AOL has invested hundreds of millions in Patch
since it was acquired in 2009, making the nationwide network of
community sites the biggest-budget bet on the notion of
"hyperlocal" by any media company. Given its very public struggles,
you'd be forgiven for wondering if the idea of "hyperlocal" as a
media business works anywhere. Well, it does and hyperlocal is far
from dead. It's just a lot smaller, perhaps, than AOL would like it
to be.
Top-down hyperlocal news efforts such as Patch and The New York
Times' "Local" blogs have yet to prove successful, but many
smaller, locally owned, community news sites are doing quite well.
Operating at a smaller scale and with less funding, these smaller
sites are finding profits where the biggest players are not.
"This business is certainly not for the faint of heart," said
Denise Civiletti, editor and publisher of RiverheadLOCAL.com, a small online news site
in Long Island, NY. But, she added, "it can be a profitable and
sustainable as a small business enterprise."
RiverheadLOCAL is now in its fourth year and not hurting for
revenue. In 2012, according to Ms. Civiletti, its sales numbers
were in the "solid six figures" and enough to support her and the
site's only salesperson, her husband.
"Local doesn't scale" she said, arguing that her kinship with
the community she covers -- she lives in Riverhead and worked in
local news for years before launching RiverheadLOCAL -- puts her at
an advantage over the two Patch sites in her coverage area. "I
don't think either has gotten any sort of traction," she said.
To be profitable, Ms. Civiletti argued, a local news site needs
to produce a quality editorial product and keep overhead down,
something large scale efforts like Patch have inherent trouble
with. "I don't see a network of hyperlocal sites supporting a
corporate structure that has a lot of middle management," she
explained.
Liena Zagare of Brooklyn knows this well. Zagare sold her
profitable network of five local news sites to Patch in March 2011
and then left AOL after working there for nine months. Convinced
she could do better on her own, Ms. Zagare launched another four
sites in some of the same neighborhoods. All her old advertisers
are back, she told Ad Age. "I don't think any of them advertise on
Patch right now," she added.
As a local owner, Zagare explained, she has the flexibility to
give advertisers the experiences they want. "If an advertiser wants
to use their Instagram feed as an ad, I can do that," she said,
"It's a lot harder to do that when you're in a big corporation
because you've got to get approvals from somebody somewhere to do
something."
Zagare's sites offer not only display ads, but sponsored
content, and she doesn't serve any network ads either, describing
national ads on local sites as creepy. "With a lot of local
advertisers, you only have one chance to prove your value and you
have to over deliver on your promises," she said. "I do think it's
easier to do that on a smaller network than on a grand scale."
Howard Owens, publisher of The Batavian, which covers Batavia,
NY, said small businesses are naturally suspicious of big
corporations like AOL and their ad reps, a dynamic which gives
locally-owned news sites a large advantage. "When you're a local
owner, and say 'I share your struggles and I'm here to help your
business do better,' they're welcome allies."
It's not only the relationships, Owens said, but the type of
sale. While selling banners ads to small businesses has typically
been described as folly, Owens called that notion "Utter nonsense."
Local advertisers do trust banners, he said, but not banner
rotations or CPM. "If they don't see their ad on the site," Owens
explained, "They don't believe it's running." The Batavian instead
sells primarily fixed position banners and charges flat fees.
While not making Owens rich, The Batavian's 110,000 monthly
visitors net the site nearly $200,000 dollars in annual revenue.
The site is profitable, he said, because he has no other
option.
Analyst Peter Krasilovsky of BIA/Kelsey said the original dream
of hyperlocal was to build a network of local sites that could
attract both national advertisers across the network and local
advertisers on each specific site. It's disappointing that the
model hasn't quite worked out, he said, but added that there are
still plenty of ad dollars ready to be spent in the space.
With newspapers and local Yellow Pages in decay, much of the
$132 billion local U.S. ad market is in
play. Capturing it, however, has been difficult for anyone to do at
scale.
"I don't know that we're going to see a destination site that
really dominates the market," Mr. Krasilovsky said. "What we're
going to see is a highly fragmented market with tremendous
opportunity and sales being covered in a number of different
ways."
