Nextdoor, the hyper local social network, is seen on a computer screen in Washington, DC, on March ... [+] 27, 2020. - There are offers to pick up groceries or medicine for neighbors, to share supplies, or walk people's dogs. And exchange information on where to find scarce items like toilet paper. For people forced to stay home to ride out the coronavirus pandemic, Nextdoor, the hyperlocal social network, has found itself playing an increasingly important role. (Photo by Eric BARADAT / AFP) (Photo by ERIC BARADAT/AFP via Getty Images)
AFP via Getty ImagesAs many local newspapers are scaling back or no longer publishing, some hyperlocal news and digital companies are making a profit. One of the more successful has been Patch. Patch was founded in 2007 and two years later AOL acquired the company. Under AOL, the company underwent financial difficulties, losing a reported $200 million to $300 million. In 2014, after AOL laid off one-third of Patch’s employees, Hale Global, a private investment company, acquired a majority ownership.
Today, Patch has over 100 journalists, who post more than 1,000 stories daily covering 1,200+ communities. Each community serves a minimum 30,000 people. Typically, Patch uses one journalist who covers multiple adjacent communities and who produces several stories each day. Readers also have the capability to post and update their own content that allows for comments.
To point out how hyperlocal Patch is, they cover news in 12 Manhattan communities (i.e., West Village-Greenwich Village) and 13 in Brooklyn (i.e., Bed-Stuy). Patch covers such localized information as car accidents, criminal activity, store openings, real estate news, weather or school board information, not generally covered by larger media outlets. Patch does not cover any global news.
Patch says it has been profitable for the past four years, with an estimated annual revenue of over $20 million. One reason for the growth has been the increase in users from 8 million in 2015 to 32 million in 2019. According to Axios, in March 2020 page views for Patch grew from its monthly average of 85 million to 148 million. Furthermore, Patch has increased its email list by 40% in the past year with the newsletters reaching the in-boxes of two million readers every morning.
Readers can also access Patch using their app. These stories can be shared on social media or sent to friends via text message and e-mail. The app allows for users to push late breaking news notifications as well as sharing content on social media. The Patch app also allow users to access news from other communities by swiping left or right.
Patch has created a successful revenue model for hyperlocal, realizing the medium needs innovation, collaboration and partnerships. Patch is free to readers and is reliant on other revenue sources besides traditional advertising. One of them is Patch’s Event Calendar, which allows for readers to post local community events. The cost to post locally is free but, typically, readers want to post events across several communities that can run for several days. As a result, the average transaction for a Calendar Event costs around $50 per post. Readers can also re-post, which expands the reach of the audience. Patch has doubled their event listing revenue in the past year.
Another revenue source is classified advertising. This enables readers to post “yard sale” type items they want to sell or donate. Services they are willing to offer such as dog walking or yard work. Local businesses can also post any promotions or job openings.
Programmatic buying is another important revenue source for hyperlocal. Although as Rick Ducey, the managing director of BIA, states, “Hyperlocal sites can get higher CPMs from their own direct selling efforts, but those sales forces are expensive to maintain and have trouble getting to profitability. Putting locally generated impressions into the programmatic marketplace is the most economically efficient thing to do. But then, hyperlocal publishers compete with everyone from Google, Facebook, major publishers, and other local media like radio and TV stations and now OTT streaming video services that offer geotargeting.”
Ducey adds, “While Facebook and Google have been efficient with programmatic ad spending driven by impressions from journalism sites, those sites have also been struggling. As a result, the duopoly has discovered they can’t survive on ad revenue alone and in ‘enlightened self-interest’ — they need their content to drive impressions to monetize—they are offering grants, reduced ad server fees, and other in-kind financial support to assist them via Facebook’s Journalism Project and Google’s News Initiative. These initiatives are especially important with communities seeking more local information on the coronavirus.”
Increasingly, advertisers are interested in hyperlocal media. “Hyperlocal has become immensely popular with advertisers,” Ducey says. BIA recently conducted a survey of companies that advertise in local media that showed 81% of these advertisers use some type of geo-targeting for their advertising efforts. For example, 75% of these businesses say they “occasionally” or “frequently” use "zoned cable ads" where their TV ads air just in specific parts of town. BIA expects mobile ads using location targeting will continue to increase in ad spend from $28.5 billion in 2019 to $50.2 billion in 2024. Location targeted ads in mobile, now at about 36% of total mobile spending, will continue to rise.
There are other hyperlocal media providers that have met with varying success. For example, local television and radio stations have websites and mobile apps that can provide geo-targeting opportunities for advertisers. In addition, established newspapers, city/regional magazines and local directories have online offerings for geo-targeted advertising. Ducey points out, “Many of these hyperlocal sites either are struggling financially and headed to failure, or are subsidized to some extent by their corporate owners.”
There are other companies providing hyperlocal news. One of them is Nextdoor, which relies on neighbors to post local news and events as well as recommendations. Unlike Patch, Nextdoor is global, available in 11 countries. The platform was launched in the U.S. in 2011 and was recently valued at $2.1 billion. In April, McClatchy, a newspaper publisher facing financial difficulties, announced it was launching a new hyperlocal news website in Longmont, Colorado. The initiative, called The Longmont Leader, will be funded by the Google News Initiative and will center on local news/events including community columns written by citizen journalists. Last year, McClatchy launched a similar hyperlocal news website funded by Google in Youngstown, Ohio called Mahoning Matters. More are expected.
Despite the financial success of Patch (after several iterations), hyperlocal from a revenue perspective has been a tough row to hoe. As BIA’s Ducey points out, even though the hyperlocal space has attracted innovative journalism and business models and scaled somewhat in terms of audiences and advertisers, “ultimately, ad revenue alone has proven insufficient to sustain and scale many of these ventures. Audience subscription plans have been tough to scale as a second revenue source.”
Besides the coronavirus pandemic, another news item of hyperlocal interest will be the 2020 elections. Billions of ad dollars will be spent in this election cycle. As campaigns collect more voting information, hyperlocal news will play an important role geotargeting persuadable voters with relevant messaging.