Reactions to VC-backed ‘scalable’ local news sites

Posted on March 2, 2009 by Howard Owens

I’ve received almost universal positive feedback on my "hyperlocal" post (well, from everybody but Jeff Jarvis).

I think the only people who would disagree are those at least maginally connected to the New York VC bubble, where the cocktail chatter is always about "scale." It’s never about building a sustainable business model.

Lucas Grindley put up a very smart post, comparing the SUNY/Times approach to a get-rich-quick-scheme. I think he’s dead on.

Why would anyone build a site targeted toward a small group of people and then worry about whether it can "scale" to serve a large group? That smacks of a confused business strategy. A hyperlocal business must first be able to make money by standing on its own — even if it never becomes a franchise.

That’s real scalability. Quite frankly, it’s dumb to start any business that can’t break a profit unless it rapidly expands. I’d be leery of anyone pitching such an idea, which isn’t much sounder in strategy than a Ponzi scheme.

Lucas also writes:

There is no shortcut to online success. Media companies look at their competitors from the technology world and see only what exists now, conveniently overlooking the immense effort and sacrifice it took the founders of Facebook or MySpace to attain.

Unfortunately, newspapers continue to look for the quick fix. Reality check: There isn’t one. It takes hard work to create new business, and the fact is, most businesses fail. I think Lucas is on to something — these VC-backed "scalable" local news sites are really just a ploy to huckster some money, not build a sustainable business model.

The question VC’s should be asking is, "is it sustainable?" Not, "Is it scalable."

Nathan Walls also takes a smart look at the issue and concludes:

Maybe there is a way to abstract a platform and aggregate neighborhood sites, but, just as mountains have their own weather, neighborhoods are unique and not taking the time to dive into them and understand them is a mistake. The large, monolithic approach is not the workable one. There’s no rule saying there must be a way to build and sustain a larger business out of “hyperlocal” content.

Finally, in comments, Jane Stevens points us to Brownstoner.com, a Brooklyn-based independent news site that will now face some SUNY-backed competition.

In looking at Brownstoner, it struck me what the SUNY-Times sites are, it turns out, are socialistic efforts. Brownstoner is now facing competition from a government backed agency (SUNY) using essentially free labor. How is that a fair competitive situation?

Government should let free enterprise thrive, not try to kill it.

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timburden

Funny, we felt the same way when a tourism committee struck by our municipal government (and backed by our provincial gov’t.) called for bids on a tourism promotion website for the area. It was for big money. We felt we had proven our mettle by developing a community-and-news website that was a full-featured as any in the big city.

When the bid was won by a Toronto company instead – even though ours was the lowest bid – we complained that government funds were being used to compete with local business.

We built our own tourism site anyway and ended up rolling all its content into the news/community site as evergreen wiki-type reference material. The site built for the tourism group was notoriously unsuccessful. Ours beat theirs for traffic and search dominance and ad dollars in every metric.

My point: a good business will survive a bit of government money being thrown in the way. Let ‘em go, see what shakes out. It’s not as if newspapers, including NYT, have never been subsidized by government before.

Tim
tishgrier

Great follow-up to your first post–completely right about Lucas being dead-on…

I’ve been thinking a lot about the whole Patch thing the past couple of days, and how much it reminds me of both BackFence and YourHub, and no matter what some of the folks involved with it think, I can’t see it succeeding, any more than I can see the TImes effort succeeding. Except maybe for a short period of time while people get giddy about seeing their names associated with the Times. After the romance is over, and the real job of doing hyperlocal kicks in, then we’ll see….

IMO, I see these efforts as a way to try to prove that corporate can get down with the folks. But, from what I’ve seen in the hyperlocal scene, it’s the folks who are independent and know their communities well that can make a go at hyperlocal. And it takes a boatload of work, both offline and on, thru old fashioned word of mouth marketing techniques and newfangled online techniques. Corporate entites sure can throw money at it, but money doesn’t buy that touchy, warm fuzzy stuff that makes hyperlocal really work.
Darrell Todd Maurina

Congratulations on "landing on your feet," so to speak, with an exit from GateHouse that includes being able to own an online newspaper that you were largely responsible for starting. I left GateHouse entirely on my own, but not everybody leaving GateHouse today had the choice, or was able to leave with a solid severance opportunity.

I’ve posted several items about your departure from GateHouse on the Pulaski County Web, including your new position. Feel free to correct if there are any errors:

GateHouse Media whacks its web wizard

New York Times tries to do hyperlocal internet news in the suburbs
Howard Owens

Darrell, I appreciate the notice and the praise, but I want to be clear — in no way did I intend my words to be in anyway critical of GateHouse Media. I’m talking strictly about how to operate online for the kind of small community sites I’m most interested in. The web is way more personal than print, making local, engaged staff much more important.

I am very proud of my time at GHM and remain friends and an admire with so many of the people worked with from top to bottom. I do not want to be associated in anyway with any criticism of GHM.

There’s a lot of misunderstanding about the company out there. It’s not my place to correct it, but be assured, I remain proud of my association with GateHouse.

I’m not registered on your site. If you wouldn’t mind clarifying my position, I would appreciate that.
Howard Owens

Trish, I don’t think association with the Times in itself will ever be a liability for the site (not that is exactly what you’re saying). To whatever degree it helps early on, it helps, and that may or may not change.

With The Batavian, we never hid the association with GateHouse. I was nervous about whether that would turn people off. It didn’t. The reason I think it didn’t, however, is our strategy of a locally-branded site and staff that was to a degree local — only one member actually lived in Batavia, but we all made sure we communicated a personal commitment to Genesee County and made our presence known. And I think that is what the Times effort will be missing.
Darrell Todd Maurina

I am truly glad to hear that you left GateHouse under good terms … all I know about your situation is what I’m reading elsewhere. That’s why I made a point of sending you a link to what I wrote to see if any misunderstandings had happened.

Your clarification, as requested, is posted here:

http://pulaskicountyweb.com/smf/index.php?topic=14841.msg164390#msg164390

With web articles out there on other sites such as "Local weeklies parent whacks web geek" (referring to you as the "web geek" who got "whacked"), there’s obviously some confusion. You may want to also contact the owner of this website …

http://www.capecodtoday.com/blogs/index.php/2009/02/21/local-weeklies-parent-whack-web-geek-cc-30?blog=14

… to have them clarify their posting.

I just got off the phone with another former GateHouse employee in a different newspaper market. One theme of our discussion was that in these very difficult economic times, pretty much everybody in the print media is in trouble and we can’t blame GateHouse for not having a crystal ball. Running up major debt to expand and buy a lot of newspapers may not have been the safest economic strategy, but all business ventures are risks and lots of other people in the news media were doing the same thing a few years ago when GateHouse was doing it.

Have a good day, and good luck with the Batavian!
Jim Schachter

I’m the New York Times editor whose project is under attack here. There’s a lot of rhetorical fire being aimed at my babies, based — it appears to me — on theology rather than any time spent looking at our sites: http://nytimes.com/maplewood and http://nytimes.com/fortgreene.

The Times is approaching this effort with utter humility. We don’t know if we can make a go of hyperlocal. We’re experimenting with citizen journalism, something that others have more experience with than we do. We’re experimenting with the notion of collaborating with a J-school. (Howard: It’s CUNY, not SUNY, and the locals in New York City are sensitive to the difference.) We are going to have to learn new, inexpensive ways of gathering ad dollars if this is going to pencil out for us; our operation is built on gathering high-priced national advertising, so the ad-based part of the business model is back-to-the-future for us.

The best thing we’ve got going for us is the game, community-minded spirit of the journalists who are undertaking the experiment. None of them are interested in creating cookie-cutter sites. What we’ve asked them to figure out are the principles of serious community journalism for the 21st century. If we can distill that formula — something that most placeblogs and community newspapers haven’t figured out, or at least aren’t delivering on — we will have something valuable to share with communities beyond the two where we’ve started. Is it a business? We’ll see. Jim Schachter, Editor-Digital Initiatives, The New York Times