Ghost of Midnight

“Tap the $100 Billion Potential of Hyperlocal?”

Fast Company magazine published story (Sept. 2009) about the state of “hyperlocal” news websites, with the typical emphasis on mostly huge international carpetbaggers (AOL, the Times, etc.) and their efforts to appear truly local.  Most of the focus is on advertising dollars…

Hyperlocal sites — covering cities, towns, or just a neighborhood — can deliver precision-targeted advertising to local and global businesses. As the once-exponential growth rate for most Internet advertising in the United States grinds to a halt, the online local-advertising market is projected to grow 5.4% in 2009 to $13.3 billion, according to media research firm Borrell Associates….

Boosters routinely note that more than $100 billion is spent annually on local ads — TV, radio, print, outdoor, direct mail, and online. Although the stat’s origins are fuzzy, what’s clear is how aggressively folks believe those ad dollars are migrating to the Web. Borrell Associates projects an online local-ad market worth $15.5 billion by 2013, fueled mostly by small businesses ditching the Yellow Pages and local newspapers.

There is a gap between these rosy projections and the more bleak reality. Debbie Galant is the “Queen of Hyperlocal,” as crowned by new-media consultant and hyperlocal cheerleader Jeff Jarvis. Her site, Baristanet, serving Montclair, New Jersey, is often cited as proof that hyperlocal can be profitable. But Galant declines to specify what that profit is. “It’s real money,” she says. “We’ll share that our ad revenue is six figures. But we won’t go into more detail than that.”

The truth is that billions are not migrating to hyperlocal sites. “Advertisers have no interest in community Web sites,” says Gordon Borrell, CEO of the analyst firm whose statistics are routinely cited as evidence of hyperlocal’s bright future. “They don’t have the type of material advertisers want to be around,” referring to archetypal hyperlocal stories about high school basketball and drug arrests. “Sites are connecting the dots inappropriately.”

Even if the editorial mix changed, the ad model may be irreparably flawed. Consider the business model that Patch is pursuing in its three original New Jersey towns. Maplewood, South Orange, and Millburn have a combined population of around 60,000. Patch charges advertisers $15 per thousand impressions. If every resident in all of these towns contributed one impression a day — and all of those impressions were sold out — Patch would make $900 a day in revenue, or about $325,000 a year. Not exactly a windfall after expenses…