Thursday, January 12, 2012

Who can make Hyper-Local News work?

I have looked at many hyper-local news networks over the past few years and many of them had some of the same qualities and features.....but none of them really succeeded in their plan to take over the online hyper-local news space.  A lot of them either went out of business, re-vamped their idea, or sold the site to another hyper-local network.  There are some like which are still operating, but have such a high operational cost that they lose millions each month!  So far nobody has the right answer, and hopefully that changes in 2012.

If the answer isn't found in 2012 it won't be for a lack of trying!  So many people are trying to build the right network and there are so many existing companies re-vamping their business model that I predict an online local news overload in 2012.  But the question still remands on what is the right formula on creating a huge hyper-local news network that is profitably.   I won't clam to know the formula, but I can tell you a few problems or issues that will need to be answered to get it done:

1) Local Ad Revenue

Many hyper-local sites are basing most of their revenue off of the sales of local advertisements and a lot of them are expecting way too much money and going about it all wrong!  The first mistake I see on most of these sites is when they divide up the areas, they do not take into account what a normal sales area would cover.  They have the areas split up into "hyper-local" news areas and then when they try to obtain local advertisements they usually cover too small of an area and do not reach enough people to satisfy the local business owner.

Another huge mistake is they predict too much money out of the sale of local advertisements.  They don't take into account that when selling on such a local level that the ad prices go way down compared to a regional ad.  So they do not set up the right budget per town or area within the network causing them to lose money even though they might be making good progress. 

Some how the local ad revenue model has to be figured out and fast or none of these sites will be turning a profit anytime soon.

2) The Hyper-Local Network Staff

This is a huge issue with many of the hyper-local new sites and networks....who runs the sites, how do we pay them, and how do we find them!  It is really important to get the right people writing the stories and covering the local events, but how to you find them?  Also, once you have found the right type of people what is your model for paying them (keeping in mind how much you can have as overhead cost compared to what you hope to make out of each site)?  These are really important questions because you can keep your cost down, but you might not find the right people.  But then if you find the right people and they cost too much your site loses money no matter how good the content.

Then comes the question of once you have your writers, local editors, site editors, etc. who will sell the local advertising or national advertising?  Some have tried to have the local editor sell the advertising or even  be in charge of getting leads and neither have worked out.  Some have tried have a sales team based in other cites to call into the local communities to obtain advertising and they hasn't worked either.

Once you figure out what the correct staff is and the correct cost of the staff in comparison to the income of a site you will finally have the winning combination.

I think that once those two main issues are truly solved then someone is going to have a real shot at creating a hyper-local news network that will work and be profitability.  Until this happens you will see many hyper local news sites appear and disappear overtime along with many underwhelming sites.  I know OurTown is working in a new "formula" this year to try and figure out these issues, but it is going to be interesting to see who wins this race!

Your OurTown Superhero,