Why hyperlocal websites like New Raleigh can't make money online

| January 23, 2013
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- Photo by D.L. Anderson; concept by JP Trostle; napalm by Dan Wegerzyn
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It started, as good ideas often do, in the back room of a bar. David Millsaps, a designer and web consultant in his mid-20s, brought together several other creative types at Mitch's Tavern in 2007. The topic was the need for a Raleigh-focused online publication that could capture the city's growing cool.

"You've got this downtown that's just budding. Raleigh Times [Bar] had just opened. SparkCon [a collaborative downtown arts festival] was in its second year," Millsaps says. "There was so much going on. I just thought, I want to have this website that everybody would check to find out about the coolest stuff in Raleigh."

For five years New Raleigh delivered on its promise of a news and culture website with a distinct voice, and it garnered tens of thousands of readers. Fast forward to Jan. 2, 2013. "The time to stop publishing New Raleigh has come," wrote Millsaps and editor Jedidiah Gant. [Disclosure: Gant occasionally writes for INDY Week.]

Three years ago, media analysts were calling community-driven websites ("hyperlocal" in media parlance) such as New Raleigh the trend to watch. And yet local websites haven't filled the information void at the same rate newspapers have emptied it.

New Raleigh, like most local news sites, never found a way to translate its influence and readership into profit. The biggest reason is that community websites inherently restrict their ability to make money by catering to a smaller pool of readers than sites with national appeal. And what ad revenue remains on the table is further limited in part because Google and Facebook gobble it up. Other news sites such as Raleigh Public Record have tried to address the financial hurdles by incorporating themselves as nonprofits. But the bottom line is: There is simply not enough money to pay people to produce high-quality work.

During New Raleigh's peak, it regularly broke news and was the go-to website for culture events in downtown Raleigh. With a readership of more than 40,000 visitors each month, its following dwarfed other independent local websites.

"New Raleigh has contributed immensely to the downtown culture and it will be sorely missed," commented Aly Khalifa, co-founder of Designbox, on New Raleigh's website. "It is highly compelling that two brilliant gents with vision can galvanize such presence and create a voice for the way our city has been changing."

Another commenter, identified as Les Stewart, captured what made New Raleigh seemingly indispensable: "Thank you for making me feel like I was in the know."

New Raleigh "was this thing we got all this positive feedback on, but there just wasn't much to sustain it in real terms, nothing I could pay rent with," says Millsaps. "Maybe all that positive feedback is just because others might not be willing to do it for free."

Millsaps gave free rein to his producers at New Raleigh. Voice and opinion were encouraged, as long as the stories highlighted cool aspects of the city. But covering politics, development, music, art and food, as New Raleigh did, typically requires three to five full-time staff members even at a small newspaper. Thus, the quality and breadth of New Raleigh's coverage ultimately hinged on the number of regular contributors.

Millsaps and Gant were the only people who wrote consistently throughout the life of the site.

While Millsaps initially created New Raleigh to fill a gap in downtown coverage, he began to envision that the site could be profitable. A major obstacle was retaining a steady stable of writers for an extended period of time. Millsaps declined to comment on whether any contributors were paid. He said they were motivated to write for the site by a passion for Raleigh.

Despite New Raleigh's struggle to retain good writers, newspapers were still leaving the door open for fresh local coverage. For example, as McClatchy's revenue has declined companywide, The News & Observer has nearly halved its staff since 2008, as INDY Week has previously reported. INDY Week trimmed its staff by two-and-a-half positions during the same time—about 9 percent.

NBC-17 made the biggest bet on hyperlocal online news in the Triangle. At its peak, the company maintained 20 community websites and employed 40 to 50 people, the company's then-general manager was quoted as saying in a 2011 media study by Fiona Morgan, a media researcher at Duke University and former INDY Week staff writer.

After massive layoffs, NBC-17's community network went silent in 2010, according to Morgan's report.

Even national corporations with financial muscle have failed to cash in on the hyperlocal movement. Patch, a company owned by AOL, operates 900 community websites nationwide. But the company's CEO reported earlier this month that only one in nine sites is profitable, according to The Wall Street Journal.

Nonetheless, around 2010, New Raleigh seemed to be taking advantage of the information gaps left by ailing print publications. Five editors, which included Gant and Millsaps, were regularly posting to the site. New Raleigh was sponsoring downtown concerts and events. It had the appearance of an established community institution.

"A bunch of people I think thought we were making money," says Gant. "But we never were."

Then Gant's son became ill, so Gant couldn't spend as much time focusing on New Raleigh. Between that and the less frequent contribution of other editors, New Raleigh lulled in 2011.

The personal cost leads many local bloggers to burn out. Founded by Kevin Davis, Bull City Rising was a popular website that extensively covered Durham city politics.

Davis was writing fewer posts in the fall of 2011 before finally updating readers to say that new job responsibilities and a family member's illness meant BCR had to take a hiatus. The site has been quiet since, but Davis hopes to revive it soon.

"The personal toll has been a major, major driver for me with this," Davis says. "The downside of citizen journalism is that there is no structure around it, the same way a corporation might be able to live beyond the life of its owner."

Orange Politics fills a similar news hole in Orange County. The website's founder, Ruby Sinreich, currently works with four other editors to maintain the site and operates at a loss every year. When she has to shell out for a major cost, like updating the website, she reaches out to her readers for contributions as a form of revenue. She says it works as a way to cover costs, not to make money.

"We've been more sustainable, because there is no budget to meet," she argues. "One of the reasons I think people trust us is that we aren't in it for the money."

Sinreich has a 3-year-old son and, like her husband, works a full-time job. She acknowledges OP's precarious existence, in so much that a major change in her life could lead to the eventual collapse of the site.

While all these sites meet vital information needs in the community, they tread a delicate line. "Individuals die," says Millsaps. "No individual can ever really be an institution."

Like Orange Politics and Bull City Rising, Raleigh Public Record focuses on government coverage; it could be classified as public service journalism. The Record insulated itself, at least in the short-term, from some revenue problems by incorporating as a nonprofit.

Charles Duncan Pardo is the website's founder and, like most in online community news, has a day job. However, he and two others earn a salary from the Record. And he also pays a team of freelance writers.

But very little of the money comes from ad revenue (what's called sponsorship in the nonprofit world) or donations. The Record is around 85 percent grant-funded, says Duncan Pardo, leaving it vulnerable to the same long-term questions of sustainability that New Raleigh faced.

"One-third of your budget should be coming from grants, a third from sponsorships, and a third from individual donors. That's kind of the holy grail of non-profit management," he says.

Audience size determines a website's ability to make money. In 2010, New Raleigh's traffic was far outpacing its independent competitors. New Raleigh averaged 42,500 readers per month over a five-month period, according to Quantcast statistics in Morgan's media report.

BCR reached 10,000 readers per month, according to the same media report. OP reached almost 7,500 readers in December, and the Record averaged more than 12,000 readers per month since July 2012, according to recent Google Analytics reports provided by Sinreich and Duncan Pardo.

Compared to national websites like Buzzfeed or Huffington Post, the numbers are ludicrously small. Those sites received, respectively, more than 15 million visitors and more than 59 million visitors in December, according to Quantcast.

But it doesn't necessarily take that many readers to make a living. Tom Mangan, a blogger in Clemmons, N.C., speculates on his website that anyone with access to 100,000 or more readers can earn a decent salary from advertising.

Mangan himself started a blog about Caterpillar Inc., the world's largest heavy equipment manufacturer, with an eye toward audience size, according to Poynter.org.

Sites such as Mangan's can be more easily sustained when they have a hyper-focus. But New Raleigh wasn't hyper-focused. It was hyperlocal.

The types of products or services a website advertises also make a difference in payoff. Google Ads is a package created by Google, which many websites, including New Raleigh, use. The software places an ad on your website that is relevant to your content.

The website then gets paid every time someone clicks on an ad. But different ads pay different rates per click. For instance, a large corporation might pay $5 per click, while a small company might pay only $1.

"If you write about the Local 506 [a Chapel Hill music venue], Google is like, 'What do I show you for this?'" Millsaps says. "The new Bon Iver album? Yeah, because music is so profitable right now."

The Internet tools that help local websites achieve prominence can also be their enemies. While Google and Facebook help spread content, Millsaps says, they also siphon money that could go toward smaller sites.

"That starts with Google disintegrating articles from a brand," he says. "If Google News is my home page, I'll read this article about this topic, but I don't care who I'm reading it from."

Essentially, people can read an article in their Google News feed without ever having to click on the content producers' website. In that scenario, Google effectively makes all the money from someone else's content.

"You don't get the traffic. You don't get the ad revenue. All you get is more of an audience, but an audience you can't make money off of is worthless," says Millsaps.

"Facebook is also a hell of a revenue vacuum," he says. "We went from having zero percent to having 30, 40, 50 percent of our traffic coming from Facebook. We put a killer article up and Facebook spreads it wide."

"Then Facebook went to this model where you could pay for promotion of your article, and then that pushes us down," says Millsaps. "We saw a dramatic downtick after that change, because they wanted us to spend our money. They wanted to not only make ad revenue off our content, but charge us to get it around."

Both Millsaps and Gant believe they ended New Raleigh on a high note. Gant's son Oliver went into remission in early 2012 and Gant was able to consistently post to the site again.

Millsaps also says that even though the website didn't have as many dedicated contributors in 2012, he had refined search engine optimization techniques, which kept traffic high in the final year. Millsaps says the site had just as many readers as its peak period, but didn't provide numbers.

Millsaps had already decided the site couldn't be financially successful. In 2011, he and Gant knew the end was near.

"We really wanted to end it well," says Gant. "I compare it to [the TV show] The Office. The British version of The Office went on for two years and it will always live as a legend. The American version just sprawls on. To me, that's the money talking."

"I think there's this weird thing we apply to news media where we expect sustainability from it, but we don't really apply that to any other form of media," Millsaps says.

But the difference between local news and The Office is that Raleigh now lacks a website dedicated to cultural events and news downtown. While Steve Carell's depiction of Michael Scott grew tired, new restaurants continue to open and new bands come to town.

"A number of people in town are thinking about how to fill that [gap], us included," says Duncan Pardo of the Record.

Other downtown businesses tied to the arts hope someone can step in to fill the void left by New Raleigh. "I do think the arts downtown, but especially an online publication like New Raleigh, are taken for granted," says Kelly McChesney, owner of Flanders Gallery. "Maybe people need to be educated more about the value of these things, or maybe you have to find other ways to be important to people. It's an important question."

If a business model can exist, Millsaps doesn't believe the idea will come from traditional journalists. "I seriously doubt that the next form of news comes from anyone working in journalism today or anyone that has a formal journalism education," he says.

Today, Gant and Millsaps like to refer to New Raleigh as a kind of art project. But while it broke many of journalism's rules, New Raleigh was still journalism, as evidenced in the site's Facebook tagline: "The obsessive Raleigh daily news blog."

"I've always made things and this is the most successful thing I've made so far, but only in one dimension," Millsaps says, "only in the attention dimension."

When Millsaps still hoped New Raleigh could be a financial success, he told Fiona Morgan he never considered the nonprofit route. "I don't see the point in building something that is non-profit," she quotes him as saying. "If it can't function in the capitalist system, does it deserve to live?"

For New Raleigh, that question answered itself.

This article appeared in print with the headline "When blogs burn out."

Correction: The print version of this article incorrectly stated that Local 506 is a Durham music venue; it is located in Chapel Hill.

20130121_BURN_LAPTOP_BLOG_022_DLA.jpg
- Photo by D.L. Anderson
20130118_BURN_LAPTOP_BLOG_120_DLA.jpg
- Photo by D.L. Anderson; concept by JP Trostle; napalm by Dan Wegerzyn
Jedidiah Gant of New Raleigh with his son, Oliver.
Jedidiah Gant of New Raleigh with his son, Oliver.
- Photo courtesy of Jedidiah Gant

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Comments (8)

Showing 1-8 of 8

Larry, certainly there are five ads on the home page.

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Posted by David Klein on 01/29/2013 at 8:55 AM

You don't look too healthy yourself. Yes, your classifieds are plentiful (not very user interactive), but where's the rest of your advertising support? Certainly not on this site.

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Posted by Larry Grimes on 01/28/2013 at 6:13 PM

They weren't the first .com to find that its business model is unsustainable, and they won't be the last.

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Posted by ct on 01/26/2013 at 4:02 PM

What about less traditional advertising + business development tactics? Curated events, business-sponsored stories featuring their products, or services, etc?

The Bold Italic is a fantastic model of this, and seems to be doing okay. Its as much about driving audience engagement with great content (which New Raleigh certainly does / did) as it is engaging the local business community to plug in and pay for new exposure opportunities. You have to find the balance and draw the line between where promotion-only stops and profit opportunity begins.

The article doesn't seem to suggest these avenues for revenue were ever investigated, but I hope whatever phoenix rises from this really unfortunate news that it thinks more dynamically about how to find sustainability.

I'll definitely miss New Raleigh, thanks for all the years and all the news.

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Posted by grain of salt on 01/24/2013 at 6:59 PM

I see you missed our site- CaryCitizen covering all things Cary. We started publishing July 2009. We created an annual event called the Cary Scavenger Hunt that each year has doubled participants and revenue. Our mission is to tell stories that connect the community. We're pretty significant and we posted numbers higher than all those you quoted.
Guess you think Cary is beige?
Our advertisers are very happy with our 1600 views per day plus email list twitter and facebook promotion. And we have been growing every year- On target for a great 2013!

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Posted by Lindsey Chester on 01/24/2013 at 5:41 PM

Will, great article but I'd like to throw a counter point to your argument, perhaps a new way to look at hyperlocal blogging. I run a blog about downtown Raleigh with a readership that is around a fifth of what New Raleigh had. The costs associated with it are pretty low. I do not advertise and I've turned down multiple inquiries about advertising on the site. Agreeing to accept advertising could have covered my costs many times over.

However, the blog is a hobby, a passion project for me and I've made my money, again a small amount, through the exposure the blog gives me. In a year's time, if I sell two photos and write one piece for another publication, I'm set. If don't, well who cares cause the cost is low and the value it has to me is so high, I'm willing to pay for it.

Hyperlocal blogging can work and cover it's cost but I feel that those working behind it have to be more than just running a website and relying on Google Ads to do the rest. Writing, photography, web dev, are all things that a successful blog can use to create other things for the community that can make them money, like creating useful services.

Time is the ultimate resource though as you mention and life takes everyone in new directions so the blogs may be affected by the editors' life changes. I strongly feel though that hyperlocal blogs, that build a community behind them, can go down for some time and come right back. The community will return if New Raleigh is picked up in some form later on. I truly believe this.

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Posted by Leo Suárez on 01/24/2013 at 12:10 PM

The writer of this piece makes a giant leap of logic to insist that "hyperlocal" websites don't work because they are too local. Really? There are scores of small newspapers that have thrived over the last century with a tiny fraction of the audience of New Raleigh. This isn't an audience problem, it's an advertising problem. You can't make a local website work with just Google ads. Imagine someone starting a local newspaper — back in that medium's heyday — that relied on a national third-party company to sell all their ads. It wouldn't work. All successful businesses rely on sales. What was New Raleigh selling? When I look at this site, I see nothing but a couple of Google ad blocks. Where are the local ads? Did they have a local sales team? Did they have ad programs and formats that would be of value to local businesses? Certainly hyperlocal websites have a tough road on the way to profitability, but it's not because they are too local.

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Posted by Kirk Caraway on 01/24/2013 at 11:50 AM

Thanks for your nice article on NEW RALEIGH. I am sad to see it fold. But it's false to imply that their departure creates a void in coverage of the arts and culture in the capital. CVNC, an edited online journal, stepped into a real void a dozen years ago, when INDY and SPECTATOR significantly reduced their coverage, and CVNC's still here, based in Raleigh but operating statewide and now covering theatre, dance, and visual art as well as classical music and opera. CVNC is a non-profit, yet it pays its staff and writers and continues to grow under a viable business plan. John Lambert, Senior Contributor, CVNC.org

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Posted by John Lambert, member of CORAC, 1993-96 on 01/24/2013 at 10:30 AM
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