Borrell vs. Potts: Can Local Advertisers Be Sold on Local Online News?

Gordon Borrell is a former reporter who says it pains him to conclude that local news online is doomed to be “a loss leader” that will never pay its way.

Mark Potts is a former reporter who says Borrell “is smoking something,” and argues that the main reason local news has never generated much advertising support is that “no one has ever tried.”

Borrell and Potts are among an array of execs, entrepreneurs and experts sharing the spotlight this week at Borrell’s annual conference examining local online advertising. (I will attend and tell you what I learn.) Kip Cassino, Borrell’s vice president of research, will project an online ad landscape for 2010 that predicts modest recovery of 15 percent from the pits of 2009, about a third of it local.

“We’re still bumping along the bottom of a well,” Cassino told me in a telephone interview last week. With revenue prospects still relatively low, the stakes get higher for each and every segment of potential growth.

“I am highly skeptical of ‘local news’ on the Web as a sustainable business model,” Borrell said in an e-mail. “It won’t be supported by subscription fees anytime soon, and people DO NOT see display ads on news sites. And I can prove it.”

Borrell, whom I first encountered at an audiotext conference in 1991, started out as a reporter at The Virginian-Pilot before heading Landmark Communications’ new media operations and, in 2001, launching Borrell Associates to advise media companies on local advertising.

“I love my local newspaper, but I don’t use my local newspaper’s Web site unless something really big is happening,” he told me in a telephone chat Friday. “I just don’t think local news has the value online that the newspapers think it has. The value is very low.”

Borrell is much more bullish on such non-news startups as zip2save, a national coupon site customizable by ZIP code, and yourLI, which provides merchant coupons on Long Island. “We don’t find advertisers clamoring to buy advertising around local news,” he said. “They’re clamoring to attract the eyeballs of people who already have their wallets open.”

In a move he describes as “brave or stupid,” Borrell has invited Potts, Jeff Jarvis, Chris Jennewein, Chris Hendricks and others to his stage to try and prove him wrong.

Potts, a former Washington Post reporter and new media exec, founded the hyperlocal BackFence site in 2005 but shut it down two years later when it failed to gain sufficient traction.

Among his takeaways from BackFence: the difficulty of mastering content creation, marketing and advertising all at once. Rather than tackling all three in his next venture, GrowthSpur, he settled on one: the challenge of local advertising.

“Local advertising is relevant content,” Potts argued. “It’s a different kind of advertising” than the typical effort to interrupt an editorial experience with a banner ad message unlikely to interest users.

Hyperlocal advertising has never worked, he said, because neither legacy news organizations nor startups have figured out a way to enable small businesses to spend small fees to reach small audiences. (That is one of the goals of the New York Times-CUNY partnership on its hyperlocal blog The Local.)

“The cost of selling the ad and the cost of making the ad has got to be pretty close to zero,” Potts said. New tools are helping publishers and advertisers approach that price point, he said, but that’s only part of the challenge. Publishers are still struggling with big gaps in the training and guidance it takes to sell to the hyperlocal market — precisely the niche he hopes GrowthSpur can help fill. 

“All this is coalescing into the next generation of community newspapers.” — Mark Potts“We’re at the early stages of what some people think is a late stage,” he said. “Local advertising hasn’t really been tried and that’s been mistaken for failure. There are unbelievably cheap publishing tools available now, along with out-of-work journalists creating thousands of community sites that didn’t exist three or four years ago, and great tools for creating advertising.

“All this,” he said, “is coalescing into the next generation of community newspapers.”

So what do you think: dawn or dusk for selling local advertisers on local news online?

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