With the national and international news game more or less dominated by traditional media and web giants like Google and Yahoo, much of the focus for companies that want to grow online is moving toward niches: sports, technology and other topics. But one of the biggest remaining unfilled niches in online content is hyper-local news. AOL has made the biggest investment in this segment, spending an estimated $50 million or so on rolling out its Patch.com network last year to almost a thousand towns. But Topix CEO Chris Tolles — whose company aggregates news and community discussions around thousands of small towns and regions — says that’s likely just the beginning of the hyper-local land rush.
The Topix co-founder says one of the reasons why local content is ripe for investment, and one of the things likely pushing AOL in that direction, is that “local monetizes better than just about anything else” in terms of advertising. “The figures show that ads are about four times as effective if you localize them,” Tolles said. This phenomenon has likely been driving advertisers to work with other avenues like Groupon, which can target individual regions or towns. Topix, meanwhile, has been making an average $4 eCPM (cost per thousand) for its advertising, says Tolles, and has also been getting much more response from large ad agencies than in the past.
Two to three years ago when a sales rep would call on some Madison Avenue firm, the 25-year-old sales guy would say “local sounds like my local news, and that sounds like my mom and dad — so no thanks.” Now they’re saying “local sounds like Foursquare and I have an iPhone and that sounds interesting, so yes.”
Local Advertising Rates are Climbing
The fact that CPMs for local advertising are up means that lots of companies like AOL and Yahoo — which is pursuing a Patch-like strategy with its Associated Content unit, which it acquired last year for an estimated $100 million — are going to be looking to amass as much content as possible so that they can get the scale necessary to make an impact on their businesses, the Topix CEO says. “It’s all about who can create a large local footprint,” he said. “I think we will see acquisitions this year, as part of a land grab from these companies, looking for someone who can deliver a large enough local footprint.”
Not surprisingly, Tolles says Topix is in a pretty good position if that happens. The local news aggregator was profitable for the first time in 2010, he says — with revenues that were up by more than 50 percent compared with the previous year. “We are one of the largest local sites in the U.S.,” the CEO says, “larger than any other except maybe one of the big newspaper chains like Gannett or McClatchy. Not bad for about 30 people in an office in Palo Alto [Calif.].” The site gets about 8 million uniques a month, he said, which is roughly the same as twice what AOL’s Patch is estimated to have across its sites.
Topix doesn’t get much attention when it comes to the online-media space, perhaps because it has been around so long. It was created in 2004 as an automated news aggregator by a team that included Rich Skrenta — who now runs Blekko — and Tolles. They used algorithms to crawl tens of thousands of news sites, blogs and other sources of information and then filtered it into topics. Over time, the company started to focus on location as the main filter, and categorized the information into more than 20,000 towns and cities. In 2005, it got a large investment from several media companies including Gannett Communications, the Tribune Co. and McClatchy.
News Is Easy — Community Is the Hard Part
And what does Tolles think about competing with Patch, as AOL pours more money into the hyper-local effort, which is now in close to a thousand different towns across the U.S.? The Topix CEO says his site doesn’t really compete with Patch in many locations yet — and when Patch has good content from a local area, “we can aggregate that too,” he says. In some ways, Topix approaches local news in the same way that The Huffington Post did with national and international news: the site pulls in and shows excerpts of stories from other news sites. But more important even than the news, says Tolles, is the fact that Topix gives readers from those areas somewhere to discuss the news.
“We started out as a news aggregator, but the thing that we have done a really good job of is giving people a place to come and talk about the content, the news from their local community” the Topix CEO says. During the mid-term elections, for example, the site created pages for every local race, all the way from sheriff to local city council. Across all of its pages, Topix gets about 4 million comments a month from readers, which is roughly the same as The Huffington Post.
“Patch may be able to set up thousands of sites in local towns, but it takes time to develop that kind of community — it doesn’t just happen overnight,” says Tolles.
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Post and thumbnail courtesy of Flickr user See-ming Lee
Google has gotten a lot of attention for the launch of One Pass, the all-in-one subscription plan for publishers that the search giant revealed earlier today — primarily because it made for a nice counterpoint to Apple’s new in-app subscription system, which launched on Tuesday. While Apple’s offering is closed and takes a big chunk of the revenue from publishers, Google’s takes a much smaller cut — and because it’s based on the web and not on controlling access to a walled garden, Google’s system is much more open. That said, however, it’s not at all clear that publishers will get anywhere by signing up for it, open or not.
The main benefits of Google’s plan are fairly obvious: It doesn’t force publishers to provide the company with preferential access to their customers, the way Apple does by requiring in-app purchasing for all subscription services, and Google is taking only 10 percent of the revenue any publishers bring in via its payment system, while Apple takes 30 percent of all subscription fees. On top of that, as MG Siegler notes, the One Pass system provides publishers with access to information about those who sign up — names, email addresses, zip codes and so on — which is crucial data that content companies use to market their services to advertisers. Apple turns this option off by default, and users have to opt in.
That’s the good news. The bad news? Google’s One Pass is pretty much just a warmed-over content paywall. All it does is collect the money for publishers who want to put up a toll-booth around their content. In fact, the thing it resembles the most — as Josh Benton of the Nieman Journalism Lab notes — is the Journalism Online Press+ system that entrepreneur Steven Brill and former Wall Street Journal executive Gordon Crovitz have been peddling to newspapers and magazines for the past year or more, without much success.
Like that system, Google’s service is essentially designed to handle the payment processing for multiple subscription sites, so users can theoretically sign up for dozens without worrying about being nickel-and-dimed by each one. There’s just one problem: There’s no sign that users have any interest in doing this — or at least, not in large enough numbers to make it work for anyone other than perhaps The Economist and the Wall Street Journal. Those who have put up new paywalls, including The Times of London, have seen the vast majority of their readers disappear into the wind.
One of the reasons users of Apple products like the iPhone and the iPad seem a lot more willing to pay for things like apps is because the experience is so much better and paying is so easy. Despite that, magazine and newspaper publishers have have had little success so far in getting people to pay for their apps. Why would it be any easier with Google’s One Pass? If anything, it’s likely to be even harder, because it’s based on the open web — and users are likely to notice that free content is all around them, while iPhone and iPad apps do a fairly good job of disguising that fact.
So congratulations to Google for making some hay with its launch, but any publisher who sees One Pass as some kind of golden ticket is dreaming in Technicolor.
Related GigaOM Pro content (sub req’d):
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Post and thumbnail courtesy of Flickr user David Kozlowski
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