One thing that didn’t get past my sleep-deprived eyes during my maternity leave was news that TBD.com was ending advertising sales for its affiliates. Launched last summer, TBD reports local news in and around Washington, DC, and serves as a portal to more than 200 hyperlocal news sites and blogs. The idea behind its affiliate network was to build sales strength in numbers: TBD would act as an ad server, and participating websites would get a cut of the advertising revenue.

Everyone and their brother watched closely to see whether this model would finally turn a buck on online local and hyperlocal news. But by the end of November, TBD announced it was pulling the plug on this program. “Unfortunately, the advertising aspect of the network has not taken off as effectively as the traffic and linking relationship,” Steve Buttry, TBD’s director of community engagement, wrote.

I’m not privy to exactly what went wrong, but here are some things an ad network might do to get things right:

Start small. According to TBD, one quarter — about 50 — of its affiliates participated in the ad network. But that number might have diluted its value. It’s the danger of doing a volume business: If demand can’t move all that ad-space inventory, then the ad server and its affiliates are shit out of luck.

Instead, a network of ten or fewer websites might offer advertisers a more targeted audience and, therefore, a more valuable piece of advertising real estate. The network might not sell as many ads, but it won’t have to if it can charge a premium for its space.

Love thy neighbor. Offering advertisers a targeted audience means limiting network affiliates to a specific geographic area, maybe a single county or city. In a large market like New York, a successful network might represent just two or three adjacent neighborhoods.

A network that stretches across several counties or states (as TBD’s network does) can actually lock out advertisers who draw on sizable yet geographically focused markets. The chain-restaurant operator knows whether her food is worth a 30-minute car ride across state lines, or just a stumble across the street. She won’t spend money to advertise with a large network if her only interest is in a local or hyperlocal market.

Work it like Goldilocks. Sure, everyone wants loving from big advertisers and their big ad budgets, and no one wants to hustle for ad revenue from mom-and-pop shops. But an ad network might succeed in courting regional sponsors who have modest ad budgets and value the opportunity to speak and sell directly to core markets. It’s an approach that’s not too big, not too small, but just right.

I don’t know how much (if any) of this advice addresses TBD’s specific woes, but I do hope they find the right fit for their business structure. Git ‘r done.

Illustration of Larry the Cable Guy courtesy of Joe Bluhm.

Recently I spoke with one hyperlocalist whom I’ll call Loretta for privacy’s sake. Loretta operates a popular hyperlocal website and was invited to join a regional network that shares advertising revenue with its members while collecting a cut for itself. Currently, the network doesn’t have an umbrella site for aggregating its members’ content or directing readers to its members’ respective websites.

Despite that, there are definite advantages to Loretta’s participation in the network. First, this particular network carries name recognition, though it’s still too fresh out of the box to call it a brand. (Details of its business practices couldn’t be confirmed, so it shall remain nameless in this post.) Next, it stretches across an entire region, which should help reel in large advertisers and their large ad budgets. Last, there’s the notion that all boats will rise with the revenue tide, even those that aren’t as seaworthy as the rest of the fleet.

There’s only one thing about this arrangement that makes me leery. Revenue sharing assumes revenue, and when talking about advertising, that usually means page views. This network is so brand-spanking new that it doesn’t yet have an audience of its own and is relying on Loretta’s site and others to drive traffic. In other words, it can’t deliver page views to Loretta’s site. Instead, Loretta’s site will deliver page views to the network, which will then take its cut of the ad revenue.

The way I see it, if Loretta and other hyperlocalists are doing all the work to drive traffic, then they should reap most of the revenue. The network still deserves a cut for using its name and relative size to leverage ad sales, but the fact is, those ad sales won’t happen without the hyperlocalists’ hard-earned page views.

I don’t know the numbers of Loretta’s revenue-sharing arrangement, but I hope she gets her fair share of the deal. Best of luck, Loretta!

Photo courtesy of Flickr user enggul.

It’s a kicker for the online news environment to rely on this same tired, old business model that has newspapers circling the drain: a nearly complete reliance on ad sales to keep business going. In the print world, selling ads meant generating fluff stories that appealed to readers. Online, it means keeping tabs on Twitter’s trending topics — prepubescent pop star Justin Bieber seems to be the shit these days — and then cranking out fluff copy on those subjects to woo Google and other search bots.

Despite inflated page views and low overhead, True/Slant and Examiner have yet to turn a profit. It’s pathetic. PAH-thetic.

Of course, some hyperlocal news sites have done well for themselves strictly through ad sales. The hyperlocal economies of those beats are healthy enough to support such publications and their writers, so if the business model ain’t broke, then don’t fix it.

But what if this Great Recession treats the economy to a summer sequel? Or what if (for whatever reason) page views don’t translate to ad sales? Even worse, what if the quality of reporting suffers because writers can’t or don’t get paid? Then it’s time to have an alternate revenue stream ready, if it isn’t already up and running.

The New World Order demands innovative strategies for generating revenue, and I don’t just mean psyching out the search engines to drive page views. It means hosting events with cover charges, offering web-design services, selling stock photography, and forming Groupon-like arrangements with local businesses to sell products beyond news. It might also mean converting a for-profit project into a nonprofit one to bring in donations, or charging subscription fees for premium content.

It should not mean fluff content cranked out by pay-per-click writers. If a hyperlocal news site’s business model supports nothing but that, then it’s working either the wrong model or the wrong business. Innovative and diversified revenue streams beget better pay, better writers and less Bieber.

Photo courtesy of Flickr user Daniel Ogren.

Oofah! The Twitterverse was buzzing Tuesday afternoon about Yahoo! News’ acquisition of Associated Content for $100 million. My initial reaction was an apathetic “So what?” Associated Content’s sloppy editorial practices would only dilute Yahoo’s wire content, and its contributing writers probably won’t see much difference in their paychecks.

But then I read this very good article by Michelle Rafter, whose blog focuses on freelancing in the digital age. In it, she points out that Associated Content’s buyout signals Yahoo’s entry into the war for local ad dollars. (AOL and Google are already in the ring with their own products.) Rafter says straight up that “local content [generated by Associated Content's writers] gives Yahoo access to local advertising that would otherwise go to those hyperlocal news ventures that have been cropping up everywhere.”

That’s when my apathy turned into complete panic. I’m one of “those” hyperlocal news ventures trying to crop up. Those are my ad dollars Yahoo, AOL and Google are taking! Motherfuckers!

Once I pulled my head out of the oven, I refocused and took an inventory of what makes independent hyperlocal news outlets the better deal in local advertising. The bottom line: Yahoo, AOL and Google don’t stand a freakin’ chance. Here’s why.

Hyperlocalists have the inside edge on what’s happening in and around their beats. Where content farms like Associated Content and AOL’s Seed spin press statements into content (don’t expect peanut-earning writers to put too much effort into their reporting), hyperlocalists fill in the blanks with strong local flavor and details that larger outlets can’t and won’t detect. It’s the difference between having an embedded journalist and reporting from amalgamated wire stories.

That flavor gives the hyperlocal outlet an “emotional value” with its audience. As I wrote Tuesday, consumers do more than just consume a successful hyperlocal outlet’s content. They incorporate the information into their decision making and allow it to influence their lives. Yahoo, AOL and Google don’t have that kind of hyperlocal clout — perhaps they never will. Score a big one for hyperlocalists!

Also, hyperlocal news outlets are more likely to have access to charitable contributions from homeowners’ associations, chambers of commerce and local professional organizations than Yahoo, AOL and Google. Sure, the big guys have investors to fuel their efforts, but investors are interested in only one thing: a big, fat return. It was the drive for profit over quality journalism that took down print newspapers, and it has the potential to undo Yahoo, AOL and Google. Slightly different business model, same outcome.

On the other hand, local donors have other interests in mind. Homeowners want their property values to rise (or at least not fall), chambers of commerce and professional groups want publicity for their businesses. Having a locally owned news outlet in the neighborhood goes a long way to advancing these donors’ respective goals. It’s something that generic news coverage from content farms can’t offer.

I really don’t mean to knock those hyperlocalists who choose to work with these larger organizations. As I’ve said previously, if a hyperlocal news organization stands to benefit from some kind of arrangement with the big guys, then do it. Surely, well-versed and justly paid hyperlocalists can only enrich the news landscape with their content, regardless of who’s doing the distributing.

But if writing for a content farm leads to nothing but pennies per click and “exposure,” then one would be better off in the trenches, digging graves in which to bury Yahoo, AOL and Google.

Photo courtesy of Flickr user godutchbaby.

So it was with great interest that I read this recent article in The New York Times about a startup clothing company that allows its customers to design their own shirts. Shoppers visit the company’s website, pick out colors, patterns and cuff styles, drop some coin and in four weeks, they’re rocking personalized gear.

The company’s success is rooted in its “emotional-value proposition,” says the company’s 22-year-old CEO. (Freakin’ hipster!) Customers play a part in the creative process, and what results is a personalized shirt that oozes individual expression. Okay.

That got me thinking: If consumers will pay to design a shirt, would they pay to participate in hyperlocal content creation? Does the emotional-value proposition apply to hyperlocal news? No and yes.

First, anyone who will pay to generate content is an advertiser. Consumers can usually distinguish an advertisement from editorial content because ads are labeled as such. But when an advertiser’s content is passed off as news, or if the hyperlocalist accepts compensation for creating “advertorial” content, then the news outlet’s objectivity comes into question.

Next, no one should create news content for the purpose of self-expression without fair compensation. That’s what larger media outlets like Forbes.com and The Washington Post call “content for exposure” (or more precisely, content for exploitation), and the practice only dilutes the quality of an organization’s content.

Instead, the emotional-value proposition can apply to opportunities for consumer feedback. A moderated comment section adds tremendous value to a news website. (The same goes for editorial essays printed on paper or broadcast as sound or video.) The opportunity to offer constructive criticism allows news consumers to express interest in their community, and the interaction reflects the news organization’s worth in the community.

That quality is perhaps the strongest selling point when approaching advertisers, sponsors and subscribers. It means that consumers do more than just consume a media outlet’s content. They assign value to it, they incorporate the information into their decision making, they allow it to influence their lives. That kind of quality far outweighs a website’s page views, a newspaper’s circulation or a broadcast outlet’s audience numbers.

The emotional-value proposition also applies to crowd-sourced content, but one should approach that with caution. I’ll get into that tomorrow.

Photo courtesy of Flickr user Kirsten Hartsoch.

I ignored the tweet. But it reminded me of a big challenge I faced with my former publication: When does announcing an event for the readers’ benefit become free advertising for the event’s organizer, and at what point does one cut off that event organizer and demand payment?

One can make the argument that any mention of such an event constitutes free advertising, and I resigned myself to doling it out in my publication’s popular event calendar. The fact was, there wasn’t much fun to be had in my beat, and I felt obligated to let readers know of any action in the hood.

Generally, I was happy to mention a charity fundraiser or an event that charged no admission and still provided free nosh. But there were many instances when a commercial venture (usually a restaurant) would ask to list a special performance or tasting menu at their venue. I omitted such events from my publication’s calendar and replied to the solicitor with “Care to buy an ad?” And then I wouldn’t hear from that event sponsor again until they had something else they wanted me to plug for free.

There was also one event organizer (owner of the neighborhood’s only bar) who ignored my sales pitches and plugged her bar’s events under the website’s comments section. At first I just deleted her unpaid advertisements and replaced them with a note to readers that “This comment has been deleted.” But after a while I began leaving notes that said, “Please pay for advertising.” We played this game for three years, and the bar owner never bought an ad.

(In fairness, there was no animosity between us. The bar owner and I knew it was just business, and she was always hospitable enough to invite me to closed-door events. Of course, subsequent coverage of those events only meant more free advertising for her business.)

Where does one draw the line? More importantly, how does one convince event organizers (and other potential sponsors) that paying a hyperlocal publisher for ad space is worth the money and effort?

Photo courtesy of Flickr user Chris Blakeley.

In the parlance of mainstream media, contextual advertising means partnering an ad with a related piece of content, Kathy Best, managing editor with The Seattle Times, described last month during a NewsU.org webinar. For example, an ad for a cruise line might appear with content on travel, or a restaurant might advertise alongside foodie content.

The most exciting thing about contextual advertising is this: News consumers respond more strongly to advertisements that have a local spin to them, Best found in consumer surveys. For instance, a local travel agency’s ad may get more attention in the travel section than one for a big cruise line. In this case, context has more to do with location than content. Score one for hyperlocalists!

But to make local (and hyperlocal) ads successful for sponsors, context must be coupled with customer service, Best indicated. The ad must do more than just announce the sponsor’s presence in town — it’s got to connect the consumer directly with the sponsor’s services. An advertisement might encourage consumers to order goods immediately via phone or online. Or it could promote a weekly special, giving the ad context in time (double booyah).

Best’s recommendation supports something that CUNY J-school’s Jeff Jarvis suggested previously, that local businesses aren’t interested in advertising their presence to consumers who likely already know they exist. Instead, contextual and service-oriented ads allow local advertisers to build on existing customer relationships by offering more (or at least different) services.

It’s a strong sales argument for why the local dry cleaner (the one who’s been around for twenty years and whom everyone knows) should advertise with hyperlocal media. Even if the advertisement provides only the dry cleaner’s telephone number, it’s one more extension of customer service that can drive repeat business.

There are some dangers to contextual advertising, Best warned, mostly having to do with the placement of ads with hard news. A media outlet shouldn’t place a politician’s campaign ad alongside content about his or her rival, unless one’s goal is to draw that outlet’s objectivity into question. Instead, contextual ads fare better when paired with soft news — food, travel, sports, and news that won’t strike a nerve, Best suggested.

Shuffling ads with content may get cumbersome for small outlets, especially for online publishers who rely on fixed templates. However, there might be tools available to help with that. (I’ll explore that in a future post.) And if an advertiser’s location and the timing of special offers are emphasized, then perhaps the ad’s coupling with relevant content might not be so important.

Photo courtesy of Flickr user FadderUri.

In Dutchess County, NY, small-scale organic dairy farmers have formed a nonprofit cooperative that allows them to bypass the middle man and market their goods directly to retailers in New York City. So far, the arrangement has allowed eight family-owned farms to earn more than the going rate while staying competitive with industrial farms, The New York Times reported earlier this month.

That got me thinking: If a hard-hit industry like family farming can make money through a cooperative, then why can’t hyperlocal news outlets do the same?

For example, several extremely good hyperlocal sites dot the Washington, DC region. As independent operations, they would probably do alright in terms of advertising sales, assuming they have the sales staff and the interest to follow that revenue stream. (Some of them do not host ads. Whether that’s by choice is not known.)

But if these organizations were to form a collective advertising venue, they could probably draw large sponsors — regional chains come to mind — and charge higher ad rates for the wider distribution. The effort required to sign those sponsors can be shared, with a finder’s fee going to whomever seals the deal and a standardized rate for those who host the ad.

At the same time, the individual outlets can avail themselves to neighborhood mom-and-pop shops and charge a lower rate for hyperlocal distribution. In this case, there would be no profit sharing among members of the cooperative.

Of course, advertising networks catering to hyperlocal outlets are already out there. At least three of them contacted me yesterday after CUNY J-school’s Jeff Jarvis retweeted a link to this blog. I don’t know how these networks operate, though I’m sure they’d be happy to explain. But if hyperlocalists can cut out the middle man, then why not snip away.

Photo courtesy of Flickr user scpgt.

AOL isn’t the first big box to move into mom-and-pop territory. The New York Times and The Los Angeles Times run hyperlocal news sites, and national news startup Politico is branching beyond Capitol Hill into Washington’s other hoods. Good for them, and good for the neighborhoods they’ll serve.

(Full disclosure: I spoke with Patch’s editorial director last month about the network’s expansion into my area. He couldn’t give me a job for reasons unrelated to business, but he did offer to take me around the company’s New York offices. Gee, thanks.)

But is big media’s venture into the neighborhood good for existing hyperlocal news sites? I’m leaning towards yes. Here’s why.

First, it creates paid job opportunities for hyperlocalists. In the case of Patch, the editors in charge of individual sites will receive a salary — don’t know how much, but a work-from-home staff job beats entrepreneurial burnout any day of the week. I only hope these editors and other content contributors receive a fair wage for their work.

Second, it has the potential to establish a profitable hyperlocal business model that others (read: me) can rip off. AOL has an army of MBAs crunching numbers to make this work. Let them sort it out and prove to sponsors that online hyperlocal news has value. I’m not too proud to surf in their wake.

Third, competition is good for business. Sure, big boxes like AOL have the sales staff to generate revenue and support editorial operations. But sponsors are always looking for an alternative, one that makes the same personal connections that fuel mom-and-pop businesses. And it doesn’t hurt to offer lower (but not too low) advertising rates and social networking opportunities.

If big media calls with a buyout check or job offer in hand, take it. And if they don’t, bury them.

Photo courtesy of Flickr user six steps.

One of the conference’s presenters, Jeff Jarvis, is a big proponent of entrepreneurial journalism and posted on his blog some very good points on what local advertisers want (and need) from hyperlocal news outlets. Advertisers want help with search-engine optimization and social networking. They want their ads to appear across a network of hyperlocal outlets, Jarvis wrote.

But what local advertisers need is an education in “the value of the internet itself,” Jarvis argued. Too true, Jarvis. Too true.

Sure, I’ve had local business owners ask about monthly visits and readership rates, but that’s where their comprehension of web metrics usually ends. (Who knows if they even get what that information means.) I’ve also had a few ask whether their businesses should be on Facebook, usually followed with an admission that they don’t know what Facebook is. Twitter is a foreign word.

These moms and pops are small retailers, restaurant owners, dry cleaners — they don’t have marketing staff to keep on top of trends in online advertising. But as confused as they may be about the internet, I’m equally stumped when it comes to explaining the internet. Yeah, I know what Twitter is and how best to use it, but I can’t convey why it makes a great marketing tool.

Those who can, do. But those who know how to explain things to small business owners with little comprehension of online advertising, sell.

What entrepreneurial hyperlocalists can use are elevator pitches on what these online tools do, and why a local business owner needs them. (Jarvis suggests doing that through seminars.) With that out of the way, hyperlocalists can finally get to why a local business owner should advertise with their news outlets.

Photo courtesy of Flickr user jsrcyclist.