Local media companies may not have thought of themselves as middlemen—but that’s what they have been for advertisers. When I used to buy advertising a decade or so ago, I felt it was my job to do what I could to get the media provider out of the middle between my brand and the customers we desired. For example, we did a lot to drive a direct relationship, including encouraging them to register with us so we could communicate with them directly later through e-mail. If we were doing it today, we’d add Facebook and Twitter into the mix.

Back then, there was more than enough ad revenue for the local media company to sustain their business—so much profit, in fact, that some companies got complacent. Just as railroad companies should have realized they were in the transportation business rather than the railroad business (and thus they missed the opportunity to get into the auto or air transportation business), media companies should recognize their business purpose is to connect their audience with products and services the audience desires. Without that business purpose, they can’t fulfill their editorial mission.

The traditional mission of a media business is to collect a loyal audience with high-quality information, and let the advertisers worry about how to sell stuff. The media companies sold the audience, not product or services.

Retailers historically aggregated consumers for product makers—for example, giving Proctor & Gamble a way to sell to people in Poughkeepsie. But many retailers didn’t add a lot of value beyond offering consumers product selection and price. Retailers such as Best Buy have realized that and have started to add other value to the experience (e.g., the Geek Squad). Meanwhile, one of the retailers’ biggest costs has been advertising—circulars, broadcast advertising or something else.

Today, media companies on the Web aggregate consumers around specific interests and product niches (technology, cooking, travel, music, movies, sports, finance) much more efficiently. I believe today’s media companies will need to get directly involved in commerce to ensure a sustainable business model. The Times (UK) and Burda (Germany) are both reported to be realizing a substantial portion of their profits from direct commerce enabled from their websites, selling third-party travel packages and other goods and services. Local media companies such as the Washington Post are either partnering with group-buying sites such as LivingSocial or rolling out their private label competition to Groupon and LivingSocial.

Some traditionalists may shudder at this blurring of church and state lines. However, the trusted relationships media companies and retailers historically aspired to have is more important than ever in this age of transparency. A company that shills for inferior products will be outed immediately. Conversely, a company that provides entertaining, inspiring and informative content and allows consumers to more easily find and complete a transaction for the best products and services is providing a great service to their readers. In a sense, Groupon is serving as a quasi-city guide and take great pride in finding unique offers and locales for their community and have an editorial staff of more than a dozen people.

The byproduct for traditional media businesses unwilling to make these moves is self-evident. It’s not hard to see this in action as you pick up your ever-shrinking newspaper that isn’t covering the topics it once did. In other words, their editorial mission is suffering due to sticking to their traditional ways.

Once again, traditional media run the risk of being slow to adapt. In some regards, smart media companies need to think more like retailers. That is, get directly involved in the transaction that they are only indirectly touching today. Rather than let the next eBay or craigslist form independently, they should get actively engaged in some of these new models:

1. Private Sale business: Companies such as Gilt Groupe and Ruelala are experiencing phenomenal growth. These insider-ish member based businesses borrow from outlet-mall sample sales to create great value for the consumer. In a nutshell, they have a member list to which they send “flash sales.” Those sales are typically 72 hours in length, and the consumer gets access to curated merchandise at 50-75% off of retail. Yet another example is private sale pioneer, France-based Ventee-privee, which is approaching $1B in annual sales and like the others is highly profitable.
2. Group Buys: Groupon and LivingSocial are seeing tremendous growth tapping people’s social networks to present consumers with great deals that still make sense for merchants. Group-buying sites have also gained investor interest because of their compelling economics as you can see for Groupon and LivingSocial.

While these trends can span both local and national media properties, I believe that the private sale business is a great fit for a national publication. National publications tend to be focused on a particular topic area whether they are gadget blogs, design site, or parenting magazine. Here are a few examples:

• Wouldn’t Zulily (a private sale site geared toward young children’s clothing) bolted on to Parents Magazine grow far more quickly and still be a good fit with Parents Magazine’s audience mission?
• Vogue has partnered with Gilt Groupe to “shop the issue” at http://vogue.gilt.com/.
• Daily Candy has launched their own Sample Sale.

Meanwhile, local media is a natural fit for group buys—the group-buying phenomenon is largely local. Already we have seen Groupon work with Metromix and LivingSocial partnering with the Washington Post. Group-buying programs can grow much faster by piggybacking the daily or regular habit most consumers already have with various local news properties.

National media will have to be more careful not to cross journalistic lines. It will be relatively easier for local media as most of the group-buying categories don’t directly relate to their editorial focus, with the exception of special sections such as travel. The value of the local media isn’t terribly different than the traditional model – i.e., aggregating a large, local audience. For that matter, “special reader offers” aren’t anything new. However, in this case, they are taking the additional step of closing the transaction.

Those of us who have sold media understand how successful private sale and group-buying programs can avoid the common scenario of trying to explain to an advertiser that the media property achieved the agreed upon objective (i.e., exposing consumers to the merchant’s offerings) but it may have been the merchant who didn’t do their end of the bargain very effectively. These social commerce programs can avoid a common problem with ads – the lack of measurability, and the inevitable disagreements between the merchant and the publisher over the effectiveness of the ads.

Some believe this model of commerce will die out as the economy recovers. I disagree. Product purveyors have always had extra inventory they need to unload. Further, the private sale approach allows them to do it in a way that they don’t perceive damages their brand even if they have premium positioning.

Likewise, in the local arena where popular group-buying categories such as restaurants and service providers (spas, dentists, etc.) are having great success, those organizations previously employed the “spray and pray” method of advertising with little idea whether it was working or not. With group-buying, they not only get a directly measurable transaction closed, they get what amounts to free advertising even for people who don’t purchase, since the group-buying sites amount to a quasi city guide. Groupon states in their marketing that 9 out of 10 businesses who have used them state that Groupon customers are among their “new regulars”. That puts this model in the no-brainer category for many local media.

For the most part, these are still simply online facsimiles of offline ad types. Isn’t a banner ad nothing more than a print display ad brought online with a few bells and whistles? We need ad types that take advantage of the unique attributes of today’s digital media—whether it’s the social nature or immediacy of the web.

There are some emerging models that excite me, because they truly take advantage of the medium even if they are borrowing concepts from the past. I believe local sites should begin moving beyond traditional display ads by deploying three of these new formats: coupons, group buys and deals of the day.

All help overcome the issue online ad sellers frequently face. Sites may have done a terrific job of delivering traditional ads, but too many advertisers still say “Gee, I’m not sure if that ad worked or not.”

What these three examples provide are models that are easily understood by small business owners. In a world where the revenue per customer is relatively low, a local publisher can ill afford to spend a lot of time convincing an advertiser that he or she got a great deal. At the startup I’m involved in (GrowthSpur), we believe that “it’s all about ME” —the most effective revenue generators are going to be Measurable and Easy from the advertiser’s perspective. Coupons, group buys and deals of the day provide these sort of easy measurement of effectiveness, by driving identifiable customers directly to the advertiser’s front door.

We aren’t the only ones excited about these ad models. Companies such as Groupon and LivingSocial are some of the hottest start-ups around, with rapidly growing audiences and revenue. This is enabling them to raise significant expansion capital. Groupon just raised another huge round at an incredible valuation ($1.2B) for one reason – they are obviously having success as investors only make these kinds of investments in today’s environment if that is the case.

This latest advertising revolution should seem familiar to anyone interested in local media: The last major cycle of disruptive companies—Monster.com, eBay, craigslist and others—decimated the classified-ad business, one of the traditional major revenue streams of local media. At GrowthSpur, we are working with local publishers to ensure that the next major cycle of disruptive ad models are a tremendous growth opportunity.

Now for the three measureable, easy models:

Coupons: The most straightforward and similar to offline models. Everyone likes a deal, whether it’s a two for one or 25% off of you next meal at the deli. A variety of white-label providers are offering their platform to publishers to streamline this process. The best of them don’t just replicate a print ad online – they offer easy sharing with friends and even “send this to my mobile phone” functionality.

Group Buys: Groupon and LivingSocial are the most active and well-funded. The basic idea is a business offers a great deal on some product/service—a $30 restaurant certificate for only $15, or three fitness classes for $29—but only if a minimum number of people sign up. Naturally this encourages consumers to share the deal with their friends, to ensure that all of them get the deal. The publisher/vendor collects the money. At the end of the sale period, the publisher cuts the business a check for an agreed-upon split, typically 50/50.

Deal of the Day: A variation on the theme above. Typically a publisher makes one offer per day that is a great deal for the consumer. The advertiser offers this deal exclusively through the publisher—so the business owner knows that any consumers asking for that deal came from that offer. In many cases, all the consumer has to do is mention the deal to get it.

We’re seeing sites ranging from Washingtonpost.com (working with LivingSocial) to uber-deals site Your Long Island charting a path in this realm. We expect to see a lot more as these and similar models prove themselves. Just remember that for it to work for the local advertiser, it’s needs to be all about ME.

The reality for most communities is that their neighborhoods either never received coverage from local media or that coverage has pulled back as budgets have tightened. This has left a big opportunity for hyperlocal sites to get a marketing boost like no other. I will share how that has worked tremendously well for my local site — www.sunvalleyonline.com — so that you can take these experiences and apply it into your own site. I will also share how we are being proactive with the upcoming Olympics to draw more audience. Our site has a local connection with the most prominent snowboarders on the U.S. Olympic team — Lindsey Jacobellis, Seth Wescott, Shaun White, Nate Holland and Graham Watanabe — that we are going to utilize to provide our community with a perspective they won’t get from NBC.

Curtis Bacca is a local the top snowboard/ski technician in the world with a small shop in town called The Waxroom that tunes skis and snowboards. No one has done the tech work for more gold medalists at the Olympics or X Games in the last decade. He had three athletes (Jacobellis, Holland & Wescott) competing in two events at the recently completed X Games and they came in first, first and second. He shared some pics after the event and was profiled by ESPN. He also provided his updates on the Waxroom page. Afterwards, he told me he was blown away with all people from our community and around the country who saw what he was doing and was psyched to do more at the Olympics.

At the time I’m writing this, he’s in Vancouver, well before the Olympics start, to do his reconnaissance and testing the boards to ensure the boards are riding at their maximum velocity, as every 1/1000th of a second can matter. In fact, he’s been at an “undisclosed location” that he calls the “Secret Squirrel Test Facility” and has had some mystery shots of a Boeing test facility honing the boards for the unique conditions of the misty, foggy, wet snow of the Cascades that his athletes will encounter. We’re setting him up with a helmet cam as they recon the course. After the events, he’s going heli-skiing/riding with Wescott and will share that, as well as being able to liveblog from his Blackberry while shooting pics (we have a feature that allows you to email pics/stories directly to the site), giving us the inside scoop, etc. If you know anyone who has interest in snowboarding, in particular, send them to the Waxroom page. They’ll get a perspective like none other.

Listed below are items on how we hope to turn a first-time visitor into a repeat visitor (something that would Jeff Jarvis would probably recommend to Rupert Murdoch surrounding the whole paywall kerfuffle). I should give a shout-out to Neighborlogs for providing us with a Content Management System (CMS) that enables what I outline below. In an earlier piece on OJR, I highlighted why I selected their platform over WordPress, despite having worked extensively with WordPress. The items below were brain-dead simple, which wouldn’t be the case with most CMSs I have worked with.

• Nearby Stories module. Most of our stories are geo-tagged. Chances are if someone is reading a story about a topic, they’ll be interested in stories that are about that same location.
• Featured Stories module. These are our editorial picks of the most interesting stuff on the site that we hope draw them in.
• Featured Photos module. Some people are more visual so we highlight some of the best pics that come in to the site. Hopefully some will grab their attention. Those pics, in turn, have links to the articles they are associated with.
• Events module. We highlight the upcoming events happening in the area and encourage them to post their own events.
• At the bottom of the article, we give them ways to sign-up for our email newsletter or follow us on Twitter (as well as some recent tweets).
• Finally, if none of that grabbed their attention, at the bottom of the page we have teasers for our Most Viewed Articles.

The following are some other examples of the sorts of stories that give a hyperlocal site a boost to ts visibility that we have seen work very well (some obvious, others less so):

• Natural disasters of local significance: We have had a flood and mudslides. At the time we had the flood, our community paper only updated its website once a week. Conditions were changing by the hour, so our updates, including pulling data from federal data sources, were invaluable for our community.
• Natural disasters of local and national significance: We had a major wildfire that became the number-one priority fire in the country. With people being evacuated and many local people either traveling or being second homeowners, the local newspaper and radio didn’t do them any good as those sources don’t reach beyond our community. We turned our classified system into a resource for people needing housing, places to board animals and more. Even though the local newspaper has 30 times more resources than us, we had the most comprehensive coverage because we tapped our community.

  They were shooting pictures, sharing stories, taking video and more. In part they were inspired by my limited videography skills (my only real skill is I don’t mind running up 3000-foot peaks to get a good view, as you can see here and here), knowing they could do better. Some of the video ended up getting picked up by CNN and by CBS’ 60 Minutes (see footage here). The video is from a member of SunValleyOnline’s community that happens to be a professional videographer but contributed his video to us for free though later was paid by CNN & CBS for his footage. You can see more of the footage that we posted on YouTube to see the range of video from low to high production value. By the time the fire was done, we’d had site visitors from all 50 states and 42 different countries. To this day, many of those people still visit the site as they have some connection to our area (friends, family, second homes, etc.). On an even more gratifying note, to this day people will stop me on the street and thank me for how connected they felt even though they were hundreds or thousands of miles away, as they’d been evacuated or were second homeowners.

• Locals hitting the big time in their sphere: Whether it is a Little League team going to the World Series, a local athlete going to the Olympics or someone in the arts hitting the big time, locals are deeply interested in their experience and proud of their connection with those individuals. Some subset of those people are willing to blog and share their behind-the-scenes perspective that you don’t get in a traditional media outlet. Even if it is raw, people love it.

Around the time of MSNBC.com‘s 10-year anniversary, I visited its newsroom and noticed what looked like an EKG reading (i.e., a line graph with spikes up and a plateau followed by more of the same). The only difference was each plateau on the graph was a little higher than the next as you moved left to right. As I got closer, I realized that this graph was actually MSNBC’s traffic growth over 10 years. Each of the spikes was labeled with the associated news event — OJ verdict, Princess Di’s death, elections, tsunami, 9/11 and so on. Little did I know that there would be a correlation between that graph and growing a hyperlocal site’s traffic.

Not unlike MSNBC, we have experienced the same dynamic. That is, when there’s a big story we will see a spike in traffic followed by a higher plateau of traffic. That plateau is what has the greatest value. If we did a good job when people visited for the first time by giving them a good experience, they will come back. Better yet, we get some to subscribe to our newsletter or RSS feed and are in a coveted spot to remind them of our site. Our site has gotten progressively better at increasing the length of time people spend on our site as we have added modules on the page to expose them to what else we have. Let me give a recent example. We had an unfortunate avalanche tragedy at the local ski area that defines our area. [As fate would have it, it happened at the same time we were doing a complete platform shift that I wrote about on OJR, but that's a different story.]

SunValleyOnline has not spent a penny on marketing, in the traditional sense, to build its audience. Instead it has used tactics such as what I outlined above to build itself into a top site in its area. This kind of resourcefulness is what has enabled SunValleyOnline to be one of the early profitable hyperlocal sites supporting a small team.

Before I get into that, I will share my experience and scenario which gives you some perspective on my situation. I’m a tech industry veteran (~25 years) though my hands-on coding experience is ancient (~20 years ago) but as a non-technical person goes, I’m reasonably technical though I’ve been on the business and editorial side of Web properties the last 15 years.

Part of my background includes being part of the early team of Microsoft Sidewalk starting in 1995 where I ran a team that supported the cities, as well as about half the cities reported through me, so I’ve been working with CMSs in the local arena for nearly 15 years. SunValleyOnline (SVO) has been around for about 5 years and was built on a proprietary platform that hasn’t changed in years. We are in the final stages of the transition from the old to the new site. SVO has been self-sustaining for a couple years with a small team of three people. We rely on a mix of community and staff contributions. I have personally blogged for several years and have used blogs built on Blogger and mostly WordPress.

To jump ahead, there’s lots of merit in WordPress and the ecosystem built around it, however I felt it came up short on the criteria I established to make the decision.

Listed below are the criteria I used with a brief explanation. While everyone will have somewhat different criteria, I listed the items in priority order from most to least important based upon my experience and priorities.

1. No developer required: In my opinion, it is no longer necessary for 98 percent of sites to have a Web developer on staff. Fortunately, there are many off-the-shelf solutions that don’t require an in-house technologist. There may be occasional needs where a developer can be contracted to do specific work but at the early stages of a site’s development, I think a site should be focused on other items rather than doing custom development. As long as your CMS has the ability to extend it later, you can defer bringing on a technologist and save yourself money. Of course, there are hyperlocal sites founded by people with technology skills, and they can certainly take advantage of that, but it’s not a requirement to get off the ground.
2. Easy to monetize: This relates to the next point (“Open”). Most sites are limited to generating revenue using standard display ads. While that is the right place to start, this is a highly dynamic sector and thus it should be easy to extend your site with various other capabilities whether it is turning standard display ads into video ads or incorporating high-quality ad networks, it should be as easy as “copy and paste” to add these capabilities to your site.
3. Open: It should be very easy to add and delete modules to a page or an entire site, such as social media features, inbound RSS feeds (i.e., pulling in a news feed from another site), and widgets of all types from weather to flickr slideshows to polls to various monetizable elements from any number of third parties.
4. Community Generated Content: It should be very easy for members of your community to contribute articles, pictures, video, classifieds, reviews, etc. The CMS should give you the ability to determine whether a specific user is able to post directly to the site or whether the contribution should go into a publication queue for review/approval. It should also allow your community to send in articles via an e-mail interface. Among other things, this can allow them to e-mail pictures and video from their smartphones, which can be critical when there are breaking news events in your community. The CMS we picked has nailed this part. It gives someone who might be witnessing a breaking story the opportunity to submit stories to the site, including pictures (and mapping those pics). What’s more, once the article is posted, you can update it via e-mail replies from the e-mail confirmation the CMS sends when the article posts. This may be the coolest single feature the platform we chose provides.
5. Off the shelf cross-promotion: It must be easy to add features that help internal site promotion. Having features sprinkled through as site such as Most Viewed Pages, Recent Comments, Highly Rated articles and so on are very helpful at increasing the time people spend exploring your site.
6. Outbound RSS: Mentioned earlier was inbound RSS. Just as you can and should pull in RSS feeds from complementary sites, you should make various RSS feeds available so that others can pull in your content to their pages. A CMS should automatically create a range of RSS feeds (e.g., Top Headlines, department and author specific feeds, etc.).
7. Design templates and flexibility: CMSs usually come with pre-built templates, as well as the ability to customize the look and feel. If you don’t like the pre-built templates you can preview, ensure that the process to change the site design is straightforward. [Side note: I have, unfortunately, heard of designers charging sites $5,000 for a WordPress template when a few hundred dollars should get you a solid design.]
8. Pictures and video: Not only should it be easy to embed code that pulls in photos and video from sites such as flickr and YouTube, the platform should allow you and your community contributors to upload directly to your site. Having users be able to rate photos and videos is another way to increase engagement with your community, which is vital for your success.
9. Integration with Social Media: Your CMS should enable you to easily integrate with Facebook (and Facebook Connect) as well as Twitter. This includes enabling you to automatically post items to your accounts on the Social Networks including shortening URLs (e.g., using a tool such as bit.ly). Also throughout your site, it should be easy for users to send your articles, photos, etc. to the major social tools (Digg, StumbleUpon). Don’t forget e-mail – still the most popular way to share an article. “Send to a Friend” should be baked into the system.
10. Analytics: Not only should it be easy to add third-party tracking tools such as Google Analytics and Quantcast to a site, there should also be the ability to measure success and reward contributors based upon how well read one’s contributions are.
11. Events: A community-powered Events Calendar is a great way to connect with the community. Not only should a CMS have this capability, it should allow your community to easily submit events. The system should allow for plotting of the events on a map and have the basics of an Events Calendar such as support for recurring (i.e., multi-day) events.
12. Classifieds: While Craigslist has made it to many communities, it doesn’t work well today for hyperlocal. If you are only interested in garage sales in your immediate neighborhood, for instance, Craigslist can be unwieldy. Thus, there is an opportunity to fill a niche where the big boys aren’t servicing your community very well. Naturally, having features you expect in articles (maps, photos, etc.) is important for classifieds as well.
13. Maps: The importance of maps/location continues to increase with the popularity of smartphones. A smart CMS will be able to recognize a photo or Tweet having a GPS coordinate appended to it. This gives your community another way to navigate your content (i.e., location) and becomes more important as mobile consumption increases.
14. Mobile: Another item that I expect to rapidly grow in importance is mobile. A CMS that allows for your site to be easily consumed on various mobile platforms will be a big asset. At the moment, mobile requires a lot of custom development but this should change in the relatively near future.
15. Search Engine Dashboard: Not a common feature yet but one we expect to become more common. Sites such as the Huffington Post are very sophisticated in analyzing search trends to drive headline selection, tagging and how visibility of articles is raised or lowered based upon search term frequency.

At the risk of this sounding like a sales pitch for the platform we chose, I was very impressed with the flexibility and extensibility of the Neighborlogs platform we chose. It met nearly all the criteria listed above. Progressively, I’m learning the platform more and more and finding more slick things it can do. If I had to summarize why it’s a great fit, it is the fact it is purpose-built for the hyperlocal space whereas WordPress, Drupal, Django and other options I consider are great general-purpose systems but not geared towards hyperlocal specifically. Like WordPress and the others, you can’t beat the price (free). They currently only charge a revenue share on the self-serve ads that are purchased through that tool (no split on the ads you bring to the table).

To provide a bit of balance, let me share some areas of constructive criticism for Neighborlogs. The platform developers are running their own hyperlocal site and local network and are very busy. They aren’t always quick to respond, though it’s certainly better than WordPress where you just have a developer community and no dedicated team to support you unless you hire your own team. There are a few items that are not perfect in how they pull in RSS feeds and the accompanying social media features. Their ad system isn’t as robust as some of the ad servers out there, but the shortcomings weren’t deal breakers for us. Being a relatively new company and platform, there’s always the risk that they don’t survive, but, as good of a job as they have done, I think others will discover the benefits themselves.

Overall, I’d encourage people to clearly define their own criteria. My criteria aren’t applicable to everyone. Establishing your own will greatly increase the chances you’ll be happy long term. I encourage others to share their experiences, good or bad, with various CMSs they have used. I also welcome feedback on our new site. What works for you and what doesn’t?

Their near death experience is similar to what Digital Equipment Corp (DEC) and IBM faced. Only IBM remains a blue chip market leader. However, IBM completely reinvented itself from a “big iron” mainframe and minicomputer driven company to the market leader in I.T. related services. There were some valuable assets that they were able to leverage but it took an outsider like Lou Gerstner to make that wholesale change happen.

Meanwhile, the vanguard company of the minicomputer era (DEC) wasn’t able to make that shift and sold at a deep discount to Compaq (who in turn was bought by HP). It’s important to recognize that IBM and DEC were in highly competitive markets. DEC along with countless other mainframe and minicomputer companies were unable to transform themselves and are mere footnotes of history. In contrast, the newspapers have largely operated in non-competitive markets by comparison. It will take a true newspaper leader and visionary to make this happen as opposed to someone just milking the cash cow until it withers and dies.

The “good news” for newspapers is their stocks are so far in the tank that there’s relatively little risk (easy for me to say!) in them taking some calculated risks. I didn’t work for IBM but my impression is they allowed the services group to have true independence from the legacy businesses IBM had. I was closer to a couple similar situations — how Microsoft handled Xbox and Expedia — so I will expand on those examples. I would argue that Microsoft’s only had two real new, stand-alone successes in the last 10 years – Xbox and Expedia.

While Microsoft has yet to fully recoup its investment, few would argue that Xbox hasn’t been a commercial success. In the meantime, it is generating a year by year profit and more importantly from Microsoft’s vantage point is having a coveted spot in millions of consumers’ living rooms.

In roughly a parallel timeframe, Expedia was incubated inside Microsoft but was running into some issues being inside of Microsoft. Rich Barton was trying to run Expedia as a company 100% focused on achieving success within the travel sector, however periodically would run into stumbling blocks. For example, organizations like United Airlines, Hilton Hotels, and countless other travel companies didn’t like what Expedia was doing to the travel market. The problem for Microsoft was that these companies were big customers of Microsoft’s software and it created internal conflict. Eventually, Rich made a compelling case why Expedia should spin out of the company and they did so. Microsoft made a nice return by selling its stock in Expedia in the public market. Unfortunately, there have been virtually no Rich Bartons in the newspaper industry.

How did they do it and what can newspaper companies learn from this?

Bill Gates and Steve Ballmer were smart enough to accede to the request of the leaders of Xbox and Expedia to have separation from the main company. That had three main dimensions:

• Physical separation. Both the Xbox and Expedia teams were located several miles from Microsoft’s main campus.
• Brand separation. Other than very light branding (e.g., in the footer of their website in a subtle gray font), you see little or no mention of Microsoft in Xbox. Expedia became a fully independent brand.
• Technology separation. A pivotal early decision was to not tie Xbox to the Windows platform which is a general purpose operating system rather than something that is focused purely on gaming. I wasn’t privy to Expedia’s development details but I don’t think the technology platform was a big factor one way or another.

Smartly, both organizations did leverage at least three things from the parent.

• They hired in great talent in to their teams. Just as important, they weren’t forced to bring people on to their teams.
• They utilized the company’s capital to build big new businesses.
• They leveraged the distribution capability of the parent. In Xbox’s case, they didn’t have to establish all new channels of distribution. In Expedia’s case, they had a carriage agreement with MSN that gave them a huge infusion of traffic to build their business.

Is it too late for newspapers? No more than it was for IBM in the early 90′s when many wrote them off. Will their leadership and investors have the guts to do it? I’m hearing rumblings from a few. Most are half-hearted attempts. Fortunately, there are some capital efficient ways of doing this. For example, with as many as 20,000 hyperlocal sites having formed in the last few years, a smart partnering strategy, limited capital and a distribution partnership would be a way to start.

Today, most of what I have observed with local media is they are using phone-based sales methods akin to the uninvited and irritating telemarketing methods that can interrupt our evenings. Not surprisingly, these “script readers” have had very low yield. Script readers can be fine for simple things like setting appointments but that’s a far cry from closing meaningful business. The successful alternative is to become invited and to establish a relationship with prospective customers through high quality lead generation.

There are many different tactics for lead generation but the one I’ve seen perform the best has been the organizations that establish thought leadership in their field of expertise. In the earlier piece, I highlighted the thought leadership opportunity available to local publishers.

The disruption caused by what Jeff Jarvis has called The Great Restructuring has created demand on the part of local businesses to accelerate their understanding of Internet-based marketing. Local publishers have an opportunity to fill that void by establishing themselves as thought leaders in digital marketing.

With my publication (www.sunvalleyonline.com), we have combined a series of seminars and a how-to guide to digital marketing to stimulate demand for online marketing that my site fulfills. The seminars and how-to resource are being used both for customer acquisition and retention purposes.

Seminars
Increasingly, local publishers have found value in inviting in 3rd parties such as Greg Swanson and Mel Taylor to present to current and prospective customers. I have done many of these as a veteran marketer myself. Ironically, I get a stronger response when I’m an “out of town expert” than when I present in my own home market. We also draw better when bringing in a 3rd party. When we had Greg present, it was our best-attended seminar.

These are terrific opportunities to position a publication as the source of great insights regarding digital marketing. While some business is driven immediately, there is a longer-term benefit we are starting to realize. Today, when a customer thinks they need to do some Internet-based marketing, we are top-of-mind. As sellers of media know, this is where you want to be.

I have created a dozen or so different presentations from Search Marketing to Website Conversion to Email Marketing. While they all help establish thought leadership, there is one that is particularly well suited for publishers that they take for granted. That is, what does it take to be a successful online publisher. Businesses of many shapes and sizes should think of themselves as mini-publishers around their field of expertise. A lightweight version of what we do as publishers is germane to them whether it is how to come up with an editorial plan (e.g., they may send out weekly/monthly e-newsletters) to how we use tools like Twitter and Facebook to how we look at analytics to measure our success. One publisher had me keynote a paid-for seminar that allowed them to defray the costs of putting on the event. They used their own customer lists, house ads and a few other tactics to drive attendance. This all keeps down the costs of acquiring new customers.

How-to resource on small business digital marketing
We continue to expand upon this resource we have used with our publication but have begun to make this available to 3rd party publications. The following is a description of the resource that provides the rationale why a publisher would want to offer something like this:

The ways to reach prospective and current customers have radically changed in the last 15 years. Most small businesses have done little to change their ways beyond having a website. They are often overwhelmed at the broad array of tactics available to them. This how-to resource is designed to demystify the digital marketing tools as well as address how their offline efforts can support their increasingly digital marketing endeavors. Each section will provide an overview of the marketing area along with steps, tips, templates, best practices and pointers to additional resources.

One of the ways this resource will be used is by publishers and technology companies targeting this audience as a lead generation tool early in the sales cycle (e.g., requiring registration to get a free chapter). Later in the customer lifecycle, it can be used as a retention vehicle. For example, the publisher may pay for the advertiser’s subscription for as long as the advertiser is an active account. If the advertiser no longer uses the publisher’s marketing tools, they would also lose access to this valuable resource.

I like to say that establishing and maintaining thought leadership is a journey, not a destination. In other words, if you want the accompanying lead generation to be a renewable resource, it takes ongoing effort. The following is how to look at it from a daily, weekly and monthly basis to ensure success if you are a publisher:

• Daily: Having a library of how-to resources available on demand to customers enables them to draw on your expertise without taking an inordinate amount of your staff time.
• Weekly: Some publications generate weekly tips and tricks emails that draw from the know-how captured in the how-to resource as well as topic things going on in your community of interest to advertisers (e.g., some community event might lend itself well to a particular marketing tool you offer).
• Monthly: Regular seminars or webinars can go into more depth on a particular topic and offer face-to-face contact with customers normally dealt with over email or phone. Recording these can make them available upon demand.

Challenging economies are a great time to recalibrate a business. There’s no more impactful area to affect the bottomline than your customer acquisition and retention practices. Is your organization taking advantage of this opportunity?

In my experience as a revenue traction consultant and local publisher, I have seen 20% growth is attainable as we saw that with a number of clients in Q1 when most businesses saw a decline in revenue. McKinsey also found that already the penetration of SMBs spending online is greater than the penetration of SMBs spending in newspapers. Though we often think of smaller businesses being behind larger organizations, it turns out they have deeper penetration with online than any other form of measured media. It is worth noting that SMBs aren’t simply interested in display ads, however. McKinsey’s findings echo my experience that SMBs have interest in other online marketing tools like Search, Email and other non-display tactics.

In general, we have seen a gap between the high-end of the market where shoe-leather sales models are still appropriate and the low-end of the market where some local media have pursued self-serve models. Our experience has been that added sales focus in the mid-market will increase sales yield. This isn’t lost on companies like ReachLocal, Citysearch and others who are grabbing swaths of the market that local media has every opportunity to capture with the proper focus. One of the ways to differentiate versus the national players is outlined in the follow-on piece on thought leadership I outline below.

It is critical to apply the appropriate sales model to the revenue opportunity. As a general rule of thumb, here’s what we find/recommend:

• If a customer will bring in more than $100,000 in revenue, you can afford a shoe-leather sales model
• If a customer brings in between $5,000 and $100,000 per year in revenue, a telesales-based approach is most appropriate. Note: The biggest point of confusion I observe is people confusing either inbound order-takers or outbound “script readers” in call centers with a well-trained, professional sales organization that actually closes new business.
• At under $5,000, you’ll want one or some blend of the following:
  • Inbound order-taker call center who can quickly turnaround a new advertiser but aren’t involved in cultivating new business
  • A self-serve ad model
  • A channel sales model where your offering is part of a larger solution/relationship

A reason this gap exists is that the traditional shoe-leather approach isn’t economically viable in the SMB market. Thus far, all of the efforts I have heard about are taking wrong-headed approaches. While SMBs are looking for a partner who can provide consultative advice, instead they are getting low-value “script readers” who are no different than the irritating telemarketer calls we hate to get at home. This is in contrast to the well-trained, professional telesales organizations that are profitably driving revenue for many organizations. One of the best examples is Dell that drives over $3B in sales via their outbound telesales organization (my business partner ran that organization before joining my firm). In McKinsey’s study, they found 60% of SMBs are comfortable with remote support via phone or email. An additional 26% said a mix of face-to-face and remote was ideal. Only 8% stated face-to-face was what they always wanted.

One might reasonably ask “where do I find the resources to build a professional Inside Sales team when we are cutting back?”. In every sales organization we have worked with whether it is in the media business or not, there are bottom performers that should be let go. Typically, the Inside Sales reps we hire have a loaded base cost of $3,000 per month and a variable comp of an additional $2,000 if they hit their targets. Two or more of this type of headcount can be filled for every bottom performing shoe-leather sales person. When we build these teams from the ground up, we normally start with two people and then scale the organization with revenues so this is well within the reach of every publisher. We have seen these Inside Sales organizations grow to dozens of team members as the revenue supports it. The typical range in revenue generation is $300-500k per rep which can be quite profitable.

Let me comment on self-serve ad models since it is held out as a savior of sorts. Like many things in technology, I believe that it is overestimated in the short-term and underestimated in the long-term. My consulting business has worked with one of the leading self-serve technology vendors. Their lack of success with the self-serve model is why we helped them develop an alternative low cost customer acquisition model that reflects the reality that the vast majority of advertisers today still need human involvement. I believe that will change but my gut tells me we are three to five years from self-serve ad models delivering on the promise many of us hope for. In the interim, a bridge to that will be what I call a “publisher assist” model. The publisher realizes some of the efficiency benefits of the self-serve tools while taking an approach comfortable to the SMB.

A topic for a separate article is the products one should offer to SMBs. In a nutshell, simplicity is key. In addition, experimenting with different offerings is important.

In a follow-on piece next Wednesday, I will address a critical component of a low-cost customer acquisition model. That is, it’s necessary to have a cost effective lead generation machine. One way of doing that is to establish thought leadership. The disruption caused by what Jeff Jarvis has called The Great Restructuring has created demand on the part of local businesses to accelerate their understanding of Internet-based marketing. Local publishers have an opportunity to fill that void by establishing themselves as thought leaders in digital marketing. In the follow-on piece, I will highlight how we are using a How-to guide to digital marketing and a series of seminars to stimulate demand for online marketing that my site fulfills. The how-to resource and seminars are being used both for customer acquisition and retention purposes.

Nonetheless, this is all moot if they don’t develop a viable revenue model to go along with it, something they have no apparent experience with since the Seattle Times had done all of their advertising sales as part of their JOA. The painful truth is that 99% of the local Internet plays have proven how NOT to develop a sustainable model. Some newspapers have claimed their online properties are profitable but this is a suspect claim since they weren’t burdened with the costs borne by the print product. In other words, most local online plays are subsidized by an offline counterpart which the P-I no longer has.

One of my observations from attending the New Business Models for News conference hosted by CUNY and run by Jeff Jarvis (of Buzzmachine & What Would Google Do? fame) and David Cohn (Spot.us) was that virtually all of the new business model discussion was about ways to lower production costs or new ways to fund journalism. While those items help, it’s clear the only path to long-term economic viability is to directly address the revenue piece of the equation.

Having spent the last 13 years off and on working on local Internet media, I’ve made my share of mistakes and have learned many lessons along the way. I’ve applied those to the site that I own and run (SunValleyOnline.com) and have managed to build a modestly profitable business. I hope the P-I has success so I’m sharing what I believe are the 10 most common mistakes that have prevented most local media sites from having success.

The following are the list of things the P-I, and other online-only newspapers, should avoid that most other local websites haven’t avoided:

1. Many local websites assume that since they’ve been in the business for a long time that they don’t need to conduct any research with their customers and non-customers. When we did research, we learned things that changed how we positioned our website to our advertisers as well as it informed our editorial direction. We also gained terrific insights into how much we did/didn’t overlap with our competition.

2. While most of us in the local publishing business think our site is available to everyone, the P-I should avoid the one-size-fits-all mentality. It’s a mistake to have your sales team start calling on as many advertisers as possible without regard to vertical market, psychographic attributes, etc. A well-honed value proposition for a particular segment is more work but worth it.

3. Until we did research, we had no ability to quantify the value of our audience. Just because one is the market leader (in terms of traffic) you still need to articulate a return-on-investment calculation to a prospect. Just as important, it’s important to worry about calibrating expectations with your advertiser about your advertising. Most small businesses need help and can have unrealistic expectations. If you don’t set expectations properly, the advertisers will “one and done” — i.e., they won’t renew as they may have had wildly out of proportion expectations.

4. Most newspaper sites clutter up their pages with as many ads as possible. After all, if there are more ads on the page, doesn’t that mean more ad revenue? [Hint: No] Many of these sites also use tiny static ads. There has been ample research on ad effectiveness of various types of banner ads. Apply that insight. While banner ads are the mainstream “solution” today, I’m fully convinced that new models of matching buyers and sellers will emerge. Google’s AdWords has been the “killer app” for online advertising but there’ll be others. Our motto is to test, analyze, refine, test, analyze, refine. I have little doubt that we’ll look back 10 years from now and laugh at what we considered to be state of the art.

5. Most media sales organizations aren’t tightly defining each step of the sales process with the corresponding likelihood of closing the deal. Too many also don’t have a systematic Win/Loss analysis process. While there are thousands of businesses in Seattle, it’s a path to failure to think you can just churn through advertisers.

6. Most local media sites simply create a rate card and when it’s time to ask for the order, toss it over the transom. The thinking is “A rate card is just a rate card. No need to use it as a strategic selling tool.” In reality, it has a lot to do with driving long-term retention of an advertiser as well as creating scarcity during the initial sales process. If they understand the rate card and you remind them on a monthly basis of how you are delivering against your agreement, advertiser retention rates will climb.

7. There’s a myth that since advertising is a “relationship” business it’s necessary to hire expensive shoe-leather salespeople as that’s the way it’s always been done. Many don’t have a grasp of how one builds a world-class Inside Sales organization and assume that an Inside Sales organization wouldn’t work for media sales. Unfortunately, they forget the fact that they are trying to extend beyond the normal 10% penetration of local businesses that newspapers have and that this means less revenue per account. That demands a lower cost model. Just because you are hiring an experienced media sales person with lots of field experience doesn’t mean that they’ll know how to create a low cost customer acquisition team/model. This is a radically different skill set.

8. Unfortunately when many local media organizations hire their online sales people, they don’t worry about making the distinction between “hunters” (i.e., sales people adept at developing new relationships) and “farmers” (i.e., account manager types that like to develop long-term customer relationships). Just because some sales people have an impressive roster of past clients from their offline sales experience it doesn’t mean they will know how to build a new book of business.

9. The P-I is fortunate that they have a buyer’s market when it comes to hiring but that doesn’t automatically mean they’ll hire the sales talent with the greatest potential. I’ve seen growing sales organizations hire unseasoned but high potential sales people and have great success. Having the right job descriptions with accompanying compensation and quota models is critical. It’s also vital to have a structured and ongoing process for developing the sales team’s sales and marketing skills. The P-I needs to have much more than an initial training curriculum and then “turn them loose” to make some rain. High performing sales teams train all the time.

10. The P-I needs to do more than just provide the sales team with a salesforce automation tool so they can use it to manage their pipelines. It can be a strategic tool for the business on a daily, weekly, monthly and quarterly basis not only for the sales team but also the executive team. We often see a tool such as Salesforce.com be under-utilized.

There are many astute and experienced readers and I hope you add your thoughts so we can tap the collective intelligence as no one I know purports to have all the answers in this evolving area. It’s an exciting (and challenging) time for those of us in local media. I wish the P-I all the best.

If you think about what made newspapers viable for so long it was the fact that they had two products/businesses that were largely unrelated but delivered by the same organization. Newspapers have had a news-and-information business monetized by display ads and a classifieds business monetized by classified ads. The classified business was enabled by the distribution and audience of the news franchise. However, it’s been clear that that second revenue stream doesn’t translate on a sustainable basis online.

To date, most local Internet plays have struggled to make it work relying solely on display ad revenue. I’ve come to the belief that it’s going to take a similar dual business model to support local media (we’re working on doing that ourselves). Unfortunately for many local news organizations, it has been more about dueling business models (i.e., worries of cannibalization) than recognizing that what they need is a dual business model to make their online business much more successful.

So the question is what will be the accompaniment to the display ad business? We’re seeing a few different approaches explored. For example, micropayments and non-profit/foundation support are oft-discussed. I don’t believe those have much opportunity to scale beyond some exceptional situations which are terrific but hold little promise for most media organizations.

Then there’s the problem of transitioning from a for-profit to not-for-profit model which typically begins by laying off the entire staff and getting the investors to agree to donate all of the assets of the enterprise into the new nonprofit entity. My friend Jonathan Weber expanded on this in his Endowed and Out piece. There are a number of other potential second business models but I think the Search-related model is a viable “other” business model.

The interesting and loose parallel with the classifieds being enabled by the news distribution historically is with those sites selling online directory solutions bolted on to a news site. Since most local news sites have the highest PageRank in their area, the PageRank is a form of “distribution” advantage that the news sites have and usually don’t recognize. One could argue when we see the demise of newspapers like the Rocky Mountain News that one of their most valuable assets in a liquidation is their high PageRank. When you have a high PageRank site with a leading directory solution, the businesses in that directory should show up very high in SEO and thus the news site has some unique value they are adding to those local businesses competing to be found.

The challenge remains setting up a winning sales model to capitalize on this. I wrote a couple of pieces for David Cohn’s and Jeff Jarvis’ NewsInnovation.com site expanding on this.

• Five Fatal Flaws that are killing local Internet plays
• Ten Point Plan to (Re)Building a Successful Local Media Salesforce | Networked Journalism Summit

The approach I’d espouse is much closer to Dell than it is a traditional local media sales force, which is generally ill-equipped to sell these new products. When I was at Microsoft and focused on the local space (I was part of the founding team at Sidewalk), we often thought that the biggest asset that the incumbent newspaper and yellow page companies had was their local sales force and relationships. Having gotten closer to “the last mile” of the Internet, I’ve come to observe that in most situations the local sales organizations of the incumbent media is more encumbrance than asset.

Consequently, the smart incumbent media should setup a parallel tele-sales based model that are filled with “hunters” and leave the existing “farmer” sales force to harvest the longtime advertisers as long as they can. It is important to note that this outbound tele-sales organization is dramatically different than the typical “call center” that newspapers have for classifieds. Thus, thinking that that group will have success is a long shot. The sort of tel-esales organization that exists at a place like Dell is able to prospect and close business into the low six figures. In other words, it’s not taking a $150 classified order over the phone.

The sooner local media businesses recognize it’s critical to have dual business models rather than dueling business models, the sooner we’ll see hiring rather than firing being the storyline of local media.