7 Habits of Profitable, Hyper Local News

Still no sustainable business model for online news? That’s crazy talk.

We love reading about online editorial success and greater activity in the hyper-local space. Yet most of these reports feature vague remarks about revenue plans still being explored and the perplexing challenge of finding a way to pay the newsroom bills.

CUNY’s Jeff Jarvis, NYU’s Jay Rosen & other veteran journos have been trying to crack the business model code for quite some time now. These entrepreneurial endeavors are well intentioned as they seek  to support the emerging legion of news sites that may one day replace traditional newspapers. Seasoned educators like Jeff and Jay used their editorial credentials to wake up many online newsrooms. But that’s not going to move the needle enough.

Now it’s time for seasoned sellers and revenue focused execs to step up and take the lead here. Maybe we need those with actual sales and revenue experience….. to tackle this sales and revenue issue?

Since 1998, we’ve been tracking and field-testing the leading revenue and sales models used by leading online operations. This research identified a robust collection of revenue models that are currently thriving in the local marketplace.

So why are most hyper-local sites still swimming in red ink, or looking for financial bailouts? With plenty of proven and active revenue models available for adoption…..are these models being intentionally ignored, or just mistakenly dismissed?

Here’s a summary of findings we submitted to CUNY’s New Business Models for News project:

7 Habits of Profitable, Local News Sites

1) Lead by revenue-first executive (just like traditional media business)

  • Profitability first, then operations, followed by editorial/content
  • Run site as a start-up business
  • Think like an entrepreneur…NOT just a manager or journalist
  • Borrow tactics from online revenue leaders

2) Running extra-lean & efficient w/content & platforms

  • Open source platforms, software & applications
  • Outsource content via feeds, blogs, indie-journalism
  • Aggregation & curation. Do what you do best, point to the rest
  • Aggressively strip out & reduce hard costs/expenses
  • 24/7 news cycle; Twitter = first responder journalism
  • Hard news & data as commodity loss-leader
  • Monetizable soft news & activity, subsidizes hard news
  • Data as content

3) Advertiser & sponsor friendly

  • Enabling local commerce is priority #1
  • Advertising as content
  • High impact ad units & sponsorships
  • Removal of GAN’s; garbage ad networks
  • Feet on the street-sales efforts
  • Local business education via Web 101 workshops
  • Self-serve & outbound tele-sales
  • Ability to show quantifiable ROI
  • Local & regional advertising networks

4) Non-traditional revenue streams

  • Rev-share, transaction fees & e-commerce
  • Free-miums & up-sells
  • Offline initiatives & live events
  • Marketing services for local business

5) Training, management & compensation

  • Regular training of all staff (especially top management)
  • Performance based compensation
  • Mandatory budgets with bonus & penalty
  • Managers lead by example, not from behind desk

6) Seed, syndicate, socialize & mobilize

  • More than just a destination site strategy
  • Leverage & monetize content anywhere & everywhere
  • Enable formation and leveraging of affinity groups

7) Database mining & video adoption

  • Sales and editorial appreciation of well-defined databases
  • Sales-based uses of video; online infomercials & ad-vertorial

Local Online News: Still Up for Grabs

The online news space is getting crowded. Maybe it’s time to start throwing some elbows?

Digital marketing dollars of most small business, are still up for grabs. When you take these tiny but high volumes of mom & pop budgets, and combine them with the ‘asleep at the wheel’ efforts of traditional media, you can see why Reach Local, Google, Yellow Pages 360 and a slew of indie efforts are doubling down and are going for the kill.

When it comes to big media’s foray into this space, it’s full of well intentioned, but often misguided efforts.

  • Philly.com’s CEO; Greg Osberg once told Poynter: “His top focus initially, will be on building audience, especially online. While conceding the point that small growth in unique visitors and other measures may not greatly impact ad sales, I think we can get 100 percent more audience, and that would make a difference.” Whoa, hold on there big fella. Since revenue & profitability is likely the top priority of his bosses, (investment firm of Angelo Gordon & others) we are not in agreement with Osberg’s statement. Instead, we believe Philly.com (and most news sites) have a sales strategy problem, not a traffic and page-view problem. Driving zillions of page views = inventory glut = lower effective cpm. Even MSNBC declared: pageview ‘dead’. Osberg also hinted of  his plan to find local collaborators, especially in the suburbs where editorial coverage has been cut. We think this will be tough in the fiercely independent, Philly blogosphere, where some indie sites are getting bought up. (see next item)
  • A Philly sports blog called 700Level, was acquired by Comcast. Another local sports site called Beer Leaguer was also just snapped up by the cable giant. This should give local, independent site owners a much better sense of the value of their work. If your stuff is good, why give it away for peanuts? If your not sure how to value your site, contact us for assistance. Indie-sites like Philebrity.com, Philly2nite.com and SuburbanOneSports.com are not likely to sell out for the relatively small pay day and employee status that the 700Level & Beer Leaguer jumped on. (we think much too quickly). Kudos to Comcast Sports Net vp; Eric Grilly, for making this smart move, while the 2 sports Radio stations in town 610WIP.com, 975TheFanatic.com, as well as Philly.com, were snoozing.
  • The Washington Post hoped local bloggers would drop everything to work with the legendary site, for what some say, free. Read the laundry list of rules you need to follow, if you want to work with the WashPo.
  • SacPress.com is the self-funded news project that reportedly reaches more Sacramento online readers than the daily Newspaper (Sacbee), by leveraging their Sacramento Local Online Ad Network (SLOAN). The network is now over 40 sites strong, even repping the web inventory of 4 local Radio stations. (stations owned by digitally-challenged, Entercom)
  • Radio & TV taking a shot at hyper-local news. Some broadcasters admit their weakness, raising the white flag, and are outsourcing web strategy to DataSphere. Others do it themselves, and make clumsy mistakes and leave money on the table. But promising Radio efforts like WYDaily.com are a sign of things to come.
  • Sites like TheBatavian, AroundMainline.com and BrigantineNOW.com are gaining traffic and advertiser support. They use the not-so-secret formula of “running their sites like a business”. They spend less time with research and theory, and more time on the streets closing deals, and making sales calls.

Old School Media Execs: Digital Drag

Last week, traditional media execs got another digital wake call with the demotion of a well respected newspaper editor in Philadelphia.

Bill Marimow was re-assigned as an investigative reporter. Philadelphia Media Network CEO; Greg Osberg, publicly stated that Marimow, though a Pulitzer Prize-winner, ‘did not have the background in digital media necessary to lead the paper going forward.’ This announcement was a biggie. If you listen very close, you can almost hear the sound of old school media execs scrambling to finally start their Linked-in profiles and Facebook pages.

In other ‘That Won’t Ever Happen Here’ news….Deseret Media in Salt Lake City, lead by innovation pioneer Clark Gilbert, purged 43% of his print staff in order to grow the ‘digital first’ team. While the plan was painful to execute, Deseret smartly merged the remaining print staff with their newsroom at KSL-TV. This resulted in a 200-person newsroom, the largest in the state. In addition, Deseret plans to also tap the indie blogger space. Overall, this may be the finest model of local media-disruptive innovation in action, influenced by the business best seller; The Innovators Dilemma.

Hey Look, I’m Digital..…NOT. It’s easy to see why a newspaper technophobe could get the boot. You could also make the case that a sales manager who hits his broadcast budget, while allowing a client to place their web budget elsewhere, could also be shown the door. But there’s another way to win some walking papers, while ‘looking’ like you’re digital. In this smooth move, the media exec outsources key sales activity to 3rd party vendor. It shows corporate a quick boost to the interactive bottom line, with little or no investment. In reality, this faux-digital exec just let the wolves into the hen house.

The Yahoo Consortium; and Other Deals with the Devil. This might be one of the most visible examples of traditional execs letting those wolves in, and keeping them warm and well-fed, too. In order to shore up their weakening web efforts, newspaper execs trained their own reps to pitch the virtues of Yahoo, in exchange for getting access to the national web giant’s cool new ad serving software and audience. The revenue split did bring in some new cash, but at the huge cost of letting Yahoo build a relationship with local print advertisers. On the flip side, this might be Newspaper capitulation: their strongest asset is their local sales force…. so why not leverage it?

DataSphere smart, Local TV Not So Much. This smart tech company from Bellevue, Washington has been a god-send for some digitally stressed TV execs. In this deal, DataSphere provides the station with a quick roll-out of trendy hyper local sites, complete with outsourced cold-calling of local business owners. Sure, it looks brilliant: nothing but  profit for the TV station, while keeping the traditional sales staff focused on selling on-air commercial time. But the creepy facts of DataSphere keeping over 50% of the revenue, pimping out the station’s call letters, and having a primary relationship with the local business… is like killing your last chicken for the meat, at the loss of your egg supply. Providing access to local advertisers, and sharing revenue with those who want to eat your lunch, is not a digital revenue plan you want your name on. We suggest that this reveals limitations of digital business savvy at best and poor fiduciary oversight at worst.

Think it’s Tough for Newspapers? It’s even Tougher for Local Radio as they hang their hat on being a platform for content they don’t own… music & syndicated talk. At a recent gathering where execs convene to network and debate the future, many put blue-sky spins on their squishy web results. The most glaring example was how they shared their digital results: revenue & web traffic increases described in terms of percentages. These numbers, coming off low comparables, won’t even impress a rookie Wall Street or private equity analyst. Recent research shows that Radio gets less than 2% of local online advertising spends.

The World of Safe & Old School Media Management is Over. It’s now being replaced by execs with a DNA infused with entrepreneurial & turn-around expertise, combined with serious biz-dev skills. Much of this evolution will start at the top.

Local media can learn from other mature industries. It took guts, humility and foresight for the great-grandson of Henry Ford to step aside, and let Boeing airline veteran Alan Mulally take hold of the automaker. Bill Ford knew current management and the insular culture had too much to protect. Similarly at General Motors, former AT&T CEO; Ed Whitacre, was hired to rip out the diseased and dying heart of GM. Whitacre, with no experience in cars other than to drive one, wasn’t looking to win any popularity contests. Lacking the motivation to protect the way it’s been, he immediately dealt with the 800-pound gorillas in the room. ‘Big Ed’ helped turn around the company in double time. An insider with too much legacy baggage could have never accomplished that.

Like the necessary & dramatic change at GM and Ford, local media will also go through this gut wrenching change as well. It’s already happening as the above examples in Philly & Salt Lake city can attest to. To be sure, we’ll hear NO WAY, THAT WILL NEVER HAPPEN HERE. The incumbents will take a stand and dig their heels in. They’ll tell you a million different reasons why there’s no need to change, and why those in charge have decades of superior results, and YES, they can be digital enough!

Creative destruction is accelerating in Detroit, Philly, and Salt Lake City and other cities yet to be announced. There is proof that the most entrenched corporate cultures can and will be blown up, with little regard for ‘the way it’s always been’.

INMA Audience Summit; Mel Taylor PPT

Here’s my presentation deck from the INMA Audience Summit, Las Vegas, Oct. 24, 2011. Session was called: State of Circulation; Monetizing the Online Audience . Special thanks to Earl Wilkinson, John Newby and everyone who gathered for this outstanding event.

Mel Taylor INMA Vegas 10.24.11