Borrell: Independent Local Sites Threaten Newspapers

As if the newspaper industry didn't have enough headaches, a new study finds they face growing competition from independent local Web sites that focus on travel and entertainment.

"Locally focused pure-play Internet sites have gained a foothold in many markets," states the report, "Independent City Sites Gain Steam: A New Threat to Old Media," released Tuesday by Borrell Associates.

These independent local sites are growing quickly and "elbowing in on territory that traditional local media properties have been trying to stake out for the past decade," states the report.

Many of these sites use a url that includes the name of their city, like Houston.com and Toledo.com. As a result, they garner traffic even without much marketing, because some people navigate the Web by typing proper names directly into a url field. Toledo.com, for instance, is the tenth most trafficked site in the city, according to the report. For the most part, these sites focus on entertainment, nightlife, and travel, while rarely reporting on local news, according to the report.

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Borrell also states that annual revenues at these local sites have "moved into the six-figure range"--and in some cases, surpass $1 million. "As the Internet tide rises, these once-mired local boats have begun to float," states the report. "From Atlanta to Yuma and from the suburbs of Syracuse to the tiny Gulf town of Port Aransas, Texas, small, independently run local sites have begun to pick up significant steam."

So far, however, independent city.com sites have profit margins of around 24 percent--compared to Web sites of local media, which are around 60 percent, according to Borrell. The independent sites also account for less than 1 percent of local online advertising, while media-run Web sites take in between 3 and 18 percent, according to the report.

The newspaper industry, meanwhile, continues to struggle with profit margins and circulation, as well as ad dollars that have been lost to online classifieds like Craigslist. Earlier this week, the Pew Internet & American Life Project and comScore Networks issued a report stating that 26.3 million Web users visited one of the top 15 classified sites in September--marking an 80 percent increase from last year.

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