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Jan. 30, 2014, 10 a.m.

The newsonomics of the for-profit move in local online news

Two-year-old startup GoLocal24 is expanding from its New England base across the continent. Will business-driven for-profits like it fill the void of local news in ways nonprofit outlets can’t?

Josh Fenton is an ad guy running a local news startup. Therein lies our tale.

GoLocal24 is a different kind of online startup. It’s for-profit, unlike so many of the city startups we’ve seen. It’s fueled solely by advertising revenue, while many other startups get no more than 20 percent of their income from ads and sponsorships. It claims a 20 percent profit margin, when a break-even balancing of foundation, grant, membership, events, and ad income vs. expenses serves as a wider model among its nonprofit peers.

golocal24Sure of its model, it’s now building out a small chain. Started in Providence in 2011, expanded to Worcester (50 miles west of Boston and 40 miles north of Providence) in 2012, GoLocal is busting out of its New England geography and going about as far as the continental U.S. allows, announcing today its third site in Portland, Oregon.

The Portland site — set to launch this spring — will double the number of GoLocal staffers. Portland will have six editorial staffers and four business-side ones, equaling the 10 total staffers putting out the Providence and Worcester sites. GoLocal could have picked Portland, Maine — much closer to home — but wants to announce itself as a national company and a national model, so it’s the Portland on the other side of the country that will do that. If Portland succeeds, Fenton and his investors plan more GoLocals — and have already bought dozens of URLs to enable that.

It’s a noteworthy move, coming on the heels of the near-final implosion of Patch this week. Like a vast stadium slated for demolition, the slo-mo demise of Patch — just recently the No. 1 hirer of U.S. journalists — has been painful to watch. Through 2013, AOL CEO Tim Armstrong dribbled out information on key questions: Which sites will stay, and which will go? To whom, and how? Or would they just close in the middle of the night some time this year? AOL had been remarkably unclear with its publics, its staff, and its readers about those questions. Then, the expected news yesterday: New majority Patch owner Hale Global would dispatch more than 75 percent of the remaining journalists. Now expect the new ownership to harvest as much of the traffic and brand value of the sites at as low a cost as possible, using local aggregation and low-cost, programmatic sales. What once the biggest experiment in local journalism will live on largely in ghost form.

In midsummer, as Patch’s direction was becoming clearer, we saw the usual spate of posts on the impossibility of “hyperlocal.” We can conclude that it’s the hype part of hyperlocal that’s been overplayed. Local is local — we know it when we see it, and we know when it’s well-done and when it isn’t.

GoLocal’s decidedly contrarian turn on local is worth understanding in the Patch context. Providence is a big, old city. Its metro area stretches into Massachusetts and touches eight counties. What happens in the Elmhurst neighborhood is different than what happens in the Elmwood neighborhood — yet the residents of both care about both their neighborhoods and the wider metro area, its crimes, schools, and only-in-Providence brand of politics. GoLocal emphasizes the city-wide issues — knowing that’s what (duh) brings in the engagement of audiences. It’s really just an application of old newspaper principles to digital local: It’s both city and neighborhood news that stokes readership. It’s worth stating that principle, given that Patch’s belief that hyperlocal was enough to build a business might have been its most fatal flaw.

Merrill Brown, a veteran and smart observer of local back to his early days plying online at, is now a board member and minor investor in GoLocal. Over the holidays, he wrote a piece for Forbes comparing Patch and GoLocal. His conclusion and his GoLocal pitch:

Markets are loaded with advertisers eager to find solutions beyond the failing, ineffective local newspaper and the overpriced television station. Hopefully, entrepreneurs and investors will take away from the Patch mess that there’s a better way to serve audiences in local markets, one with far more potential than [a] random collection of suburbs.

It’s worth noting the kinds of communities that GoLocal has picked to operate in. While Portland is in economic recovery, with jobless rates falling below 7 percent; Providence’s is more than 9 percent, one of the highest in the country. While Fenton says that GoLocal looks at a diverse set of data points in picking its locations, another fact stands out: Each of its first three locations is home to struggling dailies.

The Providence Journal has been in a long tailspin of reader, ad, and staff loss and has been recently put on the market by owner A.H. Belo. The Worcester Telegram & Gazette, sold by The New York Times Co. to John Henry in the Boston Globe deal, has survived recent years in better shape than the ProJo, but it too is now up for sale. (Dean Starkman, a Columbia Journalism Review editor, former Providence Journal reporter, and now regular contributor to GoLocal, details the Telegram story here and the ProJo’s here.) In Portland, The Oregonian — by far the largest daily in the state — is an Advance paper, which means it’s retrenching on print, its community footprint receding along with it.

It’s not quite a vacuum, but it’s a vulnerability. Low-cost, high-energy startups, like GoLocal, can exploit the weakness.

What is GoLocal’s playbook?

  • Advertising is the core business model. All of GoLocal’s revenues are ad-based. Fenton, a lead salesman as well as publisher, sells instinctively. A 50-year-old ad agency veteran, he knows Providence and has wide relationships in the business community.

    Let’s distinguish here between GoLocal’s local opportunity as compared to the national one — the one that’s spurring on a burst of new national news sites (“The newsonomics of why everyone seems to be starting a news site”). For GoLocal, it’s local institutions that are the bedrock of the business model — education, health, advocacy. GoLocal works with local advertisers; 30 percent of the revenue is sponsorship-based. All selling is optimized by technology, raising average CPMs well beyond what run-of-site programmatic advertising will fetch. Fenton says ad revenues have doubled over the last year and he expects a similar doubling this year.

    We see others pursuing similar strategies. Scott Brodbeck’s ARLNow too focuses on advertising and is profitable. While defining itself as “hyperlocal” (“In suburban D.C. a network of hyperlodal news sites expands and bets on local advertising”), it’s worth noting that Arlington is a city of 220,000 — far bigger than the average Patch hyperlocal of roughly 50,000 people.

  • Content is broadly defined. It’s the occasional big local news break, good data-driven enterprise, trend pieces, lots of one- and two-source quick reads, press releases, and listicles. You can move from much depth to little in the move of a mouse, much more like the BuzzFeed or Business Insider model than that of a local newspaper. More than 50 contributors fill the site with content, from those with impressive credentials like Starkman to a quite young staff learning the ropes, making up for their inexperience with energy.
  • Content is cheaply produced. GoLocal’s small profit is hard won. It squeezes the local penny, with its full-time staffers get paid no more than a third of what we see national journalists getting in all those highly publicized startups. Fenton’s arithmetic is compelling: He says he can produce content at 1/16th the cost per story as compared to a daily paper. Given its low compensation, it’s seen a fair amount of turnover in its brief history.
  • Social is juice. It’s in the swim, with “180,000 social media relationships.” “If you break big stories, you get tips,” says Fenton. GoLocal works all the social levers for sharing, and consequently enjoys traffic, despite its youth, that seems to equal a third to a half of the ProJo’s.

What about GoLocal’s journalism? It’s a startup in every sense of the word. Knowledgable observers credit it with some agenda-setting journalism and lots of engaging coverage — and fault it for incompletely sourced stories that may over-promise. Check out its home page. It’s in constant motion. As a true startup founder, ad leader, and effective editor-in-chief, Josh Fenton runs a work-in-progress. That’s fair to expect from a two-plus-year-old startup. As the company expands, one big test is to come: How much more experienced and stable editorial leadership does it hire on?

In Portland, it will face a bigger challenge. Fenton has regularly visited Portland, doing his homework, aware that it’s a far different audience (Portlandia is only partly satiric) and market than his northeastern. It’s also more journalistically diverse, with one of the country’s best urban weeklies in Willamette Week, in addition to The Oregonian, other weeklies, active TV stations, and an innovative public media network in Oregon Public Broadcasting. To try to meet that challenge, GoLocal’s Portland operation will have the same number of full-time journalists (six) as do Providence and Worcester combined.

It’s important to consider where we’re at in local media models. They’re struggling. Just this week, the Knight Foundation put millions more into helping build the sustainability of local online news. That grant follows up a comprehensive and to-the-point Knight report that showed, unsurprisingly, that online startups need to “create space for business capacity.” As well meaning as it is, it sounds like a Republican punchline to a joke about a Democrat’s anti-business leanings.

We can ask about for-profit vs. nonprofit local news models, but our question isn’t whether one is better than the other. I’m agnostic on that question: More good journalism, however funded, is better than less.

That’s one reason the GoLocal model is an important one. Nobody had to tell Josh Fenton about the need to build business capacity; he’s an ad guy who knew he was running a business before day one.

We see what looks like two kinds of local ships headed in opposite directions: the (mostly) nonprofits largely run by dedicated, community-minded editors who are trying to figure out the world of business because they have to — and the for-profit model that operates like any other small business. Undoubtedly, the nonprofits are better staffed editorially — more and more experienced journalists — than GoLocal, which carefully spends each dime to build its business along with its news-gathering capacity.

That’s where the Fentons fit, and why we need more of them in the mix. Editors-turned-publishers can learn the nuances of digital business — but advertising natives like Fenton bring a far different experience and perspective — in addition to all those relationships — to local media creation.

Fenton is a believer in profit-seeking businesses. Though he doesn’t disparage the nonprofit local model, he believes that going for-profit provides an edge of sink-or-swim discipline to the endeavor. I’ve heard similar sentiments from other news startups choosing for-profit status, as they make the case that for-profits selling advertising are regarded very differently by businesspeople that non-profits. Both points — the discipline edge and commercial acceptability — are debatable, but perhaps vital as we look at the reconstruction of local news in our time.

In an ideal world, we’d see a better meeting ground. We need serious business natives juiced about the building of local digital news companies, working in tandem with tenacious editors and reporters out to serve communities. Getting the models right — sooner rather than later — is essential. It’s no accident that GoLocal has gone into the under-served cities it has. The critical question about local journalism is replacement: how to replace the vast staffs, beats, and inches of reporting that have simply disappeared since 2007. Replacement will never be (and shouldn’t) one-to-one, but volume — and the quality of that volume — matters across the country.

Photo by Christopher Michel used under a Creative Commons license.

POSTED     Jan. 30, 2014, 10 a.m.
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