The approximately one million people who live in the 13 communities in suburban Washington, D.C., Northwest Chicago and the Bay Area that Backfence tried, but failed, to serve spend about $13 billion annually shopping and dining out. That’s right – $13 billion. To reach them, local online advertisers spend $28 million, based on Borrell’s 2007 numbers. Of course, established Internet sites in those communities – particularly ones run by well-established metro and smaller newspapers – gobble up most of that $28 million. But what about the ad revenue crumbs that fall from the table?
Backfence shrewdly positioned itself amid all that affluence, but didn’t capitalize on it. But couldn’t a network of grassroots sites that actually connected with their communities pick up a small fraction of that $28 million by year two or three? How about 6 percent? That would be a little more than $1.6 million. Continuing my back-of-the-envelope math, that splits down to about $750,000 for Backfence’s seven communities in the Maryland and Northern Virginia suburbs of Washington, and $425,000 for the three communities in Northwest Chicago and the same for the three in the Bay Area.
By my estimates, the three clusters of sites could break even and maybe squeeze out a modest profit – about $100,000 – from $1.6 million ad revenue (display and paid search).
Here are the estimated expense numbers for each cluster:
- Publisher: $60,000
- Content manager, $50,000
- Two sales reps: $40,000 each (in base salary and commissions that would go higher with bonuses based on sales that top goals)
- Tech manager: $20,000 share of total cost
- Staff fringes and employer taxes: $40,000
- Citizen contributors: $110,000 or $250,000 for $1,000 monthly stipends, with the higher amount for the seven-community metro Washington cluster
- Office rent and expenses: Up to $25,000 (depending on cluster size)
- Computers: $10,000
- Other (including promotion, phones): Up to $50,000 (depending on cluster size)
All this, multiplied by three clusters, adds up to slightly less than $1.5 million. Green-eye-shade folks may argue with some of my cost estimates. I agree a content manager – a good one – is worth more than $50,000. But if the compensation included stock options, wouldn’t there be a lot of talented Internet editors – ones with a passion for building grassroots sites – who would be eager to take the plunge?
Success with even a modest budget would hinge on whether the sites succeeded in connecting with their communities and producing content that users found generally interesting, sometimes significant and occasionally indispensable.
It would also depend on a “feet-meet-the-street” advertising staff that could sell strong visitor/page-view numbers to local and regional advertisers who, for good reason, have been resistant to buying display space on grassroots sites.
The Backfence strategy – expecting its communities to deliver compelling content without any inspiration, mentoring or compensation – was doomed to fail. The result was stories and commentaries that rarely made anyone sit up and take notice. When Backfence announced its impending demise on its homepages on June 29, users, the few there were, paid almost no notice. Boring content meant weak traffic, and the most aggressive ad staff can’t sell that.
We shouldn’t beat up on Backfence too hard. It was doing what most other hyperlocal sites were doing, and continuing to do, which is why so many media opinion makers have turned negative on the prospects for hyperlocal
To succeed, grassroots sites need above all experienced and passionate editors collaborating with experienced and passionate citizens. Experienced citizens aren’t just soapbox ranters. Sometimes they become activists on issues – not as one-off loners but as part of a network of deliberative doers. Working with them, editors can help pinpoint the sometimes elusive themes that shape a community’s identity. Experienced citizens know why one neighborhood school is succeeding and another is failing or why one church or synagogue in particular has a thriving congregation, but mentoring editors can help them to be better communicators.
Backfence expected its contributors to work for nothing. Its founders piously maintained that financial compensation was the last thing contributors wanted or expected. Many people donate their time to their church or congregation, neighborhood school or library and charitable organizations. But why should they work free so a for-profit company can justify its business model and rake in more money?
I propose that regular citizen contributors – working, say, 40 or 50 hours a month – be paid a $1,000 monthly stipend. That comes to $20 to $25 an hour – not a lot, but not an insulting amount, either. If you’re a retiree, a stay-at-home mom (or dad) or somebody looking to close a household budget gap, $1,000 a month for a few hours here, a few hours there, may seem like a pretty good deal.
If Adam Smith and Ricardo were even half right, compensation is also likely to produce higher value content, especially if experienced, passionate editors and experienced, passionate contributors are working in sync finding out what makes their community tick, what makes it proud but also sometimes angry about various pieces of the hometown mosaic.
In his otherwise unpersuasive apologia, Backfence co-founder Mark Potts made the excellent suggestion that entrepreneurial grassroots sites try to hook up with major media companies. Newspapers, struggling to find their place in the Web world, are plunging into hyperlocal, but the results so far are journalistic Velveeta. The missing flavor – the tang – will not be delivered by the creators of Scripps’ YourHub, Tribune’s TribLocal or even the Washington Post’s snazzy new LoudounExtra, but by journalistic entrepreneurs who have the right instinct for connecting with the inner being of communities.
On July 17, Pegasus News, the hyperlocal that covers more than 120 neighborhoods in Dallas/Fort Worth with a sassy brand of “pro-am” user-tailored content, announced it had been acquired by the Seattle-based Fisher Communications, which owns 19 TV and eight radio stations in the Pacific Northwest. With his hands-on editorial strategy, Pegasus founder Mike Orren is 180-degrees opposite what Potts and his let-the-community-decide team stood for – a lesson, perhaps, for would-be hyperlocal entrepreneurs.
On Aug. 7-8, “Journalism That Matters: The DC Sessions,” will gather at George Washington University. High on the agenda will be this imperative: “Define the citizen/media connection. How will the public be involved?”
The Washington conference has attracted more than a hundred participants from academia, corporate boardrooms and, most importantly, the trenches of hyperlocal. I hope it will put aside the millennial rhetoric that thrust grassroots journalism in the media spotlight, but didn’t provide any follow-up support and counsel that proved useful. Instead, I hope the conference will help guide journalists – pro and am – on to a hyperlocal path that is realistic but creative, that balances bottom lines with soaring ambitions.
About Tom Grubisich
Tom, your suggestion to pay citizen journalists a $1,000 a month stipend is amazingly generous! Out where I am, the local mainstream paper and the alternative press (which actually owned by a large publisher) pay their “citizen journalists” somewhere around the $25 – $50 a month range. In these operations, the citizen journalists are all hand-picked by the editorial staff–the positions never advertised. It is as if activists you’re talking about were actually discouraged from being part of the citizen journalism efforts of these established organizations.
We do not need citizen journalism that is controlled by the established press. We need challenges to the status quo.
Citizen journalism needs more entrepreneurs who can put out a voice different from whatever constitutes the journalism establishment–just so various areas can have a different viewpoint on issues that are important to them. But how many can do that are there? We talk about money–that’s definitely a big issue–but in some instances it may take a boatload of chutzpah to get out there and challenge the status quo. Can we put a price on chuzpah? who knows…
I should have been clearer that the $1,000 monthly stipend would be for steady, productive contributors, not occasional ones. Each site would need about three such regulars, I estimate. Perhaps one of the regulars could spend part of his/her time helping the content manager build the homepage, where the best stuff would be showcased and updated at least daily. One of them might blog around a subject that’s of special interest in the community (growth and development, recreation, local history).
Your budget greatly underestimates what talented and experienced non-editorial folk earn in Washington, D.C., Northwest Chicago and the Bay Area.
Stipends are not the same as competitive salaries. I was paid $200 for the last op-ed I wrote for the Washington Post (in May). Based on the time I put in reporting and writing the piece, that worked out to less than $15 an hour, considerably less than I think hyperlocal grassroots journalists should be paid. The average hyperlocal operation is micron sized compared to the Post, whose parent company’s profits were $283 million in 2006. Go figure.
True. But I was commenting on your expense budget for NON-EDITORIAL positions. I think you’ll find it difficult to hire accomplished/talented publishers, sales reps and tech employees at your budget. Especially in THOSE markets.
I acknowledge that in the commentary, and suggest a publisher or content manager might work for less than a competitive salary if total compensation included stock options. When I co-founded a chain of weekly papers in Northern Virginia, my salary — when it was actually paid — was about half of what I had earned at my previous job as a reporter at the WPost. Entrepreneurs can’t and shouldn’t expect to be paid competitive salaries. They’re rolling the dice.
Tom, you just about perfectly describe the model that we’ve arrived at, at Black White Read online community newspapers. I’d like to say that we crafted it carefully in advance, but it just happened.
As we started publishing, citizen-readers started saying, “hey, I’d like to write for you.” We’ve now got 10-12 contributors (writers and photographers) who contribute 1-8 stories/month. We pay them by the story, usually around $50.
The demographic is *exactly* as you described it: stay-at-home moms, retirees, and people employed full-time who want some extra cash.
Actually, there’s one more category: people who want to get their writing or photography published to build a portfolio; we’ve already had one young man whose efforts for us resulted in his being appointed to a student advisory board at our city newspaper.
There are other elements to our model, but you pretty much nailed it. (If you’d like to see our first publication, check out Lakewood-Now.)
I believe that this model can work. Our biggest obstacle is convincing advertisers to carve out a piece of their ad budget for online. We’re going to have to be persistent.
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Thank you for an encouraging yet level-headed look at the economics of hyperlocal journalism. If you prepared a spreadsheet in the course of your analysis and are willing to share it (how?) that would be a great assist for anyone who would like to perform a similar analysis of the hyperlocal economics of their own area. Also, I know the Borrell people are good about sending out executive summaries but must sell the full reports. Are you able to share a full copy of an old report so we can see the raw data from whence you extracted your base numbers? That, too, would be educational. In any event thank you what you have already done to get the discussion down to business.
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