Digital marketing dollars of most small business, are still up for grabs. When you take these tiny but high volumes of mom & pop budgets, and combine them with the ‘asleep at the wheel’ efforts of traditional media, you can see why Reach Local, Google, Yellow Pages 360 and a slew of indie efforts are doubling down and are going for the kill.

When it comes to big media’s foray into this space, it’s full of well intentioned, but often misguided efforts.

• Philly.com’s CEO; Greg Osberg once told Poynter: “His top focus initially, will be on building audience, especially online. While conceding the point that small growth in unique visitors and other measures may not greatly impact ad sales, I think we can get 100 percent more audience, and that would make a difference.” Whoa, hold on there big fella. Since revenue & profitability is likely the top priority of his bosses, (investment firm of Angelo Gordon & others) we are not in agreement with Osberg’s statement. Instead, we believe Philly.com (and most news sites) have a sales strategy problem, not a traffic and page-view problem. Driving zillions of page views = inventory glut = lower effective cpm. Even MSNBC declared: pageview ‘dead’. Osberg also hinted of  his plan to find local collaborators, especially in the suburbs where editorial coverage has been cut. We think this will be tough in the fiercely independent, Philly blogosphere, where some indie sites are getting bought up. (see next item)

• A Philly sports blog called 700Level, was acquired by Comcast. Another local sports site called Beer Leaguer was also just snapped up by the cable giant. This should give local, independent site owners a much better sense of the value of their work. If your stuff is good, why give it away for peanuts? If your not sure how to value your site, contact us for assistance. Indie-sites like Philebrity.com, Philly2nite.com and SuburbanOneSports.com are not likely to sell out for the relatively small pay day and employee status that the 700Level & Beer Leaguer jumped on. (we think much too quickly). Kudos to Comcast Sports Net vp; Eric Grilly, for making this smart move, while the 2 sports Radio stations in town 610WIP.com, 975TheFanatic.com, as well as Philly.com, were snoozing.

• The Washington Post hoped local bloggers would drop everything to work with the legendary site, for what some say, free. Read the laundry list of rules you need to follow, if you want to work with the WashPo.

• SacPress.com is the self-funded news project that reportedly reaches more Sacramento online readers than the daily Newspaper (Sacbee), by leveraging their Sacramento Local Online Ad Network (SLOAN). The network is now over 40 sites strong, even repping the web inventory of 4 local Radio stations. (stations owned by digitally-challenged, Entercom)

• Radio & TV taking a shot at hyper-local news. Some broadcasters admit their weakness, raising the white flag, and are outsourcing web strategy to DataSphere. Others do it themselves, and make clumsy mistakes and leave money on the table. But promising Radio efforts like WYDaily.com are a sign of things to come.

• Sites like TheBatavian, AroundMainline.com and BrigantineNOW.com are gaining traffic and advertiser support. They use the not-so-secret formula of “running their sites like a business”. They spend less time with research and theory, and more time on the streets closing deals, and making sales calls.

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FACT #1: Small businesses are quickly moving their ad budgets to web. In addition to your own direct sales efforts, there are substantial revenue & cost reduction benefits when you take part in the efficiency of a shared sales and service “co-operative”, or ‘hyper-local incubator’. (see below)

FACT #2:  Your work as a writer/reporter has incredible value. Especially to big Media. Why ‘donate’ it or sell it for peanuts? Understand online journalism business models, before you act.

Local online competition is on the rise….and now, at a much faster pace. Don’t be fooled into thinking that hyper-local news doesn’t work. Those early journalist-lead experiments from CUNY, New York Times and ChicagoNow struggled for financial stability due to a common flaw: revenue & sales expertise took a back seat to editorial & tech in the start-up phase. Indeed, ‘build it and they will come’ does not work so well on the web.

Today, a growing list of hyper-local news efforts are being lead by those with deeper revenue & business experience. It’s about time.

Who wins the local, online revenue game? The winners will be those organically-grown websites and independent content creators who know their community. These online publishers take their efforts seriously and execute realistic plans for revenue. They don’t sell via CPM. These local online titans are not encumbered with legacy business concerns that need to be ‘protected’. These are the future leaders of news.

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Not so long ago, small business was at the mercy of Newspaper, TV & Radio.

Thanks to cheap and simple digital platforms, along with a growing army of online-only companies, SMBs (small & mid size business) are no longer trapped. No longer must they endure overly confident radio reps or cranky newspaper ad directors who are counting down to their retirement and pension. Small biz can now take low-risk chances and move larger chunks of their ad dollars to new digital solutions arriving on the scene.

Consider the facts. Consumers now get 50% of their media from online sources. Compare this to the fact that local business still only allocates 4% of their marketing budgets to online. Imagine when local biz wakes up to this disparity. This impending tsunami of local marketing dollars to digital is why Patch, Reach Local, Google, Pandora and others are making big bets in the local space.

TV, Radio & Newspaper losing kung-fu grip on advertisers? The short answer is yes. The longer answer is ‘yes but so what, they still make an awful lot of money’. Thanks to typical Q4 spikes and better than average political dollars, these types of short-term windfalls obscure the growing cracks in traditional media’s revenue foundation. It also blinds management to the growing success of digital outsiders like ReachLocal, (now in 45 markets) sucking bigger ad dollars out of their market.

Here’s a look at some recent local-media disruptions, affecting all local media outlets:

1. David and Goliath in Philly. Journal Register Company (JRC) recently fired a shot across the bow of every Philadelphia news organization. CEO; John Paton, announced his intention of launching a digital-first service for the nation’s 4^th largest market. Paton’s plan calls for leveraging JRC’s suburban Philly newsrooms and sellers, with increased use of ‘cloud’ production. Paton will also look for some divine intervention in tapping a fiercely independent group of hyper-local content creators.

The JRC plan is a direct assault on dominant Philly news orgs like The Philadelphia Inquirer, CBS, Fox, NBC and KYW News Radio. It also kicks sand in the face of other market competitors like Gannett and Calkins Media. While all of these companies have competence in the interactive space, traditional management still plays a far too dominant and protective role in strategic digital decisions & resource allocation. I imagine an uncomfortable meeting where NBC corporate asks their local Philly management team: “why did we allow a former bankrupt company (JRC), take the lead in the Philly hyper-local news race? (sounds funny but could be true)

2. Hyper-local advertising and content. Speaking of my home base of Philadelphia, the hyper-local eco-system here features sites of every make and model. Examples: PhillySportsDaily.com leaves local sports radio 610WIP.com & 950TheFan in the dust with its 24/7 online sports coverage & analysis. Gawker-influenced; Philebrity.com, probably assisted in the decline of our once great alt-weekly: City Paper. Smart and dominant technology coverage of ‘Philacon Valley’ by the team at TechnicallyPhilly.com certainly must embarrass the top brass at the legendary Philadelphia Business Journal. And if you taste-test the foodie editorial of JerseyBites.com, it’s easy to imagine this content eventually being licensed or sold to The Food Network or Fodors.

All this content creation sounds like a fully staffed newsroom, huh? That’s why traditional media is desperately attempting to lure these indies into some level of partnership. Getting cheap or free content to replace empty newsrooms seats is an understandable move for anyone looking to cut costs. But as many have found, Philly blogs and sites are mature, revenue bearing efforts that see big media partnerships as win-lose proposition. Big media wins…local blogger loses. They’re not too impressed with the traditional sales forces and horrific rev-share deals being offered.

To survive, indie online publishers didn’t have to teach themselves the voodoo art of entrepreneurial journalism. They just get off their ass and knocked on a few doors. Just like former Gatehouse exec; Howard Owens, at TheBatavian did. Some have formed their own hyper-local networks and share the cost of hiring a sales team. This is how many become self-sufficient and successful.

In one more crack at old media trying to be hip, KING-TV and The Seattle Times just announced a hyper-local partnership. In theory, it’s a great idea. But when executed by a traditional sales and management team, it’s destined for a slow ride to nowhereville.

3. Dump your expensive CMS vendor. Go WordPress! In a rare moment of brilliance, the CBS broadcast division has started to dump some of its pricey and stale, interactive vendor tools. They’re moving to WordPress as a CMS; content management system. (although we think CBS blew it by combining all of their excellent brands – The Fan, 1010Wins, 610WIP, KYW1060, under the consumer un-friendly url’s of CBSPhilly.com & CBSNewYork.com)

This big media move to WordPress should be a wake-up call to all companies stuck in crappy and outdated vendor contracts. It’s a fact. Open source platforms like WP are better and easier to use than ever. WordPress; an open source publishing platform, has humble beginnings as a simple yet effective blogging tool. Today, WordPress is also the leading CMS that handles everything from easy creation and upkeep of Newspaper sites, to helping TV Networks with a series of specialty blogs.

Some web development & digital VPs snobbishly look down their nose at WP. Understandably they’re fearful of implementing an in-expensive, yet robust and user-friendly platform where it would likely affect their employment and pay status. Nonetheless, watch for others to dump a few vendors and adopt WordPress and other free digital tools. Why not reduce interactive hard costs while increasing ease of use, functionality and consumer value?

4. Tribune and 435 Digital. It’s true. I’m still bitter over not being invited to those smoky poker games inside the Trib Tower. But before his exit, Randy Michaels was a big supporter of their 435 Digital division and we gotta love him for that. Imagine a newspaper & broadcast company getting in front of local advertisers…and NOT forcing them to buy print ads and broadcast spots. Instead, clients are given the option of digital solutions like social media management, web development and search engine optimization. This activity suggests some old school media finally willing to offer….what local advertisers increasingly want to buy.

Why do local media managers ignore or mis-play the new digital competition? Well, if your compensation is primarily tied to spot and print dollars, as well as archaic rating systems and circulation audits, what would you do?

But don’t place all the blame on middle management. It’s the broadcast/newspaper CEO’s and investor groups that are in charge here. They set the tone. Instead of stepping up and immersing themselves in the business of digital, they sheepishly delegate all that icky web stuff to the company web geek…

Translation: ‘we hired some heavy hitter who worked at a dot com. He was recommended by someone who used to build streaming websites and tweaked code as a teen. Sure, this guy with the prestigious resume is burning through a lot of our cash, but our sites look cool, traffic is building, and we win digital awards all the time. He swears profitability is right around the corner.’

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Patch does share a few traits of other struggling or dead local initiatives that adopted a ‘build it and they will come’ strategy. In these plans, editorial & tech execs take the lead and burn through cash to build traffic. THEN… they retro-fit a semi-realistic sales strategy and hire a VP Sales. Ask San Diego News Network and NYT’s The Local, whether that model worked out for them. (hint: it didn’t) We can’t imagine that AOL Patch chief; Tim Armstrong is overlooking the lessons of these past stinkers. We also don’t think he’s doing Patch for purely altruistic reasons like saving journalism or winning journo awards for his mantle. Clearly, he’s wants ROI. And why not? That’s job #1 for any CEO.

Patch using smoke screen & red herrings? To my non-journo hairy eyeball, much of Patch’s current content & editorial efforts are being mis-interpreted by those who feel threatened. Editorial, massive page views and community engagement is not the ultimate end game here. Rather, the real M.O or modus operandi of Patch is to steadily build relationships with local advertisers, then offer a portfolio of digital marketing solutions. And we’re talkin’ more than just banners.

More than just banners. In other words, Patch is just starting to get cozy with mom & pops….getting them ready for a sweet and more profitable up-sell consisting of events, video, sem, web development, social & reputation management, database, etc. Friendly Patch folk stop by local retailers to ‘help’ them with their free online profiles, take some pics, and stealthily update the Patch smb databases. Smart.

Using free-mium model, Patch cuts through clutter and aims to be a primary partner with local business, something traditional media had a lock on for decades. That’s the holy grail. The life blood of local, online news & info, is local advertiser support. Without it, Patch and others like it, fail.

Market incumbents fighting back. Sort of. In Seattle, KING-TV and cross town competitor; The Seattle Times, have formed an un-holy union with their hyper-local ad network plans. In this scheme, they hope to attract indie bloggers by offering the digital sales acumen & relationships of their ‘ace’ TV and Print sellers. Since The Seattle Times has dabbled in hyper-local for the past year, one may assume their solo plan wasn’t working, so they needed a partner. To see the ‘newsroom & editorial only’ perspective on big media & hyper local, watch these very telling interviews of Seattle Times execs. This video clearly highlights the lack of any sales or local advertiser influence and understanding. Also watch for the knucklehead that states: ‘this helps the newspaper’. (why do bloggers want to ‘help’ the newspaper?)

To date, we haven’t seen this kind of plan work out so well for the blogosphere. Especially in the revenue department. That’s why we patiently wait…and wait…..for good hyper-local sales reports from TBD.com, ChicagoNow.com and MiamiHerald.com. Can a TV or Print rep properly represent the unique properties of an indie website? We still think that’s a long shot, as many reps and their ad directors, still struggle to sell their own big media sites.

Journalism’s two masters: reader & advertiser. Which one do you think ROI-focused PATCH is putting first in line? Distasteful as it may sound to some, sales & revenue need to take a front seat in every local news and hyper-local effort. Without sound financial footing, community coverage & engagement are non-existent. Journalism is a means to an end for corporate media. That end is profit. We know this is tough to swallow for newsroom vets, after decades of insanely profitable newspaper domination.

Getting hooks into local smb’s. If Patch can accomplish this, don’t be surprised to see an upgrade in their editorial & staffing. Not only will this will be tough for indie bloggers to compete against, it might just be the final nail in the coffin for Newspaper.

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Sustainable Revenue Platform for Online News 8.30.2010

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In Sacramento, the local newspaper finally woke up to the fact that a hyper-local network; SLOAN, was gaining advertiser and reader support in their own backyard. So now the city has it’s second local ad network: SacramentoConnect, courtesy of the Sacramento Bee.

Below is updated overview of the Hyper-local plan we’re following, that is showing early signs of success.

New sections include:

• Should I partner with the local Newspaper?
• Should I work for Patch?

HyperLocal News.Incubator UPDATED 8.3.2010

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CUNY New Business Models for News

Still no sustainable business model for online news? That’s crazy talk.

We love reading about online editorial success and greater activity in the hyper-local space. Yet most of these reports feature vague remarks about revenue plans still being explored and the perplexing challenge of finding a way to pay the newsroom bills.

CUNY’s Jeff Jarvis, NYU’s Jay Rosen & other veteran journos have been trying to crack the business model code for quite some time now. These entrepreneurial endeavors are well intentioned as they seek  to support the emerging legion of news sites that may one day replace traditional newspapers. Seasoned educators like Jeff and Jay used their editorial credentials to wake up many online newsrooms. But that’s not going to move the needle enough. Now it’s time for seasoned sellers and revenue focused execs to step up and take the lead here. Maybe we need those with actual sales and revenue experience….. to tackle this sales and revenue issue?

Since 1998, we’ve been tracking and field-testing the leading revenue and sales models used by leading online operations. This research identified a robust collection of revenue models that are currently thriving in the local marketplace.

So why are most hyper-local sites still swimming in red ink, or looking for financial bailouts? With plenty of proven and active revenue models available for adoption…..are these models being intentionally ignored, or just mistakenly dismissed?

Here’s a summary of findings, recently submitted to CUNY’s New Business Models for News project. This is top line insight into proven business models, currently in operation at a variety of leading websites. Most of these best practices will not only sustain the NEW, news organization, but many will allow it to thrive with high margins, attractive profitability and better editorial coverage of the community.

7 habits of Profitable, Local News Sites

1) Lead by revenue-first executive (just like traditional media business)

• Profitability first, then operations, followed by editorial/content
• Run site as a start-up business
• Think like an entrepreneur…NOT just a manager or journalist
• Borrow tactics from online revenue leaders

2) Running extra-lean & efficient w/content & platforms

• Open source platforms, software & applications
• Outsource content via feeds, blogs, indie-journalism
• Aggregation & curation. Do what you do best, point to the rest
• Aggressively strip out & reduce hard costs/expenses
• 24/7 news cycle; Twitter = first responder journalism
• Hard news & data as commodity loss-leader
• Monetizable soft news & activity, subsidizes hard news
• Data as content

3) Advertiser & sponsor friendly

• Enabling local commerce is priority #1
• Advertising as content
• High impact ad units & sponsorships
• Removal of GAN’s; garbage ad networks
• Feet on the street-sales efforts
• Local business education via Web 101 workshops
• Self-serve & outbound tele-sales
• Ability to show quantifiable ROI
• Local & regional advertising networks

4) Non-traditional revenue streams

• Rev-share, transaction fees & e-commerce
• Free-miums & up-sells
• Offline initiatives & live events
• Marketing services for local business

5) Training, management & compensation

• Regular training of all staff (especially top management)
• Performance based compensation
• Mandatory budgets with bonus & penalty
• Managers lead by example, not from behind desk

6) Seed, syndicate, socialize & mobilize

• More than just a destination site strategy
• Leverage & monetize content anywhere & everywhere
• Enable formation and leveraging of affinity groups

7) Database mining & video adoption

• Sales and editorial appreciation of well-defined databases
• Sales-based uses of video; online infomercials & ad-vertorial

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