"Can Anyone Tap the $100 Billion Potential of Hyperlocal News?" That question was posed in the headline of an article in Fast Company chronicling the recent high-profile moves in online community news led by AOL, The New York Times Company and hundreds of others. As I read the headline, two things struck me. One, that the $100 billion number bandied about as the potential size of the "local" online ad market spend has always seemed high to me. And two, why do folks assume that doing local news well online will necessarily bring local online ad dollars with it?
I spent this week in my hometown of Clearfield, Pa., a very small town in the mountains of western Pennsylvania, in a place where coal, timber and brick refractories used to rule. I relived my thoughts about the Fast Company headline when I picked up copies of some of the local newspapers earlier this week. First, the region's "big city" Sunday newspapers (Pittsburgh, Johnstown and Altoona) weren't at the big convenience store in town early Sunday morning. And second, when I picked up copies of the local and regional newspapers on Monday, The Progress, the "little" local paper of Clearfield, was now fatter than the "big" regional newspaper, The Centre Daily Times of State College. The Progress was chockful of ads, articles and inserts, the CDT was not.
How could that be? Not only does the CDT out-circulate my hometown's paper 3:1, but State College is six times the size of Clearfield, boasts one of the country's largest universities and has one of the fastest-growing local economies in the U.S. Clearfield hasn't been vibrant since it was named an All-American City in the early 1960s and its economy collapsed entirely, in lockstep with Pittsburgh's steel mills, in the early and mid-1970s. Wal-Mart has been its #1 employer in town for many years. How then could the little newspaper in the dying town seem so much healthier than the one from the much bigger boom town an hour away? The more I thought about it, the more I realized that the answer to that question goes to the heart of the issue about the future of "hyperlocal" news and ads online, at least with respect to very small towns and communities. This is what I mean:
Local distribution does not make a product "local." Local markets are exactly that, particularly rural areas, and they are very hard to penetrate from a distance and even harder to maintain. When newspaper companies were doing well, they bought lots and lots of "regional" distribution for their products to fatten up circulation numbers and rate cards. Newspapers in Pittsburgh, Johnstown and State College dumped hundreds and hundreds of newspapers in small towns across western Pa., paying for the distribution by taking away the free standing inserts ("slick" coupons) from the small papers and putting them in their own. They never really had any truly local news or local ads, just "local" distribution. When their businesses started to collapse, they started to pull back from these small towns. Thus, it's now harder to obtain "big city" Sunday newspapers in Clearfield -- but the truly local newspapers got back the regional ads that had been taken away from them the past 15 years.
Paper still has power for advertisers, particularly local. In most small markets, newspaper products are still the heavyweights when it comes to delivering value for advertisers. There is no local TV, and analog products are not so hard to deliver if you only have to get them to a couple of thousand homes in an eight-mile radius. Plus, when customers carry newspapers into the stores under their arms as they buy, you know your advertisers will renew.
Not enough density for online. In many local markets, particularly those that are older and poorer like most in western Pa., there is not enough density of online users and online-savvy businesses for local online directories to prosper -- just try checking out Yelp for Clearfield, Pa. I suspect the same situtation will be true of online news and community information for some time.
I know I said I wouldn't write about newspapers any more, but when I saw my hometown newspaper doing so well relative to its much larger competitors, I had to break my rule. I do believe that the "hyperlocal" market is a good one for online companies to focus future efforts on. However, I believe that those companies had better come into the market with their eyes wide open, or they will end up like the big-city newspapers that learned that national and regional publishing is not "local." What do you think?