Although BackFence enjoyed initial success with $3 million from two venture capital firms and expansion to 13 sites around the country, the project quickly ran out of money. This leads many to the conclusion that thus far, there seems to be little promise in hyperlocal news sites; the majority of the 500 “local-local” news sites currently in existence lose money according to a study conducted by J-Lab: The Institute for Interactive Journalism.

LostRemote points to two major issues leading to Backfence’s failure: “1) building a loyal user base without breaking the bank and 2) generating significant revenue among small-time advertisers,” problems that seem to cause uncertainty among almost all of the hyperlocal news sites reviewed by J-Lab.  The survey found that most of the sites stay afloat through self-funding and volunteer labor and that the staffs comprise mostly volunteers, community activists, and “impassioned gadflies.”  In short, the current model for hyperlocal sites must change in order to ensure a successful and lucrative future.

Jan Schaffer, executive director of J-Lab, makes the point that the surveyed hyperlocal sites gauged success in terms of community impact, rather than revenue.  She suggests that until the operators view themselves “as making big salaries and having big offices,” there isn’t much potential or chance for profit.

Both AJR and LostRemote, however, point to a few success stories, from which interested parties could pick up tips. The cynical and “snarky” Baristanet.com covers local news and commentary in two New York City suburbs, and is currently thriving, with over 80,000 unique users per month and ad sales to local supermarkets, real-estate agents, and restaurants. Baristanet’s success may come from its specific tone and focus on local community news and reader-supplied commentary.  “We’re growing, but we’re not there yet,” says co-owner Liz George.

Despite the precarious situation of hyperlocal sites, mainstream news media are eager to venture into the territory.  Most notably, The Washington Post plans on targeting its circulation area with “microsites,” the first covering the affluent Washington, D.C. surburb of Loudon County. Current plans for the project include real-time coverage of local high school football events, podcasts of church sermons, and detailed restaurant guides for the community.

“We’re struggling with, and every major paper is struggling with, is how to reach our audience on a regnular leve,l, in a way we’ve never reached them before,” admits Jonathan Krim, Washingtonpost.Newsweek Interactive’s assistant managing editor for the Loudon project.  The Post, however, will have to compete with over 11 weekly newspapers, some of which have larger sales and editorial staffs than the Post’s Loudon office.

In the end, mainstream or community-based, hyperlocal news sites must over come two major issues to see success: raising community awareness and making money.  Potts, of Backfence, mentions grassroots promotional efforts but warned that they were time-consuming and required dedication.  He also suggests that hyperlocal news sites “cluster” together over a certain area to attract regional or national, rather than just local, advertising.

Without a doubt, newspapers interested in launching hyperlocal sites will have to overcome significant challenges for the ventures to succeed. Nevertheless, as sites such as Baristanet are proving, there is a demand for hyperlocal news.  It’s just a matter of presenting it in the right way, with the right funding.

Source: American Journalism Review and LostRemote