Recent readings for a strategic retreat

A group of managers at The Frederick News-Post will be shutting off mobile phones and retreating to a farm outside of town next week to kick off a strategic planning process. Gary Greene will be leading us. To get the mental wheels turning, I Tumblr’d a bunch of recently bookmarked stories on the industry. Here they are: http://geordiewilson.tumblr.com/.

So you want to taxonomize?

In theory, taxonomies beat categories hands down for organizing content.

The main advantages are flexibility and precision.

With taxonomic tagging, you describe content on an atomic level, very precisely, and then you build queries get lists of the stories (or photos or whatever) that you want.

And because a true taxonomy maintains a parent-child relationship between entities on the taxonomy tree, you can go up or down the taxonomy tree to build general or specific queries.

So how does this build flexibility?

First of all, categories change. All of a sudden you may wake up and realize you really need to have a section devoted to the business of sports. If you’ve been taxonomizing well, that’s no problem — you’ve probably got a bunch of stuff that already has both business and sports tags. Now you just pull them together in a query, attach the query to a page or a block, and away you go.

But if you’ve been a category-based site, and you never had that particular “sports business” category before, then nobody has ever categorized anything helpful. So you’ve got to search through the database and manually recategorize the stuff you want.

Taxonomies also give you much greater precision, because you’re not just categorizing something as “sports,” you’re tagging it “sports>basketball” and you’re also tagging it for professional, college or high school, and you might even be tagging it as a tournament game. Want that Final Four page? No problem.

Even if you don’t go around adding new sections or content lists all that often, the inherent precision of taxonomies can help you get much tighter lists of related articles.

That’s the theory, anyway. In reality, there are lots of challenges to making taxonomies work for your site, from uncooperative content management systems to basic human limitations.

More on those challenges later, but for now check out the IPTC’s NewsCode taxomony, which is a pretty good starting point if you’re going to use or develop a taxonomy for your site. Also, this (somewhat outdated) history of the IPTC’s work in this area from controlledvocabulary.com is helpful. It’s focused on image tagging, but it gives a good overview of the evolution of the IPTC standards work. And the Dublin Core metadata initiative has some pretty clear explanations of what all this is about.

 

Patching together a hyperlocal business model

In the forthcoming AJR, Barb Palser argues that journalists should “give Patch a chance.” After all, she says, they’re hiring reporters and making a good effort at doing hyperlocal news.

For all the debate about the work environment and expectations (see the the Business Insider and the Chicago Reader), at least they’re not just ripping off teasers from local newspapers and using that to sell directory listings, classifieds, deals, online display ads and whatever other revenue streams they can conjure. So kudos to them for that.

But I don’t envy them their business challenge.

Several people have weighed in with skeptical looks at the business model. (See this quick list of published critiques.) For the most part, these are prospective estimates, developed before there was much of a track record to evaluate.

Now, with some of Patch’s early sites entering toddlerhood, we’re starting to get a better sense of the business realities behind hyperlocal publishing Patch-style.

And it’s daunting.

Slim pickings on traffic

Compete.com gives an approximation of the traffic coming to various Patch sites. Compete is not perfect, as anyone with access to detailed site logs will know, but it’s a reasonable enough outside view, and at least it gives us a little more to chew on in trying to deconstruct the Patch business model. So far, according to Compete, Patch sites don’t seem to be generating anywhere near enough traffic to sustain any substantive, dedicated editorial effort — even the more established sites.

Last month, according to Compete, the top Patch subdomain attracted fewer than 32,000 unique users. The next subdomain on the list had just over 13,000 users.

Interestingly, that top Patch subdomain was for Ashburn, Va., a site that just launched in October. (As a point of reference, the town has a population of about 88,000.)

The second site on the Compete list, for the far smaller town of Maplewood, NJ. (around 24,000 population), has been around for more than a year. It had its best month of the year in October, when it topped 13,000 users, but mostly it has bounced around between about 2,000 and 10,000 UUs for the last 12 months.

I don’t have the high-dollar Compete membership, so I don’t know how many page views any of that translates into. But Patch overall gets about two visits per user per month, and if you grant them five PVs/visit, you can estimate the October PV volume at about 320,000 for Ashburn and about 130,000 for Maplewood.

It’s pretty tough to develop a business plan that supports ad sales, ad and web production and editorial on top of 320K PVs/month, let alone on 130K PVs/month.

But let’s try.

Hyperlocal costs

The costs are relatively easy to estimate. Patch is apparently paying around $40,000 for reporters, and they have committed to hiring dedicated editorial staffer for each community, with editors overseeing clusters of Patch sites. (See Ken Doctor’s description of the structure.) They’re also paying for freelance contributions, at least initially. With benefits and the rest, you’re looking at $55,000 or $60,000 per site for editorial, ignoring the editorial structure at the cluster level and the freelance budget.

On the ad side, the basic structure as described by Ken Doctor suggests between one and two salesreps per town at final build-out. If they pay their local salesreps no more than their editorial staff, they’d be burning through another $55,000 to $120,000 on local ad sales alone. Call it $80,000 on average for local ad sales, and you’re up to about $140,000 for ad sales and editorial alone.

Then you’ve got production and technology and corporate overhead. That certainly will be centralized. Leaving site development aside as a sunk cost, let’s lowball all of this at $20,000 a year. And let’s assume the operations are entirely virtual, with no local storefront presence.

So we’re looking at a nut of about $160,000 a year per site.

A rough look at revenue

On the revenue side, we can try to build up an estimate by looking at each of the potential revenue streams, such as display ads, marketplaces, directory products, Groupon-like deals and so on.

But first, let me propose a very crude rule of thumb approach that works reasonably well for modestly sized news sites. My experience has been that a very well-run news operation would be happy to get, on an annual basis from all web-related revenue sources, about 40 cents for every monthly PV. So a site with 5 million monthly PVs could gross $2 million annually. A site with 1 million monthly PVs might get about $400,000. More typically, I’d suggest the number is closer to 20 or 30 cents per monthly PV.

But maybe Patch, with all of the accumulated wisdom of AOL and its serious technology and sales chops, will do much better than 20 or even 40 cents per thousand monthly PVs. They’re certainly in a much-better position to get national ads. Maybe they’ll get 50 cents.

For Maplewood, that suggests annual revenue of about $65,000 at the 130,000 PV level. You’re certainly not going to be able to afford a dedicated salesrep and dedicated editorial staff on that kind of a revenue base. And remember, that’s their second-best site, and it has been up for more than a year.

For Ashburn, at 50 cents/K PVs, you’d be earning $160,000. Not bad — they could be breaking even.

But that 50 cents per thousand PVs a month is a tough bar to hit. It depends on flawless local sales execution, great national ad sales support and significant penetration through self-service windows. Certainly, as is clear from even a cursory view of their sites, they’re nowhere near that now.

So what happens if they hit more typical revenue levels? What kind of traffic do they need to support the sites?

Given a more realistic but still generous estimate of 40 cents per thousand monthly page views, the break-even rises to 400,000 PVs. At 30 cents per thousand monthly page views, they’ve got to hit more than 530,000. If they get “just” 25 cents per thousand — a level many community news publishers would be thrilled to reach — they’d need 640,000 PVs/month.

I’ll give them some credit for executional skill. Even though we’ve probably low-balled the expenses, this crude approach suggests the Patch model is doable at about 500,000 PVs a month, but it depends on really good sales execution and a very tight rein on expenses.

A build-up view of revenue

I also tried building revenue up more atomically, estimating the potential from online display sales and other sources. That process is a whole ‘nother thesis in itself. I won’t go into the grinding details, but here’s an overview.

Assume the revenue pillars for sites like this are online display ads (including video, standard IAB units and so on), marketplaces (classifieds and related verticals) and directories (including coupons micro sites and Groupon-like deal programs). There are lots of ancillary revenue possibilities (archives, photos, events, auctions, mobile apps, what have you), but it’s probably safe to assume the Patch sites need to cover their costs with the tried-and-true revenue pillars. That said:

  • The potential for online display revenue is easy enough to estimate; make your own guesses based on average sell rate, spots per page and average CPM. With my most generous estimates, I see a chance to cover about half the $160,000 nut through display sales at a site with 500,000 PVs.
  • The potential for marketplace revenue is also pretty easy to estimate — it’s basically nil. With craigslist, ebay, job sites, car sites and real estate sites killing long-established newspaper marketplace franchises, the odds of a new player gaining a toehold here are tiny. And a look at Patch sites today shows minuscule use of their marketplaces I checked out the four sites with the most traffic that had been open for a year and counted 14, four, six and six classifieds.
  • The key to Patch’s success, then, seems to be in their business directories and in their ability to extend revenue from their directory infrastructure through deal programs, business micro sites and blogs, niche interest sites and whatever else they can cook up. And the directories are pretty darn impressive, with tons of photos, nice layout and good execution on all the things you’d expect. (Check out techcrunch for more on their plans here.)

So can they get $75,000 or $100,000 a year out of local businesses? Maybe. Certainly other small-market online publishers have. Selling directory listings is a tough job, though, with lots of competition. If they can get close to $100 a month or $1,000 a year from each advertiser, the price goal cited by techcrunch, they only need to sell 75 or so to hit the nut. But if they get more like $25 a month, then they have to sell closer to 400 businesses on the listings. In a town like Maplewood, that has to be a pretty high percentage of the potential advertisers.

Ultimately, their ability to sell deals and directories and all the rest (or at least to retain the advertisers they do get) will depend on whether they can deliver real value to advertisers. And that depends at least in part on simple volume. At 500,000 PVs per month, or even a million, precious few trickle down to the listing for any individual business.

Climbing the mountain

Now maybe 500,000 or a million PVs per month doesn’t sound like much to an AOL exec based in New York. And maybe there are lots of underserved towns and suburbs with desirable demographics and commercial centers, all of them just waiting to flock to Patch.

But 500,000 PVs is 12,500 loyal users coming to the site twice a week and looking at five pages each time, for a total of 40 pages a month.

Certainly, Patch sites today don’t seem to be generating that kind of reader engagement. Check out the Compete charts for Maplewood, Ridgewood, Darien and Garden City — all of which have been open for more than a year. They’re all growing decently, but outside of Garden City, which had a spike mid-way through the year, the charts don’t show them on a path to hit 500,000 PVs any time soon. Most importantly, as I noted above, the top-level Patch stats show an average of only two visits per user.

To develop deep reader engagement, with all of the competition and alternatives out their in the real and virtual worlds, you’d better have some useful and lively content resources. No one editorial person, short of Clark Kent, could do that. The only hope is that community members will step up and make the site their own, turning to it as the focal point for community dialogue.

And maybe that will happen, at least in some Patch communities. The sites aren’t bad, and they’ll get better. I wish them luck with that. But how many of Patch’s now-planned 500 sites will strike gold like that? And can they carry the rest?

I can’t help think that when long-established media companies with deep roots and journalistic expertise struggle to develop the traffic and the revenue models that support meaningful journalism online, maybe it isn’t so easy for a tech company to waltz in, hire a tiny editorial staff, stuff a community site with reader comments and rake in the dough.

Re-engaging readers

The stats I’ve seen about online reader engagement are pretty discouraging, as I discussed in “Disengagement.”

Leaving aside, for now, the challenges related to the medium itself, which are difficult to control, I think there are some basic approaches and principles that news sites can keep in mind to engage their readers more deeply.

Beyond the basic requirement that you offer compelling and distinctive information and services, I think it’s useful to think about three important characteristics of what you could think of as web-positive publishing. I call them the Three I’s: immediacy, interactivity and interneticity.

Immediacy is about recognizing the voracious desire among our readers for good old-fashioned news, with the emphasis on new. Having spent many years poring over news site traffic logs, I can guarantee that the big preview of coming legislative battles and priorities, however important and well-written, will drop like a stone to the bottom of the most-read list, while the short newsy item about the fire that consumed a meth lab will rise to the top. Also: Quirky news wins, short wins, timeliness and urgency win, images help and feature stories can be either big hits or traffic flops and there’s no way of knowing beforehand. And, yes, controversy loves a crowd.

That’s not to say that a steady diet of meth lab fires and short quirky blurbs is the solution for every news site. (That’s what local TV news is for.) And that’s not to say that you shouldn’t do the big takeout on the upcoming legislative session, or the heart-warming profile or what have you. All of those may be essential to your mission and equally essential to maintaining your brand and personality, both in print and online.

But the content strategy for news sites has to begin with the understanding that online readers are looking for information fixes. You need to meet that need with a steady flow of timely, newsy, relevant information.

Pew offers some insight into news readership habits. According to Pew, online news junkies typically patronize a slowly evolving core list of trusted sites that they visit frequently. For most internet users, the core list includes just a handful of sites. Only 11 percent regularly visit more than five news sites on a typical day. Critically, news readers are not terribly attached to the sites they visit — about two thirds do not have a favorite site.

One key aspect of online news readership appears to be missing from the Pew study, though — the frequency of vsits from regular users. As far as I can tell, the Pew study only went as far as measuring daily use. My belief — and it is a key assumption — is that a news site’s best users will come to it habitually, perhaps several times over the course of a day.

Or at least they will if the site rewards repeat visits. A site that doesn’t change quickly kills that impulse to check in. A site that has a sense of urgency and recency rewards repeat visits — and stays on that reader’s short list of core news sources.

So how do you engineer immediacy? It doesn’t have to be a huge effort. News blogs, alerts (even automated alerts) on stories that are hot, most-read and most-commented lists, “coming tomorrow” promos, integrated wire tickers, quick mid-day updates and quick page remakes to emphasize popular stories all help. You can look beyond the main news stream, too, to things like featured reader comments, Twitter feeds, reader queries, rotating classified displays, featured reader business reviews, reader-submitted content and anything else that’s relevant and timely.

Interactivity is the second pillar of engaging readers, and it should include both content interactivity and institutional interactvity. Make it possible for readers to grab hold of your offerings and make them in some sense their own, through comments, social media integration, personal clipboards, ratings and so on. And embrace the notion of dialog with your readers, making it easy for them to submit tips or photos or news, offering chats or other interactive events, giving them opportunities to shape presentation, coverage and priorities.

(Update: Robert Niles has written a post at OJR: The Online Journalism Review on baby-stepping your way toward interactivity.)

The third “I,” interneticity, is my own horrible neologism, for which I apologize to anyone of linguistic sensibility. By interneticity, I mean taking advantage of the possibilities of the medium for smart, useful and engaging information presentation. Some of the best examples of what I mean by interneticity can be found at the New York Times, where their team of data-smart designers regularly produce stunning information graphics. Fortunately for the rest of use, there are lots of tools out there for integrating maps, timelines, charts that can be manipulated by readers, interactive Wordles, tag clouds, slide shows, etc.

There’s no one path to re-engaging readers online. But keeping immediacy, interactivity and interneticity as touchstones for news site content strategies will reward and promote more frequent, deeper site use.