As established news companies and entrepreneurs dip their toes in the hyperlocal waters, there are increasing doubts that such ventures will be self-sustaining. Traditional local ad spending is in the dumps, and local ad dollars aren't making the leap to the web. Billions of dollars are potentially at stake, but it's a steep climb to hyperlocal Valhalla.
The first challenge is attracting an actively-participating audience. Hyperlocal promises to deliver relevant local information to consumers (see Patch for a well-executed example) who, in theory, would welcome such a resource. In practice, though, we have only seen a relatively small group utilizing such sites. Building an audience is a slow and uneven process and it's not clear how much time consumers will devote to contributing such sites on a regular basis.
The bigger challenge here is monetizing hyperlocal. As mentioned above, local advertisers often just don't have the know-how or cash to invest in online ads. Self-serve ad solutions show promise but, again, it's hard to convince a small business owner to throw money at such an unproven, unestablished ad medium. A look through Patch will reveal very few ads from local businesses.
Hyperlocal sites provide a valuable service to local communities, but it looks like they will remain unprofitable works-in-progress for the foreseeable future. Also, such sites will probably never produce the kind of big-picture journalism found in city dailies, so forget the argument that such sites can be a newspaper replacement.
Local governments may consider funding their own hyperlocal sites as a value-added service to residents. I'm reminded of my suburban hometown's monthly magazine. It was officially a government entity, but it was well-produced, editorially independent, and mostly self-sustaining through advertising revenue. Government-supported hyperlocal sites that follow a similar model may not be totally self-sustaining, but they could be quite successful in other ways.
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