Beat Businesses as Building Blocks of News Ecosystems

In research conducted at CUNY’s Tow-Knight Center in 2009 and again in 2014, modeling the news ecosystem of a market the size of Boston and then of New Jersey, we found that beats can indeed be businesses. We found examples scattered across the country — and I emphasize the word scattered — of hyperlocal blogs covering towns or urban neighborhoods of about 50,000 people that were earning upwards of $250,000 to $350,000 a year, mostly in advertising revenue. It is grindingly hard work. To serve, attract, and maintain a loyal audience of sufficient size within the community, the blogger must feed the beast not merely daily but many times per day. She must constantly be out in the community, talking with people. She has to perform not just journalistic functions but also commercial functions, getting over the journalist’s common phobia of business — specifically of arithmetic, advertising, and sales. To do all that alone is nigh unto impossible, so the hyperlocal blogger often works with partners — sometimes spouses — and has to earn the trust and affection of members of the community as collaborators. She also has to grapple with conflicts of interest more easily compartmentalized in large news organizations with their still-sprawling organization charts and lawyers on call — namely, how to deal with a local merchant as a reader, a subject, a source, and often an official of the town as well as a customer, while maintaining her own independence and credibility. It’s tough. It’s exhausting. It defeats many who try it. But still, there are many examples of success — from Baristanet to the West Seattle Blog to Red Bank Green, from The Batavian to The Lo-Down to Watershed Post. These are people who care about their own communities, who want to serve them, who sacrifice their days and any prayer of vacations, who pour sweat equity into their enterprises with no hope of the exits that other entrepreneurs work toward. And thank goodness for them.

They are, as I said, a scattering. I hope to see considerable growth in these atomic units of the nascent news ecosystem. That is why at CUNY we are beginning training in beat businesses, helping journalists and others to identify communities to cover, to create their content and service, to build their advertising plans and get experience in sales, to build their marketing plans, and to get proficient at their technology platforms. In our research and modeling, we believe hyperlocal sites could increase their revenue — getting a larger share of the money that has gone to local weekly newspapers, which can exceed $1 million a year — by improving their advertising offerings, joining revenue networks, and developing ancillary revenue streams, including events and contributions. Here is what their businesses can look like:

Advertising: Most of these sites make the lion’s share of their revenue selling ads to local merchants and services. Of course, these are not CPM-based (cost-per-thousand impressions) branding advertisements of the sort that large marketers and agencies buy from large media outlets. They tend to be banners and buttons and sponsorship messages — many to a page, often rotated — or enhanced directory listings for which customers are charged simple, flat fees of anywhere from $20 to $200 to $2,000 per month, depending on the size of a site’s audience and the courage and negotiating ability of its proprietor.

Local blogs are innovating with ads forms. Perhaps we can blame blogs for inventing the plague now called native advertising. Bloggers invented what they called sponsored posts, which flowed in with the stream of other posts, though on responsible sites they are clearly labeled. Some sites, such as Watershed Post, are creating separate feeds of Twitter-length updates from advertisers for their home pages (real-life examples: “New Mini-Hors d’Oeuvres & Dessert Molds for All Your Summer Parties!” and “Make Perfect Whoopie Pies!”). Broadstreet Ads, an ad-serving platform based in New Jersey, invented editable ads, making it easy for merchants to change their messages often. One of my former students in Elizabeth, New Jersey, has found considerable success making videos for local restaurants and merchants, which they can use not only as ads on her site, Elizabeth InsideOut, but also on their own sites and YouTube and Facebook pages. The Tow-Knight Center is preparing a report on best practices by beat businesses in ad offerings.

Digital services: Media organizations small and large need to move past selling space — no longer the scarce commodity they once controlled — to selling service, starting with the needs of the advertiser and using more tools to help them meet those needs. In this sense, media companies begin to look like advertising agencies, helping clients improve their digital lives. At Tow-Knight, we looked at the digital presences of 1,000 local merchants and services in a New York City neighborhood and a New Jersey town in 2012; what we found was opportunity: About a third of these consumer businesses and services did not have web sites and of the rest that did, only about 10 percent had been updated in a month. Almost half the businesses had no Facebook presence. About three-quarters had no Twitter account. Even more had nothing on YouTube and yet more had no email newsletter.

A local blogger or newspaper could help these businesses by building and helping to maintain feeds on Twitter, Facebook, YouTube, Instagram, Google+, Foursquare, et al — not to mention Google search. Larger newspapers have been helping clients with their SEO — search-engine optimization — for sometime. The advantage: media sites can offer fuller services with a greater share of an advertiser’s spending and can gain revenue that isn’t fully dependent on the site’s own traffic (especially useful for a startup whose traffic hasn’t yet grown to critical mass). The disadvantage: This work could be time-consuming and costly. This is why, as part of the New Jersey model, we are looking at the feasibility of shared production services for local sites.

Another issue: Many media sites don’t have great digital presences themselves and there’s nothing to say that agencies or new consultants couldn’t beat them to the punch, offering small businesses such digital services. Media sites have a limited window of time to learn these skills and then capitalize on the trust they have with their advertising customers, offering them more services to solve more of their problems and get more revenue in the process.

Ad networks: In our recommendations for growing the business of local sites, we at Tow-Knight envisioned networks both large and small. No hyperlocal blogger can go marching into a sizable regional advertiser hoping to sell an ad that will reach a few thousand readers. But a network seller — such as the daily newspaper in a market — could aggregate the audience of all the small sites there and sell them as a package. Aren’t I trying to bring mass-media economics that I’ve decried to these small sites? Yes, I am, because there’s still money to be had in selling advertising at scale. These local sites can also sell each others’ ads, so that a furniture store, say, could reach customers in five nearby towns by placing ads in five local sites for a reasonable package price.

Nascent local ad networks are emerging in some markets. Connecticut’s Independent Media Network employs a salesperson to represent more than 70 independent sites and 100 local papers with an aggregate 4 million pageviews a month, splitting revenue 50/50 with network members. BroadStreet Ads in New Jersey has built functionality into its ad-serving software that allows one site to sell ads on others’ sites, creating ad hoc networks to suit advertisers’ needs. Of course, local sites also avail themselves of Google AdSense and national ad networks, which tend to sell remnant advertising that can cheapen a site with irrelevant and junky ads, bringing in enough to pay for not much more than coffee. The best networks will be built on local value, giving advertisers the opportunity to reach engaged audiences for far less than monopoly local newspapers have charged. In New Jersey, we are aggregating data on the audience of the ecosystem’s many sites in the hope that it can be sold to larger advertisers, allowing the network to supplement the revenue of each site in it.

Now if hyperlocal networks are such a good idea, you might ask: Why was Patch such a flame-out? Patch sounded like a good idea. Its founders saw the economics of hyperlocal: Local weekly newspapers could earn $1–3 million, starting a local blog with an inexpensive reporter — paid $25–40,000, plus a small freelance budget — and having groups of sites share sales staff to steal away even a modest proportion of what the papers earned. It seemed like a sure win. Patch had complex and secret formulas to pick the most lucrative towns to serve, starting with places that had well-to-do residents and healthy downtown commerce. But Patch didn’t get its own model in shape before multiplying its mistakes across more than 900 sites. The content in Patch’s sites was — pardon me — patchy. Unlike local blogs run by local people who cared about their towns, much — though not all — of Patch’s content was dull, generic, and voiceless. Its audience numbers were spotty and its ad prices too high for local merchants for the performance they saw, according to advertisers I spoke with. Local sales turned out to be more difficult and expensive than Patch’s founders had forecast. Toward the end of its tortured run before being sold to a private equity firm, Patch tried to compete instead with the larger daily metro newspapers, aggregating Patch sites’ audiences to sell to larger advertisers. But that was no salvation.

Before they launched, I suggested to Patch’s founders that they would be wise to work with the sites already in place, starting an ad network across them, sharing content to be more efficient, and concentrating on towns where there was no local blog — there are still plenty of them. This would have enabled Patch to scale across the country much faster at vastly lower cost and risk while also learning valuable lessons from local partners. But Patch refused to play well with others. I heard its executives vow to kill their small competitors. Pity. In the end, Patch was sold by Aol and denuded of staff, doing nothing to help the reputation of hyperlocal, I’m afraid.

Events: One surprise in our research of local sites’ businesses — for me, at least — was how much some of them were earning through events. In Brooklyn, the Brownstoner blog started a flea market that became the core of its business and expanded into a food fair, renting stalls to vendors for $100-$220 per day. [Update: Brownstoner was sold and decoupled from the Flea in March 2015.] Brooklyn Based brings in sponsors and then partners with local businesses to play host to neighborhood shopping, bar, and restaurant crawls. Morristown Green runs an annual film festival and sells ads in its printed program. Other sites have held craft fairs, block parties, and other local get-togethers, which have the bonus value of marketing their services and deepening their relationships with neighbors in their communities. Brick City Live, a site in Newark run by Andaiye Taylor tried holding an event to teach local merchants how to better use the internet with the hope that she could prospect them for advertising sales. She found that the training was so valuable she could charge businesses for it, and so a new revenue stream opened up. In New Jersey, the Dodge Foundation’s Local News Lab plans to run an experiment to see whether a network of sites can support a shared, itinerant event-runner to handle the time-consuming logistics of organizing events in many of their towns.

Larger sites are using events at a different scale. The Texas Tribune hired away The New Yorker’s event specialist to run roundtables, debates, and festivals, earning the site $1.2 million in 2013. These events have the advantage of bringing in not just a consumer clientele but also a business-to-business market (including politicians and lobbyists) and big-ticket corporate sponsors. Business-to-business sites from TechCrunch to GigaOm to Re/code to Skift, Rafat Ali’s startup covering the travel industry, are holding conferences that earn both ticket and sponsorship revenue while also creating content and promotion.

Commerce: There’s little money to be made in ecommerce for small or local sites now. Specialized interest-based sites can earn respectable revenue through affiliate fees by selling relevant products to their users — shoes on a shoe site, books on a book site. While Amazon has dealt death blows to local merchants with its greater efficiency and lower prices, experiments in same-day delivery by Amazon, Google, and eBay may bring some business back to Main Street. If, for example, Google or eBay allows local merchants to sell their stock to local customers online, they will need outlets to advertise. And so maybe — just maybe — there will be an opportunity for local media, large and small, to earn back revenue from retailers they had lost to the net.

Patronage: And then there’s begging. Is it possible for a small site to get revenue from users? I’ll discuss paywalls — charging for access to content — below. But what about voluntary contributions — patronage? In New Jersey, the Local News Lab is planning to run experiments in membership campaigns for local sites, with the aid and expertise of helpful listener-supported radio stations. We will see whether patrons will pony up to help support the work of local sites as they do for public broadcasters. Will it help to offer membership benefits: deals with local merchants; free tickets to events; matching donations from a generous patron; or, yes, T-shirts and totebags? We will find out.

We do know that some sites have run successful crowdfounding campaigns on Kickstarter or Indiegogo to launch or to pay for specific projects. Our Tow-Knight graduate Noah Rosenberg started his successful New York content site by raising $54,000 on Kickstarter. The Dutch site raised $1.7 million on Kickstarter to launch its ambitious, subscriber-only reporting site, leading to a sequel in Germany called Krautreporter raising $1.38 million on its own. A key to these campaigns is that they give donors a choice in where to put their money and thus a greater sense of involvement and accomplishment.

Print and special reports: Because I urge news organizations to shift to their digital futures, away from their doomed print models, some think I have something against paper. I don’t. Print still has its place even with beat businesses. Some of the sites we have worked with at CUNY — The Lo-Down in Manhattan, New Brunswick Today in New Jersey, and Watershed Post in New York’s Catskills, plus other sites across the country — are publishing local guides and even newspapers. They find it easier to convince conservative advertisers to buy ads in print than online. Some find that print products, distributed freely in their towns or neighborhoods, are a way to promote their brands and either increase online traffic or add offline audience. Business-to-business sites similarly produce one-time or infrequent reports or white papers, delivered online and sometimes in print, as new sources of revenue.

I have concentrated here mainly on local beat businesses. But it is important to keep in mind that beat businesses, also known as single-topic news sites, can cover and serve many sorts of communities. There are a host — perhaps even a few too many — blogs and podcasts covering technology and its industry. There are blogs by economists and doctors. There are blogs covering various industries and agencies of government. The Guardian has long worked with a network of blogs covering the environment and Vox built its SB Nation business around sports blogs.

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