Nieman Journalism Lab

In the Netherlands, a Patch-like hyperlocal network is making money and nearing profit

Posted: 07 Jun 2012 11:43 AM PDT

In the United States, there are any number of individual hyperlocal sites that are proving sustainable — Berkeleyside, West Seattle Blog, and the like. What’s proved more elusive is a way to take those individual successes and systemize them — to make them replicable across a larger scale. The best known effort to do so, AOL’s Patch, has had a rough go thus far: An activist shareholder estimates that in 2011, Patch’s 800-plus sites generated just $13 million in revenue against $160 million in expenses, and AOL is cutting costs.

But across the Atlantic, there’s a more optimistic example. The Netherlands’ Dichtbij — “close to me” in Dutch — is a hyperlocal news platform that’s generating real revenue despite operating on a much smaller scale. Across its 80 sites, Dichtbij is on pace for revenue of €10 million (about $12.5 million) in 2012, according to Het Financieele Dagblad, the Netherlands’ leading financial newspaper. And its founder, Bart Brouwers, says he expects the two-year-old operation will be profitable by year’s end. “The income is higher every week,” he said.

Brouwers came up in newspapers, starting as a reporter, then becoming editor-in-chief of a regional daily and a free tabloid. He decided to launch Dichtbij in 2010. From a small start, today the site has 140 employees, 70 dedicated to sales.

Like Patch, Dichtbij is backed by a large media company: Telegraaf Media Groep, publisher of the Netherlands’ largest newspaper and a number of other print, radio, and online brands. That backing’s helped as it’s expanded from a few pilot sites to a large network today — one that’s going to increase in size again in the near future.

“Many hyperlocal networks (around the world) have had a really hard time making money,” he said. “There were not enough examples of success, so I had to invent most of the things myself, which was fun, of course.”

The first step was a choosing three cities for start in. To maximize learning, each one was planned to test a different set of questions, with the hopes that a model might become clearer in the mix.

In Woerden, the focus was on identifying and activating a community, with social media playing a key role.
In Zwolle, the model was built around aggregation.
In Eindhoven, there was a bigger investment in original content, plus what Brouwers called “commercial writing,” which consists of writing stories about events sponsored by the site’s advertisers (a model not everyone likes).

“We are trying to make a good business,” Brouwers told me. “I made a lot of mistakes; that’s the good part of doing a pilot. They were crucial in finding the formula for our platform.”

The platform is still young and it is work in progress, but Brouwers can share a few lessons he believes have helped Dichtbij succeed:

Think community managers, not just reporters

Journalists that work for Dichtbij have to see themselves as “community organizers.” For Brouwers, part of the success of a hyperlocal site is to develop a symbiotic relationship with the audience. “You have to activate your community. It is difficult and it differs from one place to another, so you have to be really involved with it.” That’s why the community managers are expected to spend half of their time reaching out to citizens (mostly through social media) and being out and about in their cities. The other 50 percent, Brouwers explained, is for traditional journalism (writing stories, shooting video, editing). A few sites in the largest cities are big enough to have two community managers each; others are small enough that two sites have to share one.

Dichtbij invites their users to visit their offices and have a beer (or coffee). “The reporter gives the audience reporting…and the public gives the reporter the knowledge of what’s happening in their communities,” Brouwers said.

What kind of content mix does this model produce? Here’s a sampling of what Dichtbij’s site in the town of Eindhoven offered yesterday: a story on two girls that were found after being missing 2 days, a sponsored piece about a new cycling tour in town, a daily “good morning” picture, an article describing how students are using Twitter to cheat, a photo gallery of how the city is welcoming soccer’s Euro 2012 championship, details on a decision to newly allow marriages on Sundays, and some breaking news (a fatal car accident.)

Allies, not foes

The Dichtbij model relies on close(r) relationships between journalists and sales people — something that raises the hackles of traditional journalists. A team of four “entrepreneurial journalists” collaborates with the advertising side across all the sites on generating commercially driven content. The result is stories like this one on Silly Bandz, which was paid by the local shop that introduced them to the Netherlands, or this one, a first-person piece from a student giving advice on how to cut expenses and paid for by a bank. (The sponsorship is disclosed in the last paragraph of the story.)

As you might imagine, and as Brouwers acknowledges, ethical issues come up. Businesses rarely pitch specific story ideas, he said, but they do get to see the story before it’s published and can suggest changes. And they often do. Brouwers says they tell clients that “they cannot dictate what we write.”

According to Brouwers, this kind of “commercial writing” makes up less than 10 percent of the site’s content, although in specific sections (like Shopping and Housing), the percentage can go up to 50 percent. Those stories are also not normally posted on the sites’ homepages or in hard-news sections. “I found it is possible to please an advertiser and still write stories that your audience finds interesting,” he said. Your mileage may vary.

Centralization doesn’t work

Stories and ads have to be tailored for each community; overcentralization makes it hard to truly connect with a community. The sales person and the community manager have to be from the region they are working with, Brouwers stressed: “Holland is a very small country, but we have small differences in the language, so if you speak with the wrong language, things can go wrong.”

Aggregation isn’t enough

From the pilot site and later experience, Brouwers said you can’t rely too heavily on aggregation to build a successful hyperlocal network. It helps — but he says it would be very difficult to make it without original content as a selling point. Today, as Dichtbij grows, more than half of its sites are what Brouwers calls “light sites,” which only do aggregation and have no sales teams, but the number of sites staffed for original content is growing..

To move beyond aggregation, Dichtbij just launched Android and iPhone apps aimed at generating more user content. Brouwers hopes the app will also help boost the site’s audience, which he said currently stands at 4.2 million unique visitors per month (in a nation of about 17 million). The site covers now 80 regions (418 municipalities), but that’s just half the country.

If you build it, you can sell it

On the business side, Dichtbij is now trying to franchise its model. Currently, three sites have been launched by entrepreneurs with Dichtbij’s framework; the sites’ owners pay three types of fees, one fixed, one based on a percentage of the site’s income, and one tied to the site’s size and potential growth.

The newsonomics of Larry Kramer’s USA Today

Posted: 07 Jun 2012 08:22 AM PDT

Larry Kramer. USA Today. Seems like an odd couple.

Since Gannett announced in mid-May that it was turning over its once-prized, now-flagging flagship property to highly respected web entrepreneur Larry Kramer, the news has been a head scratcher in digital news circles. We’ve seen John Paton ask Kramer the “Why” question and a (Staci) Kramer vs. (Larry) Kramer interview plumbing the same territory. Of course, Larry is so far keeping his strategies, smartly, to himself, making the right noises about brand and storytelling.

Why would conservative Gannett offer him the job? Why would Kramer take the job? Does he know something somebody else doesn’t and have a way of turning around USA Today’s fortunes? Can the operation once ridiculed for its colorful re-envisioning of a daily newspaper, then respected for its innovation, make the transition to the fast-onrushing digital future?

Those are just the first questions that tumble to mind. In fact, the future of USA Today — still America’s top circulation newspaper — offers all kinds of resonance for basic survival questions of the press. It’s unique in some ways, certainly, but in its quest for a future, the issues Kramer has now taken on mirror the those of the wider industry here and in the developed world.

As one observer put it, Kramer’s good for the job because he has nothing to lose. (In an interesting parallel, I suggested that as one of the criteria for the The New York Times’ next CEO; in fact, the Gannett hiring of newspaper veteran/Internet exec Kramer is the profile for what we would think to be the Times’ best candidates.) Indeed, this is America’s largest print paper, and it is owned by the country’s biggest (and world’s second biggest) newspaper company, and one in marginally better financial shape than its peers.

Kramer inherits a widely known brand — maybe not really “The Nation’s Newspaper,” but in its hotel and airport ubiquity, a mark seared into the minds of many.

Yet it’s oddly a mid-market, Middle America medium with Flyover Country warmth. Being stuck in the middle isn’t a good place in the niche-loving web.

It’s not in the same league as the Times, the Journal, or the FT, nor of TMZ, the Daily Mail, or HuffPo. It’s got a personality, but not one of this era. With America’s politics badly divided, its let’s all-put-together can-do community spirit seems a vestige of an era, maybe USA Today’s golden one. On the tablet, News Corp.’s The Daily has taken square aim at a new kind of paying mid-market, marrying the old (daily “newspaper” edition) with the new (highly visual tablet-first presentation), and in so doing has so far proven that that market looks small.

USA Today may claim to be America’s newspaper, but in reality it’s neither here nor there. Unlike the rest of Gannett’s news properties, it has no local turf to try to protect or leverage. It’s in digital competition with everyone and anyone.

Ask smart observers of the U.S. scene, which I did, and you hear three priorities, over and over again: brand, mobile, and travel. So as we look at the newsonomics of USA Today, let’s think about possible alchemy of those three, plus a few other questions. A USA Today Top 10 feature seems in order, so here goes:

1. We’re smaller than we used to be.

USA Today, like all newspapers, is less than it once was. Consider:

Print circulation: USA Today is still the print leader in the U.S., with 1,701,000, down from 1,829,099 a year ago (the number still reported on the USA Today “Audience” page). That compares to 2,251,000 a decade ago.
Ad revenue: USA Today’s print advertising is in a tailspin, one that is worse than the industry as a whole. Since the national category it sells into is moving fast to the web, draining newspaper revenues, it’s particularly hard hit: USA Today print ad revenues were down 14 percent in 2011. In digital, though, it reported an unexplained 25 percent increase for the first quarter, well above industry averages. Significantly, effective CPMs (cost per thousand rates, charged to advertisers) are lower for USA Today than for Gannett’s community newspapers. In part, that’s the market and in part, that’s selling strategy, something high on Kramer’s list to re-assess. In print and online, USA Today has never been able to charge the rates of its national competition, The New York Times and The Wall Street Journal; that delta between the Times’ and Journal’s premium ad selling and USA Today is only increasing.
Digital audience: It has a huge audience, variously ranked in the top 10-15 U.S. sites. Nielsen data shows USA Today with an increase of 8 percent year over year (from home/work computers only), compared to a 4 percent decrease for its peers.
Newsroom capacity: About half its former size, down from a high of about 550.

Overall, it’s in the same boat as the rest of the newspaper industry, though it’s leaking a bit more rapidly in revenue.

2. We’re digital first, sort of.

USA Today, like all of Gannett’s newspaper properties, have heard many digital-first, reorganize-for-the-future exhortations. Yet talk to people on the inside, and they’ll tell you this transition is still early. Larry Kramer has already been in and out of his new lair, though he hasn’t formally arrived. One early message: The newsroom needs to get real about being digital first. Job one: Moving beyond a five-day-a-week, print-centric thinking that hangs on even as many digital initiatives have moved forward. Kramer has a key hire to make: the next USA Today editor. John Hillkirk moved on from the position in November; who will Kramer convince that his own quixotic quest is worth joining?

3. A tale of two, I mean one, I mean two companies.

Since its inception in 1982, USA Today execs have zealously guarded its independence from dominating Gannett corporate “integration.” USA Today, they said, by its nature of being distinctly different than Gannett’s now-82 community dailies, needed to chart a different course. In its business and editorial activities, it managed to do so for a long time. Now, especially with print advertising in freefall for Gannett and others, we’ve seen real consolidation in business lines, and that has reined in USA Today’s independent resources.

For a change agent like Kramer — who we can expect was promised fairly free rein — his relative independence from the mothership is a key factor in his chance to find turnaround success. Especially in technology, product development, marketing, and sales (and that covers a lot of territory), he’ll need to be able to get stuff done without the additional hurdles “matrixed” organizations often pose.

4. Will the body reject the transplant?

Gannett, traditionally, is quite an insular company — promoting from within is part of its DNA. It has brought in CNN veteran David Payne to run digital for the company, and several of its recent top hires in marketing, travel, and sports have come from outside. Gannett leadership deserves credit for breaking out of its traditional mold. Still, cultures above, below, and parallel to Kramer won’t budge easily. When push comes to shove, will new Gannett CEO Gracia Martore provide enough support? Even if she does, will the wider culture succumb to Kramer’s charms? Will Kramer and Payne be sympatico, as they both chart digital futures?

5. We like to itch our niches.

The problem: While USA Today had pioneered aggressive (red) sports coverage, consumer-friendly (purple) lifestyle coverage, and your finance (green) business/money coverage, it has failed to build leading positions in those in the digital world. Leadership has talked a good game of being multiplatform and was innovative early on, yet it doesn’t own much.

In sports, where the new USA Today Sports Media Group is newly energized, it faces ESPN, the leagues themselves, Comcast, and Fox. In business, it’s Marketwatch (built out by Larry Kramer), CNN Money, CNBC, Bloomberg, the Journal, and many more. In entertainment, everyone from People magazine to Flixster has taken audience that USA Today might have claimed. In news, CNN, MSNBC, Fox, Huffington Post, Politico, and a host of others can claim similar digital turf.

6. Travel with us — we’re good company!

USA Today is the original on-the-go newspaper. In fact, founder (and then Gannett CEO) Al Neuharth’s vision was serving the more than 1 million Americans in transit 30 years ago. Half of its circulation, at least, has been hotel-oriented over the years. Further, it tries to serve the traveler with strong travel consumer content. Yet it’s not the travel go-to product that readers — especially tablet and smartphones — think of first as we chart their journeys. Some Gannett veterans point to missed opportunities — the company looked at, but passed up opportunities to buy into both TripAdvisor and Kayak and wonder how it missed the travel boat.

Building on the 2011 startup of the USA Today Travel Media Group, Kramer has already strongly signaled the priority of travel, appointing two new travel execs, one from Expedia and one from Rand McNally, within a week of his own announcement as publisher. Those execs will look at the new wifi/portal deal with Hilton, to be launched later this year, and see whether that’s prototypical of a new direction. They’ll try to figure out if it’s still possible to grab a pole position in digital (especially mobile) travel going into 2013. Among the keys here: world-leading travel utilities and smart, curated aggregation of the best travel content and functionality out there. Right now, it’s an app-by-app world, growing impressively week by week, but there’s no single place to go to as The Gateway.

7. Mobility, mobility, mobility: America’s got hot pockets.

Is it go time for USAT Mobile? USA Today was early on the iPad, but still has but one app there (other than an education product). The untapped mobile potential here is about product. It could be a place where Kramer’s audience-centric thinking can be applied, actually going beyond replicating the print product in tablet form. This thinking may well make or break the next generation of USA Today. Mobile’s still a green field of audience and ad potential, even as the corporate farmers (Google and Facebook) move in.

8. Start the meter! Time’s a tickin’.

CEO Martore has promised Wall Street $100 million in added net income in 2013, based on the startup of digital circulation (a.k.a. paywalls) at all its community dailies. So what about its other newspaper, USA Today? On the plus side, it has half to two-thirds the number of unique visitors The New York Times has, and the Times has built a $100 million digital circulation business in less than two years. Alas, USA Today is no New York Times. Much of its news is, fairly, a commodity. It’s been its voice, its presentation, and its packaging of news (and features) that has distinguished it. So if Kramer sets up a meter, have those qualities engendered enough habit and loyalty to get readers to pay? And is there enough of a bundled, overlapped audience, print and digital, to make an all-access pricing play work?

9. New weight-loss tips: Get rid of unsightly newsprint.

Call it the NOLA diet: Squeeze those remaining print advertisers into fewer days of the week, and cut out lots of printing and home delivery. Newhouse, of course, is conducting the major tests here, in its forced march to digital. For USA Today, the disappearance of its daily, iconic print product seems at first more unthinkable than even other dailies. Print had made it America’s number one paper, and now print — with its huge costs — is its anchor.

The company uses 35 printing plants around the country to enable that hotel door delivery. That compares to 27 for The New York Times. Those costs are hard to support with a rapidly shrinking print ad base, so as unlikely as it first appears, a plan to move off print, if Kramer finds the magic digital formula may well be in the cards within several years. USAT has no Sunday product, à la the Times, to support with digital circulation; its Friday weekend product is the biggest seller among its five-day-printing schedule.

10. Snapshot: USA Today generates less than 10 percent of Gannett’s revenues.

Or as CEO Martore put it in a recent quarterly analyst’s call, “To remind you, USA Today has historically made up less than 10 percent of our revenues and continues to be a small contributor to overall cash flow results, as it has historically been.” Which is another way of saying don’t look here, look there. The upside of a USA Today successful digital transformation could be substantial, but hey, if we can’t pull it off, it’s not a big problem.

Is USA Today today profitable? Gannett financial breakdowns don’t tell us. Ask insiders, and they’ll say there’s long been a question of cost allocation within Gannett, complicating the true profit picture of the paper. Back in 1997, it had a 8 percent profit margin, and in those days, Gannett was pulling in 30-plus percent margins at its community papers.

This, then, isn’t a cash cow to be milked. It’s a digital animal waiting to be named.

Ah, yes, those Snapshots. Those brand-identifying visual factoids are habit-forming — you can’t read (absorb?) just one. Many of those I polled were incredulous that USA Today hadn’t ported them over to web in a game-winning way. They won’t save the franchise, but imagine them as iPhone apps leading to more content, and Kramer may have his first no-brainer identified.

Photo by Simon Q used under a Creative Commons license.

YULI AKHMADA

Jumat, 08 Juni 2012