There’s a widespread view that people will always crave news from their local communities. This belief has driven a bevy of start-ups to focus on the local news market (e.g. Patch, Examiner, EveryBlock, The Daily Voice, etc). The business model is simple. Create and/or crowd-source engaging local community content and individuals will flock to these sites. Once the people arrive, local news sites drive revenue from hyper-local marketing by brands and local businesses.
Unfortunately, this business model is faulty. One, it requires a huge local sales force to drive revenue. Two, it requires there be minimal competition from alternative hyper-local advertising solutions. 20 years ago, a local business had two ways to advertise their business: YellowPages or their Local Newspaper. Now, local businesses are confronted with hundreds of advertising alternatives.
A study in 2011 by Borell Associates found that the average small business will spend approximately $2,300 per year in online advertising. This means that the local news site is now competing with Google Places, Yelp, Facebook and hundreds of other ‘hot apps’ for the same advertising dollars.
Building a local sales force to compete with these apps is just not feasible. This is evident with the recent closings and staff downsizing at the various local news sites within the past few months. In early February, EveryBlock, a division of NBC, shut down without warning. Two weeks later, Patch, a division of AOL, began cutting editors across its local news sites to pare back on the ~$150 million Patch was costing AOL each year. Earlier this week, tri-state regional local news site the Daily Voice closed all of its Massachusetts sites and laid off some in Connecticut.
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So what does this all mean? Are people no longer interested in news from their local communities? Most definitely, not! The combined traffic in January for Patch, Examiner, EveryBlock and the Daily Voice was more than 20.8 million unique visitors according to http://compete.com. The problem is that local news hasn’t figured out a way to build a scalable business.
Consider this, 97% of all consumers use online media when researching products or services in their local area and 90% of consumers are using search engines to research products and services locally, according to BIA/Kelsey. This means that local businesses have a better ROI on customer growth if they spend their marketing dollars optimizing their business across web and search, than placing banner ads on local news sites.
When a local business has an updated Google Places profile, Bing Business Merchant profile and Yelp listing, they are bound to reach plenty of more customers for less money. Couple that with the ability to engage with existing and potential customers through Foursquare, Facebook and Twitter, the savvy local business owner just can’t find the benefit to advertise on local news sites.
So what will the future of successful local news sites look like? A local news site will not be able to source advertising revenue by way of an internal sales force that calls on local businesses. They will need to implement technology that allows the local business to manage their online marketing efforts through one hub. Local news sites will then earn revenue based on the share of traffic that views those local business advertising campaigns.
Certain companies are already building these B2B networks that connect businesses to the end consumer by way of a publisher network. SinglePlatform shares local restaurants’ menus consistently to its publisher network of websites. Yext pushes out its customers’ business listings consistently to its publisher network of website directories. CityGrid powers local online advertising consistently across its publisher network of local review sites and search engines. My company, UPlanMe, helps business manage and promote their specials, sales, updates and events consistently across our network of websites and mobile apps. Each of these companies charge businesses a monthly fee for their services. CityGrid and UPlanMe share this revenue with their publisher partners. By tapping into various technologies like this, the local news sites may finally be able to earn incremental revenue while slashing the cost of an expensive sales force. It’s time online local news sites step into the 21st century and stop doing business as if they are still doing print advertising.