After my recent stories on the state of independent news sites, several folks called or e-mailed to say I was barking up the wrong tree by focusing on nonprofits like MinnPost and the Voice of San Diego. The real future, they said, is with sites that are in it to make money. They may be right.
“I think there’s a great business model here,” said Merrill Brown, a media management and strategy consultant. “If you can get a quality product out there, local advertisers are looking for alternatives… I think there’s plenty of evidence of that.”
So far, of course, there’s little evidence that profitability will reliably follow. Even many operations that talk about being in the black do so with asterisks – the key players aren’t drawing a salary, or the site is subsidized with other lines of business, for example. Others argue nonprofits will be the winning models for robust public-service news sites. Only today, a seemingly promising startup in Seattle, Crosscut, announced it was transitioning from a for-profit site to nonprofit status.
But many people say it’s not surprising that profits are not there at this point in the innovation cycle, and point to the rapid growth of businesses trying to tease out local advertising dollars. The day of online profits is coming, they say, and for-profit news sites will be best positioned to thrive.
“We’re still at the very early stages of local advertising on the Web,” said Jonathan Weber of Missoula, Mont., who runs a string of Western state websites under the name, New West.
Weber says the potential is already clear in the disparity between the time people are spending online and the amount of local advertising going into the Web. “You’ve got 6 to 8 percent of ad dollars online, but 25 percent of people’s media time is online,” he said. “I very much believe that gap has to close.”
By the volume of people calling him and asking for advice about starting online news operations, Weber can tell there’s wide interest in running community news sites. Some of the aspirants are former newspaper reporters and editors who took buyouts or lost jobs in newsroom downsizing efforts, and are hoping to find a new journalism life on the Web.
Weber tells them two basic things: First, making a go of a community news site on the Web is no picnic. (His own New West operation remains slightly shy of the break-even point after three years of operation.) Second, the long-term outlook is bright. “I think we’re at the front edge of this,” he said.
Brown said the potential of local advertising can be seen in the number of players stepping in at the national level to aggregate community event and hyper-local information. Sites like Yelp, Zvents and Eventful show the potential demand, he said.
Although these and other national players each take a slice from local advertising, Brown said the size of the pie is plenty big. “There’s lots of money in local advertising,” he said. “Advertisers are unhappy with newspapers; TV websites remain poor; and television is overpriced.” One key to success, Brown said, will be the adroit mining of vertical advertising categories like entertainment, fashion, real estate, the arts, etc., that are “revenue-friendly.”
With so much in flux – mainstream media in severe financial trouble and Web participation rising rapidly – it’s impossible (at least for me) to get a solid grip on the scope and dynamics of news-site development on the Web. Will national news aggregators like Ourtown or outside.in grab a strong foothold in communities across the country? Will national lifestyle networks like Glam.com take a big chunk of advertising dollars? Will the wide-scope offerings of a local newspaper be a sustainable model online? Or will a multitude of niche sites – local sports, local politics, local schools, local traffic – be the winning model?
At a minimum, it would seem we’ve entered a period of intense startup fever, with expectations growing that the marketplace is ready (or almost ready) to support Web operations that combine hometown information and advertising.
Peter Krasilovsky, a digital media consultant and blogger, says the entry point for any community news startup has to be the advertiser. Too many website entrepreneurs are still thinking in terms of the newspaper model — assembling a potluck of community news and trusting that advertisers will naturally follow, he said. “That’s a kind of longing for the old ways,” he said.
Successful startups, he said, will begin with the question of what local small businesses need to be successful. One answer may well be advertising on a local news site, but there are likely to be many other answers, and Web entrepreneurs need to be prepared to provide them, even if it’s at odds with their initial mission. “You’re never going to have a successful business until you focus on the advertisers,” said Krasilovsky.
James Macpherson, who runs the Pasadena Now site, is following this strategy, aiming to serve as Internet and e-commerce consultant for Main Street merchants in Pasadena. But all advise that people who get in the game now will need to prepare for some lean (at best) early years.
Like Weber, Macpherson hasn’t yet turned a profit. And Weber gets close to the break-even point by having sideline businesses like hosting conferences on the Western state issues of growth and change, and a small indoor advertising operation.
“There’s going to be a business there,” said Krasilovsky. “But think of it this way. People are going to have to get accustomed to making $30,000 to $50,000 a year instead of $100,000 or $125,000.”