One of the best-known publishers in the hyperlocal market, AOL’s Patch.com, announced a retreat this month. Industry analysts had been predicting this outcome for several months and generally report that small media enterprises are facing a tougher time generating enough ad revenue to support themselves. However, the news may not be as grim as some think. Steven Jacobs at StreetFightMag interviewed a few experts who believe that media companies can use some different strategies to succeed in hyperlocal.
The business model behind the 900 sites on Patch.com was to sell enough advertising at high enough rates to generate a profit. Each site operates in a local market and offers unique content that readers are not likely to find elsewhere. Unfortunately, advertisers weren’t convinced that they could reach their customers and this division of AOL never generated a profit. The company began closing sites and laying off editors and this week finally sold most of its interest to Hale Global which hasn’t disclosed specific plans for the hyperlocal business.
So what can companies do differently to avoid the Patch.com fate? According to Ken Doctor at Newsonomics, who was interviewed by Jacobs, smaller media companies can take away important lessons from AOL’s experience. One of the first is that size matters. A community of 20,000 residents may not be large enough to support a hyperlocal site, but a bigger market area that includes ‘wealthy suburban towns’ may provide enough of a base to interest advertisers. Other industry analysts and operators believe Patch.com failed to scale their business model effectively and that led to profitability problems. Some hyperlocal publishers are succeeding and they point out that the climate is as tough as it’s ever been. They must prove value and relevance to get marketers to pay for advertising.
In addition, local media companies are no different than their larger counterparts. Jacobs observes that these businesses must understand the consumer’s path to purchase in these days of instantly available digital information and the role content plays in that path. Do you agree? Have you discovered the secret to the success of hyperlocal?