Local is the new frontier. Local ads, deals, and services represent a massive business opportunity for the Internet giants and media companies.
But local ads need local content and that local content can't be machine aggregated, it requires feet on the streets: selling ads and collecting the news.
And 'Local' is a tough nut to crack.
In the UK, Guardian newspaper today said it will close three local news sites set up as an experiment in March 2010. These are based in Leeds, Cardiff, and Edinburgh.
Each of the local news sites has won praise for strong reporting on local issues and has had good input from community leaders.
But that's not enough. Meg Pickard, head of digital engagement, delivered the bad news on the Guardian Blog:
As an experiment in covering local communities in a new way, it has been successful and enlightening. Unfortunately, while the blogs have found engaged local readerships and had good editorial impact, the project is not sustainable in its present form.
Even though each web site had only one salaried staff member, the Guardian, which won the Press Awards 2011 for Best Newspaper -- was unable to sell enough advertising to pay for one salary. Each news site made only about $800 in total.
Robert Andrews at PaidContent reports:
Despite years of talk, hyperbole and failed experiments in “hyperlocal” journalism, which has been championed by many including the Guardian Local staff, there remain few concrete examples of formalised such efforts becoming commercially sustainable...
GNM’s (Guardian News & Media) decision may be one more indication that there is no future for industrialised “hyperlocal” journalism.
AOL seeks 8,000 bloggers by next week
If "industrialized" hyperlocal doesn't work in the UK, maybe AOL should take note. In the US, AOL is making a renewed push with its Patch network of 800 hyperlocal sites - each run by just one paid editor. Brian Farnham, Editor in Chief of Patch, has asked each Patch editor to recruit up to 10 local bloggers by next week, as part of a relaunch on May 4.
Jeff Bercovici, a blogger at Forbes.com, reported:
“The introduction of blogging on our sites is far more than just the release of a new feature,” wrote Farnham. “It is a full-on course correction heading Patch in the direction we want to go.”
AOL's Patch has had a bumpy ride. But now that Arianna Huffington is in charge, it seems that each site will be turned into a micro-HuffPo, relying on free contributions of news and features from local bloggers.
Hyperlocal media sites have to answer this question: can enough money be generated from local businesses and national brands in advertising to pay the costs of running each site?
In aggregate, the local market may be worth billions of dollars a year, but in terms of capturing it in hyperlocal media sites, the challenge is how to translate relatively low traffic into ad money that pays the bills.
Online ads pay very little and require sites to have millions of pageviews in order to generate enough revenue to pay for a very small number of staff. Most hyperlocal sites will never have the traffic levels large enough to generate the modest levels of revenues they need.
It seems obvious that the current economics of online media preclude an advertising supported business model for hyperlocal sites.
Patch, and other hyperlocal entrants, will therefore have to develop multi-tiered business models (Heinz 57 business models). These might include lead generation, special marketing programs, events, etc. So far, there's no sign of that happening.