If you’ve been working in local news over the past decade, chances are that your job hasn’t felt very secure. One study estimated that as many 1,800 local newspapers have shut down since 2004, and those that have survived have faced steep budget cuts and layoffs. Hedge funds have been purchasing newspapers, saddling them with debt, and bleeding them dry, while Facebook and Google have diverted more and more local advertising toward their own services. Last year, Facebook launched a feature that would allow users to be shown more local news in their Newsfeed, but it recently admitted that one in three U.S. users lived in areas that didn’t produce enough local news for Facebook to curate.
But not all local news operations have struggled. A New Jersey based media company called TAPinto has launched 81 local news sites and is still growing. While most of those sites are located in New Jersey, the company has recently branched out into Pennsylvania, South Carolina, and Florida. I recently interviewed Mike Shapiro, TAPinto’s founder, and asked him about why his model seems to be working. We also discussed other failed local news projects and whether Facebook’s efforts to boost local news are actually working.
To listen to the interview, subscribe to The Business of Content on your favorite podcast player, or you can play the YouTube video below. If you scroll down you’ll also find a transcript of the interview.
This transcript has been edited for clarity.
Simon Owens: Hey Mike, thanks for joining us.
Mike Shapiro: Thanks for having me, Simon
You’ve actually be on the podcast before. You run a company called TAPinto. Before we get into new developments with the company, can you give us a brief overview of what it is?
TAPinto is a network of more than 80 franchised, online local news sites in New Jersey, New York, Pennsylvania, South Carolina, and Florida, with more than 8 million readers in the last year.
The interesting thing about it is you use this franchise model. Rather than trying to have this strong corporate control, you work with local people who live in these communities to run these sites. They buy into it. Can you explain how the franchise system works?
Basically, we provide the infrastructure. We provide the site hosting, text support. We do all their billing, their credit card processing of their advertisers, we train them, we provide continuing education, and they do the local news for their town and the ad sales to the local businesses in their town. And through proprietary software that we’ve developed, the sites can share content with the click of a button, and they can also sell advertising into each other. So it makes our network of local news sites both a network and scalable on the content side, as well as on the advertising side.
So if a person sells advertising on their own TAPinto site, they get a large chunk of all the money they make from that, but they can also sell advertising on other TAPinto sites. Let’s say they have a national advertiser or a regional advertiser that wants to advertise all across the state — they get a cut of whatever they sell on other people’s sites. So it incentivizes all of them to work together.
That’s correct. It even goes down to the local businesses, because most local businesses, yes, they want to reach the people in their town, but they also want to reach neighboring towns. So through our system, we’re able to help those small businesses, because really the small businesses are not only the pillars of our communities, but really are the pillars of TAPinto in terms of our marketing base and our advertising base.
Most of the monetization right now is through advertising.
Various forms of advertising. Chief among them is advertising coupled with content marketing. Second is sponsorship coupled with content marketing. And third is email marketing. We can also do social media marketing for businesses, and we also have a do it yourself feature, which we actually have a patent pending on, where businesses can submit content through the site, whether it’s a classified, a real estate listing, or a sale for the calendar. They can choose the towns for it to be published in, pay per town, and those payments are split out to the franchises of those towns.
And when you say content marketing, you’re talking about what many would consider native advertising, where they can submit an article that’s a piece of content instead of a display ad.
We have various forms of content marketing, ranging from content that they submit to content we do for them. The key is that not only are our readers seeing that content, but because our site gets very good search engine optimization, it helps them organically with SEO.
You’ve said in the past that an ideal town to launch a franchise has at least 10,000 residents. That’s the minimum population you need to have a robust business sector that can support it from an advertising perspective. And you usually advise that at least two people are working on this TAPinto site, an ad sales person and then someone responsible for the news side.
Right now we believe that a population of 10,000 and above can definitely support a TAPinto site, as long as there are enough businesses in the town or within neighboring towns in order to support it. People can combine towns, so if towns share the same school systems or the same services, it make sense to combine towns into one site.
In terms of the other aspect of it, two people can do it together part time. One person can do it full-time, so they can do both the content and the ad sales. We also have other models. For example, we have a nonprofit model where a nonprofit can launch a site, and they can do either the content or the ad sales, and then partner with a member of the community to handle the other aspects of the business. We have six hard copy newspapers now that have franchised from us to be their online site. We also have a university model. We also have an investor model, where someone can buy a franchise and then bring on someone to handle the content or ad sales.
In general, one person part time could do the content, one person part time could do the sales. I think for larger places, for example a Fort Lauderdale in Florida, which has 180,000 people and 30,000 businesses, you’d want a larger team, both to be able to report the news more robustly and also have a larger sales team to reach all those businesses.
That’s just the minimum. You have lots of TAPinto sites that not only do they have one or two full-time people, but they also have freelancers.
Correct. It ranges from sites that have content people who do it on a freelance basis, all the way up to a full-time, salaried reporter position. The franchisee can decide that and structure the business any way that they want. It provides them with flexibility. The model is itself flexible. There’s no one size fits all for any community, since every community is different. Our model accounts for that. So whether it’s an economically distressed community or a tony suburb, there’s a model that works for every community.
You mentioned there’s a nonprofit model and a university model. One example of the nonprofit model is a YMCA that hired out people to run the advertising and content, and this was another revenue stream for the YMCA. And then the university model, there’s a university that has a journalism professor running it, and each semester the students are responsible for, as part of their training, collecting news and publishing to the local TAPinto news site.
What’s interesting is we’re starting to get people reaching out to us from local chambers of commerce, downtown improvement districts, and civics associations, who are approaching us and asking if they can launch a TAPinto in their town. In the case of the civics association, we have people in the association, we can divide up the content, and we’ll either hire a salesperson or one of our members will be the salesperson. On the part of chambers of commerce, they handle the business side, and then they hire a journalist to handle the content side. There are a lot of potential models.
When we spoke last year, TAPinto had a few dozen sites, mostly in the New Jersey area. Now you’re up to 81. Where did all that expansion occur?
We had quite a bit expansion in New Jersey, but we also launched our first sites in Pennsylvania, South Carolina, and Florida, which we’re really excited about. What we’ve been seeing is that — with a lot of local newspapers getting acquired by regional or national publications, and then their newsrooms being gutted — there are more and more people reaching out to us about starting TAPinto in their town. We used to get two or three people reaching out to us a month; we get three to five reaching out to us a week now. And sometimes more than that. There’s a real desire out there for local news. The void in local news continues to grow. This provides a lot of opportunity for TAPinto and other local news sites to fill that void and provide local news for their communities.
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How much of that expansion is still organic? What I always thought was brilliant about the TAPinto model is that it would launch in a town, then there would be people in adjacent towns that would land on the website, and they would start building up a desire for their own TAPinto site, and so by the time you launched in that adjacent town, people were already aware that TAPinto existed, since there was one close by. So it was much easier for the new TAPinto site to get up and running and profitable. Are you still seeing that organic growth?
In New Jersey, definitely. In the new states — we have one, for example, in Pennsylvania. We have one in South Carolina. And we have one in Florida. They’ve all launched within the last six months, and while we don’t yet have additional sites in those states, we’ve gotten interest in those states. For instance we have one in South Carolina, and just this week someone reached out from Hilton Head, South Carolina. We have one in Parkland, Florida, and just in the last three weeks we’ve had people reach out from Fort Lauderdale, Florida, Orlando, Florida. All of those came from hearing about the Parkland site.
Whether they become franchises or not is another story, but that kind of theory is starting to work even in these states that just have one site.
And you think they’re going to have a harder job since they have less of that synergy, where they can sell their ads on sites nearby. They’re islands on their own.
It is definitely harder in the beginning. I think they also have an advantage in that they’re the first, so they’re the forefather of TAPinto in that state. The key for them is to do as good a job as possible, not only for themselves, because it’ll help them grow their business, but they’ll also attract other people who are interested in starting TAPinto sites, and the more people who start TAPinto sites near them, the more cross selling they’ll have and the more sharing of content they’ll be able to do.
How is your job shifting? You’re the one who heads the parent company. You’re in charge of quality control. How are you scaling effectively?
That’s one of the things that I think have been a big improvement here in the last six months. I’ve been able to focus a lot more of my time working on the business, versus working in the business. So one of the things we’ve done is a transparency initiative that we launched last week. One of the things we’ve been seeing across the country is, when there’s a void in local news, often times sites are popping up that are not objective, that are funded by political action committees, or are generating fake news and things like that. We actually put out a whole transparency initiative pledging to our readers guaranteeing our journalistic ethics and our standards and our transparency.
One of the things we’re currently working on is compliance within. So in addition to our transparency standards, we want to up the quality across all our sites the quality of the news content, and things like that. We’re working on that internally.
And meanwhile we’ve been implementing new systems here to make ourselves more scalable, more efficient, and provide even better customer service, not only to our franchisees, but to our advertisers and our readers. For instance, we recently developed an API where when a franchisee sells an ad to a business within their town, they can actually upload that ad to our CMS and it’s placed automatically, versus all sorts of emails that were generated back and forth.
Statistics are now automatically generated, which go to the franchise so they can communicate to their advertisers. They can search for their own reports. All kinds of things like that, that we’ve been able to develop.
One of the other things we’ve done is that we used to use a service for creating dedicated email blasts that we send out to advertisers. We’ve now built that system internally, so that franchises have control over it. It used to be that it could only go out on a certain day at a certain time, and they had all kinds of deadlines for them to get it to us in time, because it took all kinds of time for us to do these for all the sites across the network. But now with the system we developed, they control it, they can put it out whenever they want, and it’s better for them, it’s better for the advertiser, and it’s better for us.
One of the other things you did was to hire editors to work at headquarters and help with quality control. They’d email a franchise owner and say ‘we found these kinds of headlines works better,’ or ‘I noticed that you haven’t really been covering school sports. We know from our analytics data that covering high school sports is a huge draw for readers. You really should be putting more effort into that.’ Is that sort of thing scaling effectively?
We’ve kind of changed it a little bit. Tim on our staff provides such feedback to our franchises. But the other thing we’ve been doing is a lot more in terms of educational programs for the franchises. What we realized was that if we’re providing feedback to an individual franchise, it’s time consuming and they might not actually get it that way. They might be able to learn it a different way.
So one of the things we’ve done is we’re now bringing in a lot of outside speakers. For instance, at our June franchise meeting, Stefanie Murray, who is the director for the center for cooperative media in the state of New Jersey, she’s coming in and doing a whole half day seminar on content and, in particular, how franchises can better listen to readers in their town and produce news that’s of most interest to the residents of the town. We also brought in an outside consultant who’s been doing live seminars to our franchises on sales and how to more effectively sell. He now does a monthly seminar with all our franchises where they can ask questions. It’s recorded, so if the franchise can’t be on the call, they can listen to it later.
We’ve also launched biweekly franchise calls, where we give company updates and we also provide continuing education on those calls. And those calls are also recorded. So if a franchise can’t be on a call, they can listen to it later. So under the franchise agreement, they’re required to either be on the call or listen to the call later. That way, all of us are able to stay on the same page.
And we’re also providing tips to them through two different things: One, our internal Facebook group for all franchises. And second, we developed an intranet for all of our franchises, where we have training materials, tips, advice, all kinds of things like that. All these different initiatives together have proven to be more scalable and provide better services to the franchises, in a more efficient manner.
Of the 81 that are running, how much are on a very firm footing? How many have been running for at least six months and, if they’re not profitable, are at least heading toward profitability?
I would say about 75 of the 81.
It’s not like 40 of the 81 launched within the last month. It’s still pretty organic and growing at a quick, but not rapid, pace.
That’s a really important point. I think that a lot of times, other companies that have tried to scale local news have scaled too quickly. They’re looking for hockey stick growth. Instead, you really want to work out that model, make it as solid as possible, and grow slowly. And that’s the best way to do this.
We’re not in a rush to get to a thousand sites across the country. We want to do this incrementally and do it the right way. Ten years into it, we’re still learning. As we continue to learn, we continue to improve the model. I’d much rather see us do that instead of be in a thousand towns all over the country and go, oh geez, there’s a part of the model that’s problematic, and now we have to fix them across a thousand sites.
Things have gone well for you, but it hasn’t been rosy for the entire local news industry. In fact, one of the most high profile local news companies, Spirited Media, has run into some trouble. Can you talk about what Spirited Media is?
Spirited Media was an initiative run largely by Jim Brady, who’s kind of a godfather, so to speak, of local news. He developed a site called Billy Penn, in Philadelphia. It was very successful. Then they launched a second site in Denver and one in Pittsburgh. It was really seen as a promising model for hyperlocal news. But in the last three or four months, Jim had announced it wasn’t reaching the growth expectations on the financial side that they were hoping for, and they were in the process of selling them.
Since then they’ve sold the sites to public radio and public television stations, who are now carrying on the mantle.
There are definitely some differences between TAPinto and Spirited Media. One is that it seemed to be focusing on cities, whereas you can go down to a town with as few as 10,000 residents.
Right. We have TAPinto sites in pretty large places like Newark, New Jersey and Camden, but at the same time, Philadelphia is a monster sized town. I think a TAPinto site could potentially work in a place like Philadelphia, but it would have to be structured differently. I think it could work. But it would need to have a larger team of reporters and sales people.
Like you said, it started to sell off its sites. Spirited Media started to pivot away from advertising, and toward memberships. And it seemed like it was having some success, but it wasn’t happening quickly enough. Why do you think they struggled?
I think they struggled for a couple different reasons. One is that they had some of the overhead that a traditional newspaper would have. Like office space and things like that. So that increased their expenses. And then secondarily, some of the folks that got involved, capital wise, were more interested in hockey stick growth. So while they were making profits, it wasn’t enough for them. That’s a problem. You couple those two things together, and that’s why I believe they weren’t as successful as they could be. Jim Brady said something like he could make more money consulting for sites than he could make with these three sites he built.
It also seems like they were too spread out. One thing we talked about with TAPinto is that it spreads more organically, where one town would launch a TAPinto site, and then the next town over would launch one. So there was some synergy where you could have crossover readerships across locations, crossover advertising. But with Spirited Media, the Denver site was going to be of no help to the Pittsburgh site, they were too far away from each other. So you couldn’t have those network effects.
You’re absolutely right. They didn’t really have a way of scaling this. They couldn’t share content among the sites in any way that made sense, and they couldn’t share advertising with each other. So they could keep launching these sites in different cities, but at the end of the day, they wouldn’t have the advantages that a TAPinto site has. And it was also really expensive to do this in every community, whereas under our franchise model, it’s really affordable to franchise, and on the corporate side it’s affordable to provide assistance to these sites.
We also really saw this report from Facebook about their efforts to boost local news. A year ago they launched this feature called Today In, and if you opted into this feature, and it would pull from local news sources and try to show you more local news stories in the Newsfeed. I think something like over a million people opted into this. But this year they admitted that a lot of their users lived in areas where there wasn’t much local news. I was wondering if you were surprised when you saw that report?
I wasn’t surprised because the void in local news continues to grow. Something like 1,800 local newspapers in the last few years have shut their doors. The problem is getting bigger, it’s not getting smaller.
I wasn’t surprised by the dearth of local news, and I don’t blame Facebook for it. A lot of people have been bemoaning Facebook and saying it’s Facebook’s fault. I don’t see it that way. It’s that these news organizations haven’t evolved quickly enough, and also in many respects they haven’t thought outside the box. In addition, a lot of them have been taken over by the multi-national conglomerates that have slashed their newsrooms. So when those different factors come into play, you have a lack of local news in your town.
Just in New Jersey alone, the North Jersey Media Group was purchased by Gannett about two years ago, and Gannett made significant cuts where one of the local news sites near me used to be chock full of local news, and now when you open it you’re lucky if you get one or two local stories a week. Everything else is regional or national. Now a hedge fund is trying to take over Gannett, and they have a reputation of even further chopping up the newsroom and getting rid of journalists. That’s happening all over the country and that’s why we see this real lack of local news and that void in local news continues to grow.
If you look at a lot of websites for even thriving print newspapers, their websites are still terrible. Even if they’re good of good quality, Facebook still can’t link to it because they haven’t invested in their websites.
That’s a really big problem. Tons of these local hardcopy newspapers don’t even have an online site. Those that do, a lot of times it’s really subpar. That’s why some franchise with us. They keep all their hardcopy newspaper revenue, and then they franchise with us to be their online site, just like the six newspapers that have already partnered with us. For a couple hundred bucks a month they have a really robust news site that Facebook can pick up, that they can utilize and grow their revenue. It’s really a win win. That could be a solution for a lot of hardcopy local newspapers.
Yeah, we’ve seen other solutions like that. The Washington Post is making its Arc content management system available to everyone so they can all have this state of the art publishing software, without having to hire the full team that the Washington Post has access to.
I think the advantage that we have over those other initiatives, is that not only is it more affordable, but if they do this with us, they can take advantage of the content network and the advertising network we’re creating. In a lot of these other situations, they basically get a CMS in a box. That’s nice because they can get online and have a website, but that doesn’t help them in terms of sharing content with other sites, or selling advertising into each other.
Did you see any evidence that Facebook was pulling TAPinto articles into its Today In aggregator, its product?
Yeah, we actually see it quite a bit. We see them trying to utilize TAPinto news.
There’s also a lot of discussion about news apps. Apple News has been sending a lot of traffic to publishers. Apple News just launched a subscription version called Apple News Plus. It’s mostly magazine content, but they have a few newspapers in there. But none of these app seem to be linking to local news. Why do you think that is?
Study after study shows that that’s what people care about most, what’s happening in their towns. But I think these news apps are encountering the same problems Facebook is. There’s either a dearth of local news, or there’s a good hardcopy newspaper that doesn’t have a good online site or doesn’t have an online site at all, and as a result, there’s very little local news to pull from.
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