Can Anyone Tap the $100 Billion Potential of Hyperlocal News

Outside the local train station, the Maplewood Civic Association maintains a bulletin board plastered with news of jazz festivals and yoga classes for this small, affluent New Jersey town. One day last winter, an unassuming new flyer appeared, nestled between ones hawking a fish tank and a drum set, titled, “Introducing the Local.” The flyer describes the Local as “a community Web site by you and for these communities, mentored by The New York Times.”

Why is a media titan like The New York Times Co. — already stretched thin by the challenges of a faltering business model — dabbling in community news, traditionally the bottom of the journalistic food chain? Call it the Google Effect. The search giant’s model, described by author John Battelle as “a billion dollars, one nickel at a time,” is a perfect description of how media companies hope to take tiny sources of local revenue and roll them up into big money.

Hyperlocal sites — covering cities, towns, or just a neighborhood — can deliver precision-targeted advertising to local and global businesses. As the once-exponential growth rate for most Internet advertising in the United States grinds to a halt, the online local-advertising market is projected to grow 5.4% in 2009 to $13.3 billion, according to media research firm Borrell Associates.

As it happens, one of the architects of Google’s success, former head of advertising Tim Armstrong, founded a community-news site called Patch that intends to collect those nickels. Armstrong, in his new role as the CEO of AOL, acquired Patch in one of his first moves. And where, of all places, has Patch set up shop? Maplewood.

Hyperlocal seems like a can’t-miss proposition. “There is real demand for good information about our neighborhoods, our children’s schools, our streets, our blocks,” says Jay Rosen, an NYU journalism professor and media blogger. Except for one thing: Success remains perpetually around the corner, constantly predicted yet never fulfilled. While different people have named hyperlocal as a trend to watch every year since 2004, “everybody’s groping for a business model,” says Gordon Joseloff, who fits the all-too-typical norm for this space with his popular, distinguished, and unprofitable site in Westport, Connecticut. The Local and Patch — and by extension, the Times and AOL — may, too, be destined to find the same trouble.

Carpetbaggers’ Quest for Gold

It is no accident that the Local and Patch each selected Maplewood as its hyperlocal testing ground. Patch engineers “had a computer model of the different factors they wanted,” says Adam Bulger, the self-described “midlevel reporter” who covers Maplewood for Patch. The algorithm looks for civic-minded towns with a central business district instead of a series of strip malls, and high broadband penetration, which correlates with a burg’s affluence.

The Local’s Maplewood editor, Times metro-desk alumna Tina Kelley, lists the same traits, as well as the fact that the town is something of a “reporter’s enclave.” This combination of local features means, of course, that these neighborhoods are likely to have an already-crowded local blogosphere, poised to brand the new ventures as carpetbaggers. When the Local was first announced in Maplewood, the largest of the town’s many home-brewed sites, Maplewood Online, hosted a very active conversation in the “Now the NY Times Invades MOL’s Turf” thread of its community message board. In one of Bulger’s first weeks on the job, a prankster annoyed with Patch’s colonial ambitions tried to trick him into posting a story about local gangs whose leaders happened to share the names of characters from the movie Ghostbusters. The Local has encountered similar resistance to its two sites in blog-filled Brooklyn as well. “They’re worried,” explains the Local’s Kelley, “about the big media companies coming in and taking up [their local sites’]advertising dollars.”

When AOL announced the Patch deal, CEO Armstrong called local advertising “the largest white space” for the company moving forward. “Hyperlocal is going to be a huge, huge market,” says Mark Josephson, CEO of the hyperlocal aggregator “Local advertisers are not online in a major way yet — like they’re going to be.”

Boosters routinely note that more than $100 billion is spent annually on local ads — TV, radio, print, outdoor, direct mail, and online. Although the stat’s origins are fuzzy, what’s clear is how aggressively folks believe those ad dollars are migrating to the Web. Borrell Associates projects an online local-ad market worth $15.5 billion by 2013, fueled mostly by small businesses ditching the Yellow Pages and local newspapers.