The bottom left quadrant is the source of the most surprising lessons about building commercially viable journalism online. The independent, locally grown news sites that populate this quadrant would seem to be at a clear disadvantage. They lack the editorial backing from established newsrooms that many competitors enjoy. Their infrastructure costs—bandwidth, content management, ad serving, and so on—are fixed and cannot be shared across a network. They lack what has been considered a crucial element of success in the media business: scale.

That several of these grassroots sites have nevertheless built viable businesses raises two questions. The most obvious one is how they have managed to make ad revenue align with expenses. But just as important—and perhaps still to be determined—is whether their model can support serious accountability journalism.

The city of Batavia, N.Y., is unlikely to show up on AOL’s carefully calculated list of promising Patch sites. It is a Rust Belt community of just 16,000 people in the western end of the state, about fifty miles from Buffalo. The prison system is one of the few growth sectors in what was once a thriving industrial center, and Batavia’s downtown merchants have struggled to compete with big-box retailers.

When The Batavian’s website went live in May 2008, the local paper, the Batavia Daily News (owned by the Johnson Newspaper Corp.) didn’t have a website. (It does now.) Gatehouse Media, which publishes small dailies, weeklies, and “shoppers” around the country, launched The Batavian as an experiment in online-only publishing. In addition to hiring two reporters, who are no longer there, Gatehouse provided its in-house digital guru, Howard Owens, who became the new site’s publisher. In early 2009, Gatehouse laid Owens off and he assumed ownership of The Batavian, which runs as an independent site with no editorial or business ties to other publications.

Three years after going live, The Batavian, according to Owens, is profitable. It offers a promising example of local online journalism. The site has grown from fewer than 2,000 unique visitors per day in 2008 to roughly 6,000 now, generating close to 600,000 page views each month. Owens won’t say what it costs to run, but The Batavian operates with a skeleton staff: Owens, his wife, and two part-time employees, in addition to freelancers who are paid a small sum per story. The site posts about five short reported stories per day, and additional bulletins or photo pieces.

Most impressively, The Batavian has about 100 advertisers at any time—up from just three in 2008—and pulled in between $100,000 and $150,000 in ad revenue in 2010, Owens says. He aims to double ad income in 2011 and to hire one or two full-time employees. “I don’t really have to sell anymore—they call me,” he says of local advertisers. “It’s driven by word of mouth.”

One factor driving that word of mouth is The Batavian’s modest advertising rates. The site eschews pricing by traffic completely; instead it charges a flat fee of $40 to $260 per month (though one premium package runs as high as $400).

Owens estimates that a month’s run on his site would buy just one day’s placement in his print competitor, the Daily News. “I wanted it to be an easy decision,” he says. “What’s another $200?”

Online, of course, the supply of space available to sell to advertisers increases with traffic, because “impressions” are the unit of measurement. A small site like The Batavian would be hard-pressed to support 100 advertisers with the top-of-page banner model used by many large metro dailies. With one major banner per page, each sponsor would get just 6,000 impressions per month, or $30 worth at a fairly generous $5 cost-per-thousand. (In 2010 comScore found that average newspaper CPMs were $7 nationwide, though its analysis included the largest newspapers and newspaper chains in the country; small local outlets tend to have lower rates.) At that rate, the site would earn $36,000 a year. If there were two big banners on each page, annual revenue would rise to $72,000.

Bill Grueskin, Ava Seave, and Lucas Graves are the co-authors of "The Story so Far: What We Know About the Business of Digital Journalism." Grueskin is dean of academic affairs at the Columbia University Graduate School of Journalism. Seave is a principal of Quantum Media, a NYC-based consulting firm. Graves is a PhD candidate in communications at Columbia University. For further biographical details, click here.