The Hazards of Hyperlocal    

Why neighborhood news online is a dicey proposition

A hallmark of a successful product is that it addresses an unmet consumer need or want, either conscious or latent. Like DVRs, Facebook and aerosol pancake batter.

At this moment, news organizations and startups across the country are betting heavily that hyperlocal news sites will solve the needs of both consumers and advertisers. But this path is littered with false starts and failures, some quite fresh. In June, the New York Times handed the keys to its New Jersey community news site to the hyperlocal veterans at Baristanet.com, after turning over its Brooklyn community site to journalism grad students at City University of New York.

Other news organizations have launched and abandoned hyperlocal efforts over the years, some big like the Washington Post, others small and unknown. The managers of these projects tend to leave a common admonition to those who would follow: Hyperlocal is difficult, expensive and not for the faint of heart. (See "Rolling the Dice," June/July 2007.)

A handful of sites driven by passionate, hard-working and media savvy founders have not only survived but won accolades, journalism awards and sometimes even grants. But even among the best of the best, there's not much publicly available data to speak to their business success. A recent Seattlepi.com article covering Seattle's fertile local blog landscape attributed a million monthly pageviews to the Next Door Media network of neighborhood sites, widely recognized as one of the best hyperlocal initiatives around. Baristanet.com, which covers seven New Jersey communities, says it is profitable and claims to receive 9,000 visits per day. These are solid but not amazing numbers―and so far, they are the outliers.

Yet the startups keep coming. Two of this year's entrants are AOL, which plans to expand its recently acquired Patch network to hundreds of communities by the end of the year, and DataSphere, a Seattle-based company supporting the community sites of several TV groups, including Fisher Communications and soon Gannett Broadcasting.

However, as more companies crowd into the hyperlocal space, the question arises: Exactly how much consumer demand exists for neighborhood news?

According to a survey by the Pew Research Center for the People & the Press, only 20 percent of American adults reported using digital tools to communicate with their neighbors or stay informed about community issues at least once in the past year. Only one in 10 reported reading a community blog at least once in the past year.

Assuming Pew's findings are reasonably accurate, the potential audience seeking neighborhood news in a given community would be roughly 20 percent of the population--including both frequent and infrequent users. Now consider the competition of multiple hyperlocal sites and bloggers, established community newspapers, and aggregators such as Topix.com and Outside.in. Not to mention other sources of local information such as online directories, event calendars and government sites. The math suggests a very stiff challenge.

Maybe there's a larger appetite for neighborhood news than the data suggest. But for people who are accustomed to centering their social interactions and news consumption on their personal interests, the write-ups of town council meetings, local theater events and public works projects typically found on a hyperlocal site might not seem any more relevant than the offerings of a traditional news site.

As users of hyperlocal sites trade topical relevance for geographical relevance, so do advertisers. The anticipated explosion of online ad spending by local small businesses is driving many of today's hyperlocal efforts. But it may well be that geography isn't always the best measure of relevance. Is an advertiser better off casting a wide net across a close area, or using behavioral or contextual targeting to reach the most likely customers even if they live farther away?

What if they didn't have to make that choice? What if local advertisers had the ability to deliver ads to the right consumers, at the right place and at the right time?

Consider Foursquare, the location-based social application that allows people to alert their friends when they enter a bar, restaurant, movie theater or literally any other location. Launched in March 2009, Foursquare is valued at $95 million and has attracted 2 million users, growing by 15,000 every day. Founder Dennis Crowley expects Foursquare's main revenue stream to come from offering local businesses the ability to send special offers to consumers at exactly the right moment. It's hard to get more relevant than that.

This may be the biggest threat to hyperlocal news initiatives: The possibility that the needs they're addressing will be solved by newer, cooler, less expensive and more effective technologies. No doubt some hyperlocal ventures are a step ahead, already incorporating these tools into their plans. The others may have to continue as labors of love.