To download the complete version of "The Story So Far: What We Know About the Business of Digital Journalism," a new report on digital news economics from the Columbia University Graduate School of Journalism, click here.
To run all of those Patch sites, AOL can count on centralized resources like a massive in-house ad network, a sales force with ties to national brands, and sophisticated search engine optimization technology for maximizing the meaningful lifespan—and thus the economic return—of every piece of content it produces. Like McDonald’s, AOL uses sophisticated market research to assess the commercial potential of the communities where it is considering planting the Patch flag. (According to a New Yorker profile of AOL chief executive officer Tim Armstrong, the Patch formula considers fifty-nine factors, from average incomes to voter turnout.)
The same infrastructure supports AOL’s growing stable of niche or “vertical” content sites, anchored by acquisitions such as the martial-arts blog MMAFighting.com, the tech-industry site TechCrunch, and the sprawling Huffington Post, which AOL bought for $315 million in 2011. It’s no exaggeration to say that AOL, whose original business model (providing dial-up access to the Internet) is badly out of date, has staked its declining fortunes on local and niche journalism.
Why? The underlying logic is the same at AOL as it was at TBD: In a world where much of the daily news has become commodified, only news that people can’t find elsewhere will command a loyal audience. This is hardly a novel insight among media analysts, who since the late 1990s have pointed to financial news as a rare example of the sort of information that people, and advertisers, will pay for online.
A 2006 report on “value creation” in journalism, from Harvard’s Kennedy School of Government, put the lesson bluntly: “specialize or localize.” As the report explained, “Because of the increasing range of information sources, greater abilities to access material from anyplace at anytime, and requirements to create tight bonds that lead to loyal consumers, news organizations will have to move away from the unfocused, something-for-everyone, one-size-fits-no-one news products characteristic of the second half of the twentieth century.”
Of course, not every news outlet can be the Financial Times or The Wall Street Journal, with long-cultivated expertise in a valuable and time-sensitive brand of information. For most, the clearest path to “adding value” lies in paying closer attention to their immediate community. The Harvard report put this drily: “To be competitive and create economic value, media will need to increase their differentiation, and thus exclusivity. The most effective way to do so is to create value through local coverage that is linked to the lives, aspirations, and understanding of individuals in the locations in which they live. It is this kind of coverage that other news providers cannot do well.”
That’s the theory. But TBD, Patch, the hyperlocal sites launched by The New York Times and The Washington Post, and many others like them have yet to produce a commercially viable proof-of-concept. The list of success stories in local online news hasn’t changed much in recent years; it contains mainly small, grass-roots community sites. If nonprofit ventures with significant foundation funding, such as MinnPost and Voice of San Diego, are removed from the list, most of what’s left are Baristanet, Alaska Dispatch, The Batavian, West Seattle Blog, and a few others.
These ventures vary in their business models and the kind of journalism they produce. What they have in common is limited resources, a narrow coverage footprint, and no claim to the corporate efficiencies of their larger peers.
Alaska Dispatch is a statewide news site launched in 2008 by the husband-and-wife reporting team of Tony Hopfinger and Amanda Coyne. In 2009, philanthropist and former U.S. News & World Report executive Alice Rogoff bought a majority share; the founders stayed on as editors, and the Dispatch was relaunched with a mandate to build up a newsroom and dedicate itself to serious political journalism.
Today the site has a full-time editorial and web staff of ten, up from just two at launch. It also uses paid freelancers. Total staff costs run in the neighborhood of $650,000 per year. The Dispatch saves money by avoiding print and delivery costs, which is an especially serious expense for dailies in Alaska. In late 2008 the Dispatch’s print rival, the Anchorage Daily News, ended rural air delivery to the state’s remote outposts.