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Summary:

As the online media game gets increasingly saturated, a new land rush is building in the hyper-local market, according to Topix CEO Chris Tolles, who says AOL’s ambitious rollout of its Patch.com network of local news sites is just the beginning of the land grab.

Birdhouses
photo: See-ming Lee

With the national and international news game more or less dominated by traditional media and web giants like Google and Yahoo, much of the focus for companies that want to grow online is moving toward niches: sports, technology and other topics. But one of the biggest remaining unfilled niches in online content is hyper-local news. AOL has made the biggest investment in this segment, spending an estimated $50 million or so on rolling out its Patch.com network last year to almost a thousand towns. But Topix CEO Chris Tolles — whose company aggregates news and community discussions around thousands of small towns and regions — says that’s likely just the beginning of the hyper-local land rush.

The Topix co-founder says one of the reasons why local content is ripe for investment, and one of the things likely pushing AOL in that direction, is that “local monetizes better than just about anything else” in terms of advertising. “The figures show that ads are about four times as effective if you localize them,” Tolles said. This phenomenon has likely been driving advertisers to work with other avenues like Groupon, which can target individual regions or towns. Topix, meanwhile, has been making an average $4 eCPM (cost per thousand) for its advertising, says Tolles, and has also been getting much more response from large ad agencies than in the past.

Two to three years ago when a sales rep would call on some Madison Avenue firm, the 25-year-old sales guy would say “local sounds like my local news, and that sounds like my mom and dad — so no thanks.” Now they’re saying “local sounds like Foursquare and I have an iPhone and that sounds interesting, so yes.”

Local Advertising Rates are Climbing

The fact that CPMs for local advertising are up means that lots of companies like AOL and Yahoo — which is pursuing a Patch-like strategy with its Associated Content unit, which it acquired last year for an estimated $100 million — are going to be looking to amass as much content as possible so that they can get the scale necessary to make an impact on their businesses, the Topix CEO says. “It’s all about who can create a large local footprint,” he said. “I think we will see acquisitions this year, as part of a land grab from these companies, looking for someone who can deliver a large enough local footprint.”

Not surprisingly, Tolles says Topix is in a pretty good position if that happens. The local news aggregator was profitable for the first time in 2010, he says — with revenues that were up by more than 50 percent compared with the previous year. “We are one of the largest local sites in the U.S.,” the CEO says, “larger than any other except maybe one of the big newspaper chains like Gannett or McClatchy. Not bad for about 30 people in an office in Palo Alto [Calif.].” The site gets about 8 million uniques a month, he said, which is roughly the same as twice what AOL’s Patch is estimated to have across its sites.

Topix doesn’t get much attention when it comes to the online-media space, perhaps because it has been around so long. It was created in 2004 as an automated news aggregator by a team that included Rich Skrenta — who now runs Blekko — and Tolles. They used algorithms to crawl tens of thousands of news sites, blogs and other sources of information and then filtered it into topics. Over time, the company started to focus on location as the main filter, and categorized the information into more than 20,000 towns and cities. In 2005, it got a large investment from several media companies including Gannett Communications, the Tribune Co. and McClatchy.

News Is Easy — Community Is the Hard Part

And what does Tolles think about competing with Patch, as AOL pours more money into the hyper-local effort, which is now in close to a thousand different towns across the U.S.? The Topix CEO says his site doesn’t really compete with Patch in many locations yet — and when Patch has good content from a local area, “we can aggregate that too,” he says. In some ways, Topix approaches local news in the same way that The Huffington Post did with national and international news: the site pulls in and shows excerpts of stories from other news sites. But more important even than the news, says Tolles, is the fact that Topix gives readers from those areas somewhere to discuss the news.

“We started out as a news aggregator, but the thing that we have done a really good job of is giving people a place to come and talk about the content, the news from their local community” the Topix CEO says. During the mid-term elections, for example, the site created pages for every local race, all the way from sheriff to local city council. Across all of its pages, Topix gets about 4 million comments a month from readers, which is roughly the same as The Huffington Post.

“Patch may be able to set up thousands of sites in local towns, but it takes time to develop that kind of community — it doesn’t just happen overnight,” says Tolles.

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  1. Mathew,
    I think you’re missing the story. The innovative local news developments aren’t in Patch or Topix, but in the truly local efforts that are spring up all over the place.

    Compare the Topix page on Berkeley — http://www.topix.com/city/berkeley-ca — to Berkeleyside — http://www.berkeleyside.com. One is doing a real job of providing news, information and community for a city. The other is doing, well, I’m not quite sure what.

    I wrote about this in the context of Patch on Niemanlab: http://www.niemanlab.org/2011/02/lance-knobel-for-hyperlocal-news-we-local-players-will-have-the-edge/.

    Next time you want to cover the local space, talk to us or some of the other great truly local sites.

    1. Thanks, Lance — I think Berkleyside and some other local sites are doing a great job, and I have written about some of them in the past. This post was specifically about Topix and its approach to the space. But thanks for the mention of your site, and the link to your Nieman piece.

  2. If accurate, 4 million uniques a month divided across the landscape of Patch sites seems pretty low to provide any kind of long term success.

    I am also assuming Patch contributors are unpaid as well…

    1. Each Patch site has a paid journalist running it, but they do accept unpaid contributions as well I believe.

  3. Andrew Vazzano Sunday, February 13, 2011

    Mathew,

    Tolles hit the nail on the head with his last quote, “Patch may be able to set up thousands of sites in local towns, but it takes time to develop that kind of community — it doesn’t just happen overnight.”

    Main Street Connect, the company I work for, has spent our first ten months of existence becoming the fabric of the communities we serve. A hyperlocal news site much like Patch, our plan is to become a part of the community as we begin our national rollout, not take a shotgun approach to setting up sites.

    MSC is directly competing with Patch in Fairfield County, Conn., and with the help of our Local Advisory Boards, we’re winning. MSC sets up Local Advisory Boards in each town, made up of the movers and shakers of the community – the people that know what goes on in town – and we tap into their ideas, suggestions and knowledge of their towns so we can develop a better approach to our communities.

    We don’t want to swoop in and start covering news. We want to become the community’s “digital town green” – a place where they feel welcome and want to discuss the happenings in their town. The Local Advisory Boards are our ambassadors and our extra insight to our communities.

    Take a look at MSC vs. the AOL-backed Patch. It’s an old-school news war, now digital. It’s an interesting story and it’s only going to get more exciting.

    -Andrew Vazzano

  4. The true value of hyper-local media sites are that they are run locally. I think you will have a big pushback against the larger media companies such as AOL who are trying to bring in local outlets. They are just too detached from the locality and they will appear very generic and unappealing. Most of their current sites such as Patch are trying to use a common template for every community which just doesn’t work for those looking for a true local, online community.

  5. From the headline to the many unverified claims of the CEO, this reads like a promotion for Topix.

  6. I agree that most of the posts below, just because AOL or PATCH throws up a tent pole, it hardly makes them a site a local would go to to seek local content. I would also like to point out doing a Google Local or News search brings far better results than Patch. I find it hard to believe they have the traffic they do, It must be from users who don’t know how to use Google.

  7. 8M/month is nice but only a fraction of what the big boys in local are getting. The CEO claiming they are 2nd or 3rd is ridiculous. I expect GigaOM to be better researched and analyzed than engad/giz/crunch/mash/etc so am surprised that you posted that claim without any mention of its inaccuracy. In fact, by juxtaposing it with the statement that they are 2x patch, you seem to be supporting it to uninformed readers. The CEO needs to learn more about the local space he plays in IMO.

    1. I believe that my “#2 or #3″ reference here had a couple of caveats – specifically that it was people who did *not* have an offline presence (like physical newspapers) and were doing temporally relevant local content — so not directories or reviews sites.

      So, people like patch, outside.in, FWIX, and the myriad of local blog networks.

      Mind you, we show up as a top 15 newspaper chain (right behind Media News Group) and well within the top ten individual newspaper *sites*.

  8. I noticed the article failed to mention how much destruction Topix has done to communities. That site is nothing short of a cyberbullying site who, according to one Attorney General receives more complaints than any other company. They don’t require registration or moderate their forums. They consistently don’t show any business ethics and you can’t even talk to a live person with that company. I am sorry but if that’s the future of media, then this world has no hope. If you want an example (in which there are many) let’s look at the following: http://www.courier-journal.com/article/20110212/NEWS01/302120073/Southern-Indiana-deaths-turn-spotlight-Topix-com

    I am not trying to be rude here, but how anyone can defend Topix or their business ethics is beyond me.

    1. Reed:

      We do in fact provide moderation, in the form of taking out nearly 15% of all posts from our site, and dealing with feedback within 3 working days (to the tune of over 1,000 issues per day).

      People being upset by gossip is hardly anything new.

  9. Hyper-Local News: It’s About the Community or It Fails: Tech News and Analysis « Friday, March 4, 2011

    [...] on the web, started out doing the news aggregation thing just like Outside.in and Everyblock, co-founder Chris Tolles said recently in an interview with me, and then almost accidentally started to become a community hub for lots of small towns and regions [...]

  10. Hyperlocal? « Wir sprechen Online. Monday, March 7, 2011

    [...] acquires hyperlocal aggregator Outside.in for a merger with Patch. Hyperlocal wishes and dreams; [...]

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