June 22, 2021

The Intriguing Lookout Local is Working

I first wrote about Lookout Local about a year ago and said that I thought it was an intriguing idea. But it was still just an idea. There’s a lot that can change from idea to execution. But now, we’re now starting to see the results and I remain convinced with my initial thought: this is intriguing.

Lookout Local’s CEO, Ken Doctor, wrote an op-ed for Nieman Lab about everything they’ve learned since launching. A few core numbers jump out to me:

Consider our pricing: $17 per month or $187 a year, what we like to call fair value pricing. With a limited free access system in place for fewer than four months, we’re approaching 1,000 members paying that price. Of those, 76% have opted for annual membership.

When it comes to advertising, we have 17 market partners, with an advertising renewal rate of 100%. Average revenue per advertiser is $2,000-plus per month. We ask for a three-month minimum contract, with the average range between three to six months and increasing.

And half a year in, we’re more than 30% of the way there in matching our earned revenue to our monthly expenses. That’s ahead of where we’d hoped to be.

Lookout Local is running a very straightforward business. Create a great product (content), become a part of the community, and then monetize in multiple ways—advertising and memberships. But I think it’s Lookout’s belief in connection to the community that is its unique opportunity:

Our stated mission — “Lookout aims to make Santa Cruz County a better place for all who live here” — drives us philosophically and strategically. How we do that is two-fold: the ever-better local news report and the deployment of a range of community betterment initiatives — solution-oriented (and other) events (in-person and Zoom), those community give-back programs associated with membership, the creation of more than 60 “civic group pages” and regular listening sessions with all segments of our communities. We’re now putting the finishing touches on a broad access program for the county’s students.

Such a mission doesn’t diminish us as a news company; it multiplies our ability to do more and better solutions-oriented journalism. Healthier communities nurture healthier journalism, and vice versa.

We are not anonymous in the community, operating out of a distant, faceless distribution center.

This is the right approach. I’m reminded of a tweet from Ryan Sneddon where he writes: “If you still need proof of the power of local email newsletters: I just went on a walk with the mayor [of Annapolis] and more people recognized me. Not kidding.”

This isn’t surprising. Unlike the mayor, Sneddon has a direct means of communication with the community that he communicates with regularly. And because he has become part of the said community through his newsletter, people know him.

It’s the same with Lookout, I’m sure. By focusing on the community and being a part of it—and wanting to see it succeed most of all—a deeper connection with its prospective readers is formed. None of this means that Lookout isn’t reporting on important stories. At the time of my writing this piece, I saw a story about a sales tax hike, one on misconduct at the school district, and many Covid related. These are the types of stories one would expect in their local newspaper

I was thinking about a conversation I was having recently with my team. We were talking about how so many media companies focus their thinking on the content. Conversations are had to discuss the content medium rather than asking a very core question: what does the audience need? Being an audience first company means making every decision through that lens.

For a local publication, the answer to that is to determine what the community needs. What information is required to keep a community of only a couple hundred-thousand people informed on everything pertinent? Understanding that can help inform how to best deliver the right product.

There’s also something to be said about the advertising business Lookout is building. When we think of ads, we think of Facebook, Google, and other big tech companies generating a disproportionate amount of ad revenue. And they do.

But for smaller, local publications, there’s opportunity. It comes back to identifying contextual audiences. While Facebook can target more tightly one-to-one, it can’t attach advertising to contextually related content. If you look at a Facebook feed, it’s a smorgasbord of content. Some may be related to local; other content won’t be. With a local publication, it’s all local all the time. That matters.

This is the same reason I like niche media so much. When someone advertises in one of the b2b newsletters at Morning Brew, they know that they are going to be exposed to people that are thinking about work related to that niche. That’s powerful. And local news has the same benefit.

There’s no denying that there’s a massive gulf in local news. We can’t just blame the platforms and hedge funds for that either. There is some blame to rest on the newspapers for being unwilling to innovate early enough.

When it comes to Lookout Local, my opinion remains the same: it is an intriguing addition to the local news diet.

Shopify goes affiliate

Not only is Shopify looking to power future ecommerce businesses, but it is now looking to help these same businesses generate more sales. According to The Information, Shopify is:

…rolling out a new service that will allow content publishers to link to merchants in the Shopify network in exchange for a cut of transaction revenue, according to people familiar with the situation.

BuzzFeed already has signed on to the new program and integrated it into its site. Shopify has approached a number of other digital media companies, including Complex Networks and Vox Media, people familiar with the matter said.

Under the new program, digital media publishers will be able to include links from articles and other content directing readers to products from Shopify’s network of more than a million retailers. The initiative also will enable publishers to create their own Shopify-powered online stores if they choose to, allowing customers to purchase products from retailers in Shopify’s ecosystem without leaving the publisher’s site.

There are a lot of unknown details, but I understand why publishers would want to do this.

First, Amazon owns a disproportionate percentage of the affiliate market. One publisher told The Information that Amazon accounts for more than 70% of its affiliate revenue. This carries a huge risk as we saw in April 2020 when Amazon cut commission rates.

Second, because the publisher has to work out individual rates with each brand, it can, theoretically, generate more money than Amazon is paying for affiliate commissions.

But this does have a major downfall. With Amazon, it’s easy to scale an affiliate business. There are millions of products and you can link to any of them from a single dashboard. With this proposed solution of having a one-to-one relationship with the retailer, Shopify is forcing the publisher to do a lot more work without first knowing if that product is going to do well with the audience.

For this to become a scaled opportunity for publishers, Shopify, and its retailers, it needs to figure out how to give publishers access to more brands without needing to work out terms one-to-one. There are a couple of ways this can work.

One way is to simply let the retailer set their affiliate fee on items and then that gets populated in the publisher dashboard. Publishers would now know how much money is available for each item and can decide their content strategy as appropriate. There’s less control for the retail brands, but ultimately, they’ve got a CAC in mind and if the publisher hits it, it’s a win-win.

Another way is to create a product that is similar to Skimlinks. This works by automatically generating links when certain keywords are used. These then point to retailers where the publisher earns a commission if a good is sold. This is the simplest for publishers because there’s almost no work.

I’ve never really been a fan of the Skimlinks business, so I would encourage the former option.

I take a very straightforward stance with these sorts of things. The very big publishers—BuzzFeed, Vice, Vox, etc.—will likely get great terms for running early experiments with this sort of product. For smaller publishers, my guess is Shopify will try and be better than Amazon, but with very little negotiating.

What the publisher needs to really track is whether average order volume and total sales drop. Shopify may be an exciting alternative to Amazon and it may reduce risk, but everyone knows Amazon. If publishers gain access to this, run short tests and see how the audience reacts.