• by Diane Mermigas , March 2, 2009

What's wrong with this picture?

The pending hardship closure of The San Francisco Chronicle would leave the first major city in the U.S. without a daily newspaper. At the same time, The Huffington Post has been eyeing the hyperlocal Web site Outside.in as a way to monetize its online brand in local communities. It is a troubling schism.

Local news, interests and connections between consumers and advertisers are at the heart of both the failing traditional media saddled with legacy costs and the nimble Web-based contenders. The value of all things local has been woefully underestimated. It has been devalued in print and television, which can't quite make the leap to digital, and botched on the Internet--where it seems impossible to capitalize on the hyperpersonal in bloggers and tweeters run amok.

What could be more relevant than what is going on in consumers' own backyard? Institutional media (newspapers and TV stations) has failed to connect with local as it is being redefined by consumers who are obsessing over the interactive ME-dia they care about most: their needs, family and friends.

"The future of local is intensely personal. It is about what is within 1,000 feet of where you stand. Local is centered on the individual," says Outside.in CEO Mark Josephson.

Intimate, interactive local--that most newspaper and TV stations have failed to tap and that the Internet has barely explored--is coming too late for some. The widespread collapse of newspapers and TV stations that is just beginning will stretch into 2010. Rocky Mountain News was shuttered Friday after 150 years.

At the same time, Interactive creations from Craigslist to The Huffington Post to Outside.in and Google's new Patch (Beta tested in New Jersey) seek to grow their fortunes mining grassroots resources at the core of local TV stations and newspapers. Outside.in is providing a local blogosphere of news and views to NBC-owned TV stations, The Washington Post and 10 other major publishers for PCs and mobile devices. At the same time, The Washington Post's vibrant community-driven LoudounExtra.com is one of many thriving examples of what newspapers and TV stations have accomplished on their own.

The result is an explosion of new local business models that combines advertiser geotargeting, equal parts curator-aggregator content, and a viral approach to community service right down to a neighborhood block. They are the only way out for hemorrhaging local newspapers and TV stations, and a prerequisite for future growth. The local media ad spend will dip to $136 billion in 2010 with one-third of total revenues eventually tied to digitally generated performance data rather than CPMs or subscriptions, according to BIA and the Kelsey Group.

The shift of core ad dollars to digital could be even more pronounced if the major traditional media are not able to integrate new interactive products into their bundle. Holding on to advertiser and consumers isn't enough; everyone must be interactively engaged. 

That is why monetizable connections to individual consumers are the new critical mass for ad-supported media. They are captured with free content and social networking, and charged for products and services. (So much for the notion of online newspaper micropayments or Cablevision's planned gate fee for Newsday.)

Relevance is the new key metric. It is at the heart of AOL's Platform A-Lifestreams-MediaGlow reinvention. It's why Google News has begun offering ad space, and why Google's AdSense is concentrated on matching real-time location and preference data to be steps ahead of consumers' buying impulses to deliver discount codes, directions and other intuitive information to their mobile devices. Such promising interactive applications demand a more constructive alliance between the valuable local content and connections of newspapers and TV stations and the digital distribution, advertising and social players that need them. Hyperlocal may be one of the biggest untapped treasures of the digital age, but it is not materializing fast enough, per Veronis Suhler Stevenson, BIA Kelsey Group and Borrell Associates forecasts.

Ultimately, what is needed is a ubiquitous interactive interface to facilitate access and monetization cross-platform. There must be a universal dashboard to seamlessly combine existing and new resources and economics for local media to efficiently thrive in a digital world. Better economic times will bring new ways to create, define and price micro value. The ongoing economic crisis will intensify the process.

In the meantime, more of the solutions need to spring from strategic business collaborations funded by private and public money. For instance, maybe Hearst's San Francisco Chronicle gets a second life as a hyperlocal, digital extension supported by Huffington Post and other new players. There are limitless opportunities for strong local newspapers and TV stations to align with new branded local iterations, such as ESPNChicago.com.

Cash-rich companies such as Microsoft, Google and Apple, as well as private-equity firms (which raised more than $220 billion in 2008), can put some of their money to work to revive and reinvent existing local businesses they ultimately will mine. They can fund partnerships or increasing merger and acquisition of distressed properties.

Amazon should put its Kindle, search, socialization and monetization magic to work for more newspapers and for local content aggregators.

More TV stations should work with each other, local newspapers and new online community players to create interactive local hubs for content, advertising, marketing and transactions. They can consolidate costs and rely on supporting infrastructure from Google and others.

TV station groups should create strong business alliances to provide video conferencing, digital marketing and other private or consumer-based services from their new digital base.

Advertisers and agencies should work more aggressively with companies such as AOL and Yahoo to dig deeper into niche content and social verticals to create productive feedback and sales loops with target consumers.

Microsoft, Google, Apple and other companies heavy in research and development should hasten their applications to market by working directly with grassroots media players to create new models and revenues around their local content, advertiser and consumer connections.