Why local online sites died: a post-mortem with a possible silver lining
Hyperlocal online news startups can resemble the bloody wars convulsing the Middle East.
"In the world of community news, you win or you die," said David Boraks, founder of the Davidson News and Cornelius News in North Carolina.
Boraks died, or at least his sites did a few months ago, he recounted to the Local Independent Online News Publishers/LION Publishers (LION) annual gathering in Chicago last week. "I'm totally at peace with the decision to shut down," Boraks said. "We kicked ass until the end."
The auditorium at Columbia College in Chicago's downtown South Loop might have been draped in black for a gathering whose de facto predecessor was called Block by Block. There was, after all, a distinctly funereal air to a session titled, "Turning out the Lights."
Conducting the journalism autopsy was Jan Schaffer, executive director of J-Lab: The Institute for Interactive Journalism, an incubator for U.S. news entrepreneurs and innovators. She's also the Entrepreneur in Residence at American University in Washington, D.C.
The subjects of her genteel dissection were Boraks; Ned Berke, founder of Sheepshead Bites in Brooklyn, New York; and Mike Fourcher, founder of Center Square Journal and Roscoe View Journal in Chicago (with whom I partnered briefly at the Chicago News Cooperative, which for two and a half years produced local content for The New York Times).
The local news journalists shared distinct commonalities. When they started, they saw a potential market. They were proud of their work. And, in hindsight, they weren't especially good businessmen and wish they had given more disciplined forethought to that element of their enterprise.
By the time they came to that realization, it was too late.
Boraks had about 105,000 unique monthly visitors to his two sites, he said, and revenues actually rose last year. But he was also up against two weeklies, two monthlies, a daily with its local section, a local deals site, even the Chamber of Commerce selling ads both in its print magazine and on its website. It was all competition for slices of the same advertising pie.
When new business surfaced in the area, he just wasn't in their marketing plans. They may have loved the notion of his writing about them but not necessarily in signing a contract. He couldn't ever get a Small Business Administration Loan since banks didn't quite understand his business.
There were other problems. He really needed to expand to a few more towns to sell to a larger network of advertisers. He didn't have a mobile site (partly because he never thought it would actually help in selling ads). He didn't do money making events or charge for access to his sites. He was totally dependent on an advertising model to support what at one point were four full-time and three part-time staff, which was essentially the preponderance of his costs.
So after nine years, he decided that was it. His counsel to attendees was simple: If you start, have a business plan. He really didn't.
Ned Berke ran his Brooklyn site for six years until he sold to Corner Media Group (a rarity that he got out via a sale). Until he departed recently for LifePosts, he continued to edit the publication that he started "on a lark." It is still alive.
But the challenges he referenced were similar to those of Boraks and Fourcher, with the latter the most vivid in discussing the ups and downs he encountered.
He started in 2010 after a career in politics and doing consulting for alternative papers. It was a very small operation, with himself, a full-time reporter and a part-time sales person. He grossed around $120,000 a year, which was healthy "but not healthy enough." He had around 120,000 to 150,000 unique monthly visitors.
But was what perhaps most interesting about his post-mortem was the unexpected competition that undermined him.
Yes, AOL's Patch came to Chicago, but they didn't prove that much of a threat, he said. Then there was the arrival of DNAinfo, which was and remains a strong editorial product "since they hired good people." But even that wasn't a killer.
The biggest threats were email newsletters produced by various neighborhood businesses, in part to fill a gap created by the demise of some neighborhood papers, and even newsletters by local Chambers of Commerce and Chicago aldermen.
Yes, news of individual wards provided by the politicians themselves was a competitive impediment. One newsletter, he said, has 40,000 readers. And, of course, it's free.
"You can't go to the alderman and say, 'Stop doing that!'" Fourcher said not long after he tongue-in-cheek thanked Schaeffer for his "being on the most depressing panel EVER."
When he pitched a big museum, it pointed to the larger audience of the Chicago Tribune online and, Fourcher said, asked, "Why do I care about you?"
He then realized how very small he was and how difficult it was "to make a value proposition. They wanted customers from all over, not just a small area. That was devastating."
He did partner with the group I helped to start, the Chicago News Cooperative (CNC), and charged $150 for a six-month political newsletter leading up to big local elections. It was very good and inspired a brief uptick for the CNC. But, for him and his primary endeavor, it was too little, too late, even if the essence, and name ("Early and Often"), of the political newsletter is now found at the Chicago Sun-Times, albeit without his involvement.
There was less interest in the quality of his editorial product than he had originally assumed. When he held a community meeting to discuss his site's future, "120 people showed up to support me." But when it came to actually committing to raising money for him, there were no takers.
But even though he closed down, he was not deterred. The past failure led to his latest venture and to his ultimate advice to the gathering.
He's now turning out a newsletter, Aldertrack, about Chicago aldermen. There's a free email, with a basic aggregation of news; a $345 a year newsletter with original reporting each weekday; and what he calls "white label reporting," in which he charges thousands of dollars for content of specific interest to a client, be it a trade association or a lobbyist.
"That's the thing I learned from the CNC [and other endeavors]: Audiences may be declining in value but services and understanding those audiences are increasing in value."
"Building subscribers and providing a service they think they can't get anywhere else is increasingly valuable and difficult to attack."
And here's the real kicker for those who get too down over the tales recounted at the conference: a lot of the content he's making money from may well be in the public domain, but it's what his customers want.
And who are the people who can find and communicate that content, he asked rhetorically. "Journalists."