Hyperlocal; a goldmine or fool’s gold?
Fast Company takes a look at the hyperlocal market that everyone is watching, which some say is a multi-billion dollar future of online, but might not amount to anything much more than a sizeable pile of nickels.
The projections say, according to Borrell Associates, that the hyperlocal market could (one day) be worth $15bn by 2013. Whether they happen or not, the big numbers are enough to attract the likes of The New York Times Company (the Local) and AOL (Patch) in the US and the likes of Newsquest, Trinity Mirror and Associated Newspapers in the UK.
But whether that cash will materialise is another question, considering how the growth rate for online advertising is not the steam train it once was.
The thing with Hyperlocal as Fast Company points out is that it is lauded by many, but success always “remains perpetually around the corner”. The reason for this according to Mark Josephson, CEO of the hyperlocal aggregator Outside.in is that local advertisers are not online in force, but he insists they will be.
The piece also quotes Debbie Galant who runs Baristanet, one of the models for hyperlocal (championed by Jeff Jarvis), as saying only that they are making “real money” and that “ad revenue is six figures”, but she won’t go into more detail than that – probably because after costs there is not a lot left.
This growth in hyperlocal revenues is dependent upon a number of things. One is local advertisers ditching the Yellow Pages and local newspapers on mass, those mom and pop advertisers, which are not exactly overflowing with local classified advertising (anyone remember craigslist?).
Add to that their is an increasing amount of competition. The New York Times Co’s Local project is going up against established local sites as well as the likes of Baristanet and Brownstoner in New York and Examiner.com, which has domains for sites in 70 US cities. The San Diego News Network is another established hyperlocal player, but look what is happening in that city. The San Diego Union-Tribune newspaper is to cut 112 jobs and says it too will focus on more local community news and advertising. It doesn’t look like there are enough ad dollars to go around, which is part of the problem already.
For bigger advertisers to come in the hyperlocal market is also dependent upon sites having the right content to attract them. Local crime and townhall stories are not typically the kind of thing that many brands what to hook up with, but it is a catch 22, to develop other content takes time and more importantly staff — something of a problem today for America’s struggling local media as papers close and jobs are cut.
The conundrum about hyperlocal appears to be that it can be profitable if you employ next to no one and your content is user generated and free, but if it is user generated and free then the quality and appeal of that content becomes an issue.
Fast Company quotes Jim Schachter, editor of digital initiatives at the New York Times, as saying: “We’re talking about several hundred thousand dollars a year in personnel costs. I don’t think the local digital-advertising market anywhere would cover those costs.”
With those costs in mind, The NY Times plans – if its experiment proves successful – to license the Local’s platform to bloggers in other towns across the US who would like to be associated with the Times.
“We could help those people mobilize their communities and gather local-advertising dollars in extremely low-cost ways. That could work, economically, for these local journalism entrepreneurs, and, at scale, it might work for us.”
That, of course, brings back the question of the quality threshold, which you can’t do without an investment and in so doing cut any profit and the reason for doing it in the first place.
But the pioneers insist that eventually someone will make it work. Somehow.