February 7, 2020
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A Different Way to Monetize Local Media

I’ve always had a soft spot for local media. When I was younger and first moved to Manhattan, I launched a media company about the East Village neighborhood. Although it didn’t wind up working, I couldn’t stop thinking about it as a business. That was insane because local media has probably been the most gutted of all the sectors in media. Hedge funds gobbled up local media brands and they sucked most of the profits out of them. These papers didn’t innovate and instead of focusing on delivering strong journalism, cuts were made that reduced the product to nothing.

This tweet sums it up perfectly.

I’ve said it before and I’ll say it again, but the journalism is the product. The ads are not the product. The only way you’re going to get people to pay for your local news is if the product is exceptional. Most local media companies have failed at that.

But it doesn’t have to be that way. I believe there is a business model where local media can work, but it requires a different way of thinking.

Local news serves the community with context

I believe a lot of hard news media is meant to hold specific groups accountable. For B2B news, it’s holding the specific industry accountable. For local news, it’s holding the community accountable, which is a service in and of itself. But what does it mean to hold the industry accountable?

It means reporting on what’s happening within that community. What it does not mean is reporting on what President Trump is doing. Yet, a lot of papers waste a lot of time covering national level issues.

Why?

The big reason I can think of is that it’s easy and it gets a lot more traffic. When publishers were struggling to earn their revenue from advertising, high trafficked stories were important. But as the strategy has shifted to subscriptions, this has become a lot more difficult.

None of this is that hard to accept. I go back to Shorenstein Center and Lenfest Institute white paper Digital Pay-Meter Playbook. I’ve called this section out, but it’s worth repeating:

The Business Case for Local and Unique Content: According [to] the publishers surveyed, users who view local news appear to be 2-5 times more likely to subscribe than those who view national and wire-sourced stories. Critically, our analysis identified a correlation between subscription sales and amount of local content produced by the publication, reinforcing the business case for local reporting.

If you produce high-quality local news, the subscriptions will follow. But how do you know what kind is best for your community?

Although I am pretty critical of The Athletic from a valuation perspective, we should look at what they’ve built for inspiration. Back in December, Paul Fichtenbaum, Chief Content Officer at The Athletic, said in an interview:

Our mandate is to tell people why things happened, and how they happened, not what happened. We do very little transactional news. We need to give the audience something more, something deeper. It’s that explanatory journalism, the bigger picture that brings people back to us.

What we’re trying to do is bigger stories, deeper stories, more in-depth. We always tell our people to make more phone calls. We don’t have any issues with hard deadlines because we don’t have a printing press that we need to make, we don’t have to hit a delivery truck deadline. We’re not trying to serve a print audience as well as a digital audience. When they’re out in the field, a lot of our competitors are looking at their laptops, typing up the whole game because at the end of it they have to hit send to meet a deadline.

I tell our folks ‘watch the game, don’t type’. After the game, don’t go to the press conference because that’s where everybody gets the same quote. Go find somebody who’s not there. Go talk to some other personnel from a team, develop sources. If we get the same information as everybody else, then why would people give us their credit cards. It’s really about differentiation and uniqueness.

I would reread that section again because there is something that really jumps out to me. It’s important to report on what happened, but it’s even more important to explain why that news is important. Providing context is the value a local media company can offer to the community. Don’t tell say that a vote happened, but explain the impact on the community.

It’s certainly harder work, but I don’t know a single journalist that wouldn’t be willing to do that work if they were given the latitude. But when under pressure to deliver a high volume of stories, it just doesn’t work.

Sam Parr, co-founder and CEO of The Hustle, has a theory on what type of content local news needs. In his Trends Facebook group, he wrote:

My content strategy would be simple: name as many freaking names as possible so people want to see themselves and their friends. This is what people will pay for. Write about the smallest stuff possible even. List people’s name who were arrested. Or list names of people who graduated from high school or whatever. List rumors so you have an excuse to use more names.

I don’t know if I would take it that extreme, but there’s a good way to do that with local sports. Rather than reporting on the scores of a local football game, why not do a deeper story on the star quarterback? It’ll take more time, but the community will better understand the star player on a team they love.

Going back to my original point, local media provides a service to its community by reporting on important issues and explaining the context behind it.

But what is the business model?

As many media companies have found, providing great content can be an avenue to get people to pay for it. There’s no doubt in my mind that with the right platform and the correct types of stories, a small team of journalists can build a subscription product.

I also think that advertising does belong on these sites. It provides a second, diversified revenue stream, which every media business needs. However, I wouldn’t hire a sales force to handle this. Instead, I would make this a self-serve platform and let the local restaurants, service providers, etc. purchase their own advertising.

When I was running the publication about the East Village, I spent a lot of time thinking about unique ways to monetize and one kept coming back to me.

Some of the most consistent advertisers on any local news site are real estate agents. It makes sense. You’re reporting on the community and the thing that everyone needs is a place to live. Therefore, real estate agents are constantly looking for people to work with. If the agent is advertising, clearly they’re getting business out of it and earning enough to justify those rates.

It’s probably a radical idea, but I believe the local publisher should become the real estate broker in their community. The audience is already coming to the publisher and there’s obviously trust there. Instead of bringing business people on to sell advertising, I would rather see the media company become the broker and have the business team focus on buying/selling houses for clients.

According to Zillow, the median home value in the United States is $244,000. The average commission for a house is 6% split between the buyer and seller agents. That means, if Media Company Realty can support both sides of the deal, a home deal can result in a commission of $14,640.

Here’s how I’d run the business…

Real estate is the new ad deal

The publisher announces that it is now in the real estate business. It makes it clear that, like any business deal, the editorial team is 100% independent, but now the publication is also helping people sell their homes.

The package is pretty straight forward. In exchange for the opportunity to sell a home, the publisher offers the following:

  • A piece of sponsored content on the site that has all the listing information, pictures, etc.
  • Inclusion in the newsletter with a specific “latest homes for sale” section on the site.
  • A social media post about the new home for sale.

The publisher will obviously have to do a lot of the other work that goes into listing a home—that really means pushing to MLS so it sends to all the aggregators—but what you’re selling the client is the ability to drive interested people to the new listings.

The best part for the client? This costs the same 3% that any real estate agent would charge, but the client is getting so much more. It should be a no-brainer. But 3% is only half the total commission and we want to try and capture the full 6%.

Pushing prospective buyers into a funnel

The nice thing is, you’ve already got an audience, so the buyers already exist on the site. You want to identify these people as prospective buyers and slowly move them down the funnel until they decide to hire you.

Here are the list of steps I’d take to accomplish this:

  1. Find an Internet Data Exchange (IDX), which is what allows agents to list properties from the MLS on their site. List all the houses that are for sale in the community.
  2. Put a big call to action on that page for people to sign up for a weekly real estate newsletter. This newsletter should be about the latest properties that are available in the community. Obviously, Media Company Realty’s properties would be up top.
  3. You then want to track how many listings each newsletter subscriber clicks. If it’s one or two, the lead might not be very hot. But if they are clicking on multiple properties, perhaps they are a warm lead.
  4. Send that warm lead a form that asks them to tell you more about the type of homes that they’re looking for. Here they are self selecting entirely. If they don’t fill it out, they’re probably not ready to buy. But if they do fill it out, this becomes a hot lead.
  5. The subscribers receive a custom email from the real estate team with a few properties in the community that fit what they’re looking for. If it’s one that Media Company Realty offers, great. If not, it’s still fine.

In the event that it is a Media Company Realty property, you’ve now got an agent representing the buyer and seller. That’s a 6% deal.

It’s really just a commerce play

If we really stop and think, this is just another type of commerce. Media companies have been diving way deeper into that, but local media hasn’t had a real opportunity. Real estate is the physical product that can be sold.

In this instance, a local publisher has an incredibly targeted audience that is looking for more information about the community. Extending that service to information about real estate is, in my opinion, a great way to launch a new revenue stream.

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