Summary:

Outside.in, which has raised $12 million over the last two years, got its biggest endorsement to date this week with CNN’s announcement that…

Mark Josephson

Outside.in, which has raised $12 million over the last two years, got its biggest endorsement to date this week with CNN’s announcement that it would invest in the hyperlocal aggregator as part of a $7 million funding round. But perhaps as noteworthy was CNN’s decision to adopt Outside.in’s feeds. CNN.com, with more than 30 million monthly unique users, is by far the biggest publisher to run Outside.in’s content.

It’s part of Outside.in’s new publisher program, which takes the startup’s content beyond the Outside.in website. Other publishers that have signed on include Dow Jones (NYSE: NWS) and the NY Post; publishers pay Outside.in for an ad-free version, while they can get feeds for free if they include ads. Yet, for all the vast promise of the local online market, hyperlocal startups still have a lot of convincing to do to win over local advertisers. We asked CEO Mark Josephson about next steps for Outside.in, and to assess some of the other players in hyperlocal. Below, an edited transcript.

paidContent: How will you use the new funding?

Josephson: We’re going to continue to evolve Outside.in so that more publishers can do more things with all the data we aggregate and organize. We’re going to do more things for local bloggers to drive more traffic and help them build their business and we are going to continue to evolve our core site so that people can get more answers about what’s going on right around them.

What’s Outside.in’s revenue breakdown? How much money is coming in via advertising, versus revenue generated from the publishers program?

We haven’t disclosed that, but it’s predominantly advertising. We’re focused on creating high-quality local ad inventory that converts for advertisers. That’s the function of a good media business, and i think we’ll primarily be advertiser based (in the future).

Do you have a sales force or is it self-serve for ads?

We do not yet have a sales force or self-service. We have been focused on inventory and data growth. If you have both, you’re in a good spot.

When do you see that changing?

We are more revenue focused every day and you can expect to see some things from us next year.

But why should a local advertiser put their ad on Outside.in and not on the content source itself — like a local blog?

I’m not sure that they should do one or the other or one over the other. They should do both. But the challenge is it becomes incredibly fragmented, and the efficiencies of ad buying don’t speak to placing 50 or 75 buys. You need to buy one. That’s one of the reasons why AdSense is so successful. You’re reaching an audience that you don’t have to make individual buys for.

What are you seeing in terms of the performance of the local ad market?

Fundamentally, we think there’s not enough high-quality local ad inventory. There’s plenty of geo-targeted ad inventory that you can buy on social networks or in e-mail clients. But as you talk to the folks, they’ll tell you in-market, in-context inventory on branded sites– there’s not enough of it. So we believe that more and more local advertisers are coming online through lots and lots of different channels, and they’re going to be looking for places to put those ads.

Is advertising the only way for local players to make money or do you see other compelling opportunities like services, events, etc.?

There are different ways to make money in local. No different really than other media business. The media business is about aggregating a targeted audience and providing services of interest or selling ads to those who do. Great example is Brownstoner, a fantastic local blog, (which) also owns and runs Brooklyn Flea (a weekly outdoor flea market).

And how about the overall hyperlocal space –what shifts do you find most interesting?

Certainly, a lot of attention and a lot of money and effort are flowing into this space. We’re going from a world where it used to be one publisher, one content creator — one place for an advertiser to advertise and one or two or three advertisers — it was about scarcity, scarcity of content, scarcity of data, scarcity of impressions and very opaque. You had no choice but to buy this ad. You (didn’t) know if that Sunday newspaper worked for you. That was the past.

What we’re seeing now is a shift toward abundance. A real undeniable shift toward abundance. Abundance of content, content in local now means that article in the newspaper but also someone adding a star to a Yelp review. Someone taking a picture of the plane landing in the Hudson or a fantastic local blogger talking about the latest and most important thing happening in that neighborhood. There is so much content in so many of these markets.

Local advertisers are getting a heck of a lot smarter and it’s getting a lot easier for them to get online and they’re still figuring out the right ways to do it and the right models and the right pricing structures. But it’s undeniable that dollars are flowing from Yellow Pages and print to online.

Whom do you consider to be your main competitors? The portals? Everyblock?

I don’t want to cop out on the answer but I’ll tell you we don’t think anybody does what we do. EveryBlock does some of the things we do. They’re fantastic at the pieces that they really focus on, like finding really deep municipal data. Folks who come from geo world who do mapping and things like that — they do great jobs but they’re not necessarily media folks. We (have) relationships with bloggers, relationships with publishers, relationships with direct to consumer.

Because EveryBlock — for instance — is indexing the content without building relationships with those bloggers, while you actually have these local bloggers reaching out to you?

That’s right. We give tools for bloggers to get distribution; they get to impact where their content goes. We’re going to be rolling out analytics to them so they can see where their content is used and how it’s running.

If you weren’t part of Outside.in, in which local players would you invest your money?

I really like some of the more scalable platform plays in local that are trying to solve big problems, and if they work, they should scale to multiple markets or sectors. I watch content-platform companies like Neighborlogs and Patch that are making progress figuring out the individual content creator model; scalable advertiser acquisition engines like Clickable, Yodle, CitySquares and AdReady that are making it easier for advertisers to have success and social-media companies like Foursquare that are so darn addicting and are creating tons of interesting real-time local data.

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