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Nov. 20, 2017, 2:10 p.m.
Business Models

Village Media, relying on local advertisers, seems to have found a scalable (and profitable) local news model

“We have to find new and creative ways to not replace a client’s Google and Facebook spend but find our own portion of it.”

Village Media is doing that weird thing where it’s using only digital advertising to support local news — and it’s working.

With roots from an online coupon book in the early 2000s for local residents to print out discounts and bring them to the retailer in person, Village Media has evolved and expanded since 2013 to six news websites across half a dozen communities in Ontario, Canada and several partnerships for other news organizations across the region. The team of 35 people (plus a deep freelancer list), as a wholly digital operation, relies on an advertising base with 26 million page views per month across the sites, said Jeff Elgie, who took on the company in 2012 and is now CEO.

“I speak a lot about this scarcity in local markets,” Elgie said. “There’s the scarcity of original journalism, which I believe people in small communities people still crave. I also still believe that there’s scarcity of available display advertising for those communities….I think there’s a lot of value that people overlook.”

Many U.S. hyperlocal outlets have based their business models on local advertising, but it’s the failures that often get attention: This month, DNAinfo CEO Joe Ricketts shut down the Gothamist and DNAinfo sites earlier this month, pointing to the advertising model as unsustainable. Spirited Media just laid off staff at all three of its publications. Some digital operations that draw support from their readership via paywall rather than scaling with advertising.

But Elgie, who previously founded and sold a digital ad agency company, believes his company has hit on a winning combination — its custom-built platform and infrastructure are so streamlined that Village Media can launch a new site within four hours, and its journalists (and some republished press releases) provide content that’s 97 percent local news.

“When we enter a market as a purely digital outlet and know what our audience wants, we take a position in the minds of our viewers that we are the go-to online source of community news and information,” Elgie said. “A lot of legacy media has a tough time making that transition.”

A clear example of that is the emergence of GuelphToday.com, the fourth site Village Media launched but the first deployed within days’ notice. When news broke that the 149-year-old “intensely local” Guelph Mercury newspaper would officially stop its printing presses and cease operations in January 2016, Elgie jumped to move up the planned Guelph Today start date from September to February.

My colleague Ricardo Bilton described the hole in Guelph’s media environment where Village Media saw opportunity:

Another attempt to fill the void came from local news network Village Media, which just days after the Mercury closed hired a pair of the newspaper’s reporters and its top salesperson to launch GuelphToday.com. Village Media, which runs four other news sites focused on mid-sized Ontario communities, saw an opportunity to successfully apply its model to Guelph, which “has a real sense of community. People love it, and love to talk about it,” said Village Media CEO Jeff Elgie. “It shocks me that [Metroland] couldn’t make a daily newspaper in a market like that work.”

But while GuelphToday.com’s entry has been encouraging for Guelph residents, the site realizes it can’t replicate what came before it, at least not in the short-term. In-depth pieces are a rare occurrence on the site, a reality that isn’t lost on Tony Saxon, the site’s community editor and a former Mercury reporter. “Obviously, we would like to have the resources to do more in-depth pieces and longer stories. We just don’t have the time to do it,” said Saxon. Instead, GuelphToday.com’s primary focus has been on, in Saxon’s words, “a hodgepodge of softer stories” that readers want and respond to. “You have to cover the hard news, but you also have to be very conscious of what gets really good readership,” he said.

[Former Mercury managing editor] Phil Andrews praised GuelphToday.com, which he said has, in a short time and with limited resources, become “the go-to website for local current news developments and reporting” for the city. But those limited resources also limit the site’s ability to beef up its reporting staff and cover big stories. “At the Guelph Mercury, we routinely engaged in enterprising journalism that would pause the community and have them confront something with a lot more context,” said Andrews. “Those types of value-added journalistic products are exponentially fewer with the removal of the daily newspaper in the market.”

The Guelph site was a bit of an unusual case: Elgie said the team usually evaluates each potential market based on the size of the community, local pride and investment, and relative isolation from other media outlets — those factors can determine whether a new site will get enough interest. “We’ve learned that this sense of community and identity is very important,” he said, noting that events, obituaries, and some classified ads are the type of bread-and-butter local content the Village Media sites include.

Originally, Village Media targeted areas with 40,000 to 150,000 people. Last month, though, it launched a site in Elliot Lake, which has a population of just 10,000. The available advertising dollars, though, seemed to support the decision: “Because we’re new, we introduced ourselves and told businesses we were coming. A lot of them jumped on,” Elgie said.

“Google and Facebook are as much our friends as our enemies. In many ways they’ve been helpful to us, but they do demand a very large scale of digital revenue. They’re our number-one competitor in that sense, and it’s an objection we get from clients all the time,” he said. “We have to find new and creative ways to not replace a client’s Google and Facebook spend but find our own portion of it.” It’s a community-by-community process, he added.

So you have a local news void. You have the tools for building an easily replicable website. You ingratiate yourself with local businesses to draw advertising revenue. And let’s say you hire one editor/reporter and one reporter at the outset. (The Sault Ste. Marie site, the oldest and largest Village Media arm, has grown to 11 people in editorial.) But how do you sell — figuratively, of course, since Elgie veers away from subscriptions — the local audiences on the site?

The obituaries, coverage of local events, and other community markers factor in, but a large part of it comes through a positive advertising consumer experience, he explained: No pop-ups allowed, only standard banner ads, some email distribution sponsorship, sponsored content, a small business directory, and other display advertising. “Because we’re so locally focused and we do well with selling locally, the advertising content becomes part of the package for us,” Elgie said. “They’re seeing some, of course, but they’re seeing ads of interest locally to them. It’s not as intrusive, and it becomes part of your content experience.”

Readers come to the site primarily through Facebook (which drives 15 to 20 percent of traffic, especially in new markets), direct combined with organic search traffic (50 percent), and the recent addition of email distribution (driving 15 percent of monthly pageviews). Elgie isn’t gung-ho about putting articles on Facebook or other third-party platforms. “We’re very protective of our content. We don’t participate in [Google] AMP or [Facebook] Instant Articles,” he said. “We always drive everything back to our site.”

The approach so far has worked: the “core sites” of Village Media are profitable, but the company overall loses money through investing in new markets like Elliot Lake. A site needs two to three years to garner enough of a footprint in a community to become profitable, Elgie said.

Many are skeptical of advertising as a future revenue source for news — and 26 percent of Canadians use an ad blocker, with that number growing slightly over time — but Elgie is confident that Village Media will continue to build its own brand. The company has three partner sites in different parts of Ontario (and one in Nova Scotia), where Village Media provides the publishing platform, marketing plans, rate standardization and they report and manage publishing on their own. Elgie is looking at larger media entities to scale, and the company is also eyeing 15 more local markets in Ontario on a list for future expansion.

“It definitely requires some investment, even though we’re as lean as we are,” Elgie said.

Illustration of the Ontario Agricultural College and Experimental Farm in Guelph, Canada from the BiblioArchives used under a Creative Commons license.

POSTED     Nov. 20, 2017, 2:10 p.m.
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