for NextDoor, for example. I think that people are realizing this is going to take a long time to truly turn into a large set of businesses.

I don’t think anything has dramatically changed [in the past two years] other than the daily deals business going through some major restructuring as the marketing budgets have been cut. But you look at Patch or Yelp or us or NextDoor, and people have set their course and they’re sticking to it. I think that’s the part which is, if nothing else, a little surprising, given the amount of grief everyone has gotten.

How are CPMs holding for hyperlocal content sites?
I think what’s become clear is that mobile is the place where all the traffic is going. Our [desktop] CPMs, overall, have been stable. But the other side of that is that the majority of our traffic is now mobile. Our mobile traffic doubled from year to year.

So the mobile CPMs are currently lower, but I think that if I look at the future of that, there are fair number of people coming out and saying: “Well you know, these actually aren’t lower on our side after all.” And we’ve found that they’re not horrible. We’re getting somewhere between a buck-fifty and two dollars, on average, for our mobile traffic.

So I would say that what people are seeing is that as things move to mobile they’re trying to manage the transition economically. And I think that’s the part which is really the challenge over the next while — to make sure that [the lower mobile CPMs don’t] create a permanent problem.

Lots of people have been talking about the opportunity for local online publishers to offer all-in-one marketing services for SMBs. Do you think there is really a market synergy in there?
Yeah, I think if you, for example, ran a small local newspaper. … I think if you have feet on the street, there’s some opportunity there to change what you’re doing business-wise. And for someone like ReachLocal, that seems to be working relatively well for them. But I think that the arbitrage opportunities are hard to extract. … What are you going to provide these people and what’s the uplift that you can provide?

I think that the real issue here is that nobody’s really done a good job on hyperlocal ad markets at scale. For example, neither Patch nor us can really go out there and tap into some sort of local ad market. And that might change — and I think that AdSense has done an incredible job but not an amazing job of that — and it’s just sort of time.

One of the reasons that CPMs were up for a couple of years was that the daily deals guys were buying AdWords on every local site. So that’s taking a little bit on the chin, but really what it comes down to is how are they going to get people to come to the site? These guys who are doing local ad services, they’re going to be buying AdWords and where are those AdWords going to go? They’re going to go on my site and on Patch.

In the past year you’ve added like a few professional journalists. How has that worked out and has that changed your philosophy at all?
We’re experimenting with a much more moderated and a much more sort of directed community. That’s working; it’s growing. I don’t know if I’d switch everything over to that. For us [the professional editors are] sort of the head of the community. We have a nice place now to get started, and then there’s other places to go once you’ve got established there. So this is still a work in progress: I don’t have a plan to hire a bunch more journalists — nor do I plan to take the thing down that we’ve got.

I think at the moment it’s working pretty well to be a good front and everything else. We’re still trying to figure out stage two. I think stage one will work really well on our site. Our site traffic is up 40 percent. It’s hard to necessarily say it’s all based on that, because it’s not all going there. But I think that it gives us a place where we can point people to that’s like “Hey, if you want to have really high-quality discussions around things you care about, here’s where to start.” And then that sort of up-levels the entire discussion tone on the site.

And a lot of the things that we did for editorial like these interactive sections on the site — like quizzes and polls and things like that — that’s kind of the next level of interactivity for us and our engagement on site is amazing. I think eleven minutes per new user per month, which is, like, triple anybody else out there. And good page use per visitor. That kind of engagement is what the world is looking for, and we can provide it.

So I think that engagement engine is really what we are trying to build and editorial is essentially a catalyst for that engagement.

What kinds of companies do you think are going to do better than others in the coming year or the coming couple of years in hyperlocal?
I am surprised that the location-based stuff has not created more money. I would have thought that actually they would have. … I think with the location-based services, this is probably the make-or-break year for those guys to bring out a business model, and then something will come out and it will work and start going forward — or people will decelerate their investment in location-based services as a product.

And people who are doing content, whether it’s us or Patch or whomever else: there’s a market for it. … I think that Patch is going to get its costs under control and then they’re going to produce content. And we’re going to aggregate and get people to talk and produce content.

I don’t think it’s going to be one of those things where you’re going to have some breakout star like Groupon. It’s probably unlikely to have another model in this space that’s going to kick it off as high as that. But I think the money is going to flow in there.

Chris Tolles SFSW13Mobile is the place where it’s like, if there’s going to be something destabilizing, disruptive, and interesting, it will be in mobile. That’s really the place where, if someone creates a mobile ad network, for example, that actually works for people, then all of a sudden we start making a lot more money and then it’s just a virtuous circle.

David Hirschman is Street Fight’s co-founder and COO. This interview has been edited and condensed.