Hyperlocal Websites will Boom in 2009 as Community Newspapers Fold

Hyperlocal websites have for a long time been an albatross of the 2.0 world; many have tried to create vibrant startups in the space, and many have failed.

There is some argument about the definition of hyperlocal; some say its news at a town or suburb level, while others argue its news for a community, but not an entire city or large town. For the purposes of this post, Hyperlocal means community news, serving a town or local Government area, often below a large city or State.

That there is demand for community news is a given, the issue has been delivering hyperlocal news online with a sustainable business model. The problem so far has been one primarily driven by competition: many towns and local communities have been served by a local community newspaper for years, and while some of the attention has switched online, the switch hasn’t been large enough so far to sustain hyperlocal news sites that by their very nature have a limited and small audience constrained by geography.

2009 though will be different. Hyerlocal websites, both existing and those to launch will thrive as they become the only place to find community news; in 2009 community newspapers will fold in record numbers.

Community Newspapers in a Recession

We already know the broader trends for the newspaper industry: declining circulation, and declining advertising. Some of the largest newspaper groups and papers in the United States are now in serious trouble. Which will remain at the end of the year can’t be predicted, but we can draw one conclusion: community newspapers, having the smallest profit margins to begin with, will be the first to fold as they are the easiest to close.

Community newspapers consist of a number of different formats. We see in some places paid for daily newspapers serving communities of under 60,000 people. The majority though are weekly or bi-weekly, with a mix of paid and free. They all share a common thread though: a high reliance on advertising.

The bread and butter of community newspapers comes from real estate, automotive and classified ads. Community newspapers owned by larger companies get some retail and national advertising, but usually at no where near the volume a big city or state newspaper gets them.

Classified advertising is in its death throws today. Where as once upon a time you’d list your second hand goods in the local paper, more people today would list them on Craigslist or eBay. Automotive relies on local dealers looking to drive business, and the number of local dealers is in decline along with the broader automotive industry. What advertising there is now faces stiff competition from larger newspapers who are cutting their rates, driving the returns down, and that’s presuming you’ve still got vibrant local competition from car dealers: many smaller communities now often don’t, or have very few.

Real estate is the last domain where some community newspapers still thrive. Despite the switch to online in other sectors, real estate has lagged behind employment and general classifieds. My local community newspaper here in Australia for example has half of its content dedicated to real estate ads; Realtor’s may list properties online, but they still haven’t given up on glossy ads or real estate liftouts. This is going to radically change in 2009. The problem comes back to money: house prices in the United States fell 18% in 2008, and in some places fell over 33%. House sales are usually made on commission of sale and sometimes with a fixed price component. If the price of houses in the local community has fallen, and the commission rate has not gone up (given the market it’s unlikely they’d go up), the return to real estate agents on sales is lower, and that’s presuming they can find buyers, particularly in smaller towns or outer suburban areas. Where there is a fixed price component, usually set to cover advertising, the amount simply may not be available; a large section of the market today in the United States is repossessions, and those that aren’t are often people trying to exit their homes because they can no longer afford them; many simply can’t pony up thousands for advertising. The internet, with its lower costs will thrive in real estate in 2009, driving an even bigger drop in returns for community newspapers.

Bloat logic: print vs online

Community newspapers will fold in 2009 as owners are no longer able to turn a profit, or sustain losses any longer. The killer will be costs: even a small town newspaper could have a staff of 6 or 10 or more (usually more, but I’ve worked with papers in the past that often have 2 local reporters, with the rest of the paper filled by syndicated content from the company network). Millions a year to run, with no hope in sight of a turnaround in advertising fortunes. The model is dying. Some may switch to online only, a trend that will accelerate this year, but the bloat logic problem still remains: high overhead costs for reporters and editors in small markets.

This is where hyperlocal websites step in. Communities still want local news, and left without a community newspaper they will still seek that news esewhere, and the internet is the place they’ll have to turn. Radio is often not local through networks like Clear Channel, and television news may offer some local news, but mostly news higher up the news scale (city, state, nation, world).

Hyperlocal news: one size won’t fit all

The void left by community newspapers won’t be filled by a one size fits all hyperlocal news product. The very reason community newspapers will fold applies to hyperlocal sites (advertising, scale), although to a lesser extent due to lower overheads.

What we will see is different models in different places. Some of these have been described elsewhere; the labels are mine, so apologies if the terminology doesn’t sit with what others are saying.

Blogs

Blogs and bloggers are already starting to fill the void of community news. Local bloggers are increasing as the community turns online for news. Small scale local blogs that exclusively cater to local content will increase in 2009.

Dedicated community news sites

Local communities start their own site, allowing anyone to contribute, perhaps with a volunteer editor to filter the content before it goes up. It may or may not show ads, and may be for profit or not-for profit. These may be in the traditional news site format, or a group blog format. There’s no strict rule on the model here: some sites now run advertising but use any money earned to run the site on a not-for-profit basis. Some are simply advertising free community sites run by individuals that involve community input, and some may be for profit from the start, with individuals or companies taking a cut, and/ or investing some of the money in hiring writers or staff on a small scale. Community news sites will bloom in 2009, although by volume of traffic may remain small.

Hyperlocal startups

Startups that offer local news in many places will rise to offer hyperlocal news where community newspapers have fallen. We’re already seeing some sites do this now, although usually at a higher level (large towns, small cities). The challenge will be to incentivize locals to participate; Citizen Journalism is constrained by goodwill, and while people may happily contribute to a not-for-profit, they may be less inclined for a large company. Having said that, there may be enough people anyway, you only need to look at what CNN is doing with iReport to know that finding willing participants may not be a major problem.

Big media hyperlocal

Large media companies are already moving into local communities, aggregating and often facilitating local content. The New York Times Company is being sued by Gatehouse Media, one of America’s largest community newspaper publishers (by number of papers) for that very crime; Boston.com, the online portal for the Boston Globe links out to community news on other sites and on blogs. As mention above, CNN has iReport, that despite the odd issue has captured many contributions, although not so much targeted yet at the hyperlocal space. Those big media companies that survive 2009 will do so due to an increased presence online, and hyperlocal news that taps into citizen journalism offers growth opportunities.

Conclusion

Some will undoubtedly be sad by the closure of their local papers. Many papers often have long historical roots in the community and for many years have been the only outlet for community news. What needs to be understood by those who call for Government assistance for community newspapers is that journalism and community news doesn’t disappear with the local paper, it just switches to a different medium, a medium that is more efficient and in many cases may provide more news and give voice to more people than the paper ever did. That medium is the internet. Hyperlocal websites will boom in 2009, and the voice of local communities will become stronger because of it.