Drilling Down To Find New Local Ad Rev

Where did the idea for the hyperlocal sites come from and how long did it take to go from the idea to the marketplace?

It came out of our 2006 strategic plan. We identified that it would be hard to get bigger nationally, but that it would be easy for us to look inward and super-serve our markets. We didn’t know what that meant yet. That was just an objective.

And how did you go from that objective to the launch last summer?

There were four riddles we needed to solve: The first was, how do we use more of the content that comes into the stations. We did a week’s survey and we determined that approximately 80% of the material coming in couldn’t be used because it was too narrow in scope. We were wasting a good portion of what we had.

In addition, we had all this long-tail stuff after 60-some years of TV broadcasting. We had a lot of information that we couldn’t monetize.

The next point was how to use our existing staff to start moving into multiplatforming. So we had to change the mindset of most of our employees. You’d think it would be a big hurdle, but ultimately they’ve really embraced it and run with it. There has been a complete paradigm shift because they publish 24/7 now.

Then the last piece: In the past, we could not find a way to make these kinds of efforts monetizable, in part because the cost per sale was too great to dedicate any kind of real sales resources to it.

By working with DataSphere and its tele-sales operation, we’ve been able to solve these big riddles that were stumping us.

Tell me about DataSphere.

DataSphere is a three-year-old private company that developed technology for the global real estate market, for selling real estate through sites like LandWatch and ResortScape.

When I moved here, they asked me to be on their board and I joined to keep my Internet skills sharp. I wasn’t in there very long before I realized their technology was a solution to our media problems. This is somebody that dealt with vast numbers of properties around the world just as we dealt with vast numbers of media stories from across our markets, not to mention across the years. They had found a way to bring order to it all in an affordable way, without a human touching it. So we just adapted their technology, applied it to media and we have been running with it ever since.

You mentioned that the advertising is sold through DataSphere’s tele-marketing operation. How does that work?

They’ve got very informed sales people who are polished and respectful. They say they represent KOMO News and they’re calling to talk to them about their Internet strategy and would they like to advertise on our neighborhood sites. The success rate in very high. Most of these advertisers don’t even have a website. Many of these advertisers need help in developing their message.

It allows us to develop many advertisers who are clearly recognizing our brand, know we’re not going anywhere and would like to do business with us.

You have more than 100 sites now. Are the sites profitable at this point?

Altogether, it is profitable. Some become profitable right away; others take a little more time. The hard thing is to understand when you come from mass media is that this is about literally rolling up the nickels. This is really about selling very small advertisers at price points they can afford, multiplied by more than 100 multiplied by 12 months. It’s that exponential mass that makes it become meaningful.

What are the total revenues?

I can’t say because we’re a public company and I have not released that yet. We are certainly in the zone of profitability with no issue there. The size is meaningful enough that we have decided we are going to invest a small amount in DataSphere and participate more heavily in guiding the development of the product.

You see this as a bigger business than your conventional station-branded sites?

What I have said is that as of last October hyperlocal was already 25% of our Internet business.

Well, it sounds like a lot of nickels there.

It’s a lot of nickels.

How many people does it take to manage all these sites?

We currently have one producer assigned for 15 sites. Usually they’re adjacent sites because often times what affects a neighborhood overlaps with another one. We’re still experimenting with that. Is it going to be 15? Is it going to be 50? I don’t know, but right now we’re playing it safe.

And those are producer-level employees with salaries of $30,000 or $40,000?

Yes. That’s our choice. Not everybody has to do that. Some of the other companies who have bought into the DataSphere product have chosen not to do that.

We did not have to hire anyone to do this. I will say, though, we did repurpose some bodies. Now as we continue to develop, I’m looking at what we can do to make it better. If we did hire somebody, what would we do? What kind of skill sets would make us more profitable? What kind of skill sets would add to and improve these sites? We’re exploring those things, but we haven’t hired anyone yet.

Who are the advertisers and what’s their typical spend?

Anywhere from $25 to $300 per month depending on what they decide to do.

And who are these people? Are they restaurants, small businesses?

Absolutely. Dry cleaners, boutiques, nail salons, tax businesses, interior design businesses. I can go on and on.

So essentially the guys that might have taken a display ad in the yellow pages.

Yes. In fact, many of tele-sales employees are from the old yellow pages.

Now, to do this, to get into the hyperlocal business, do I first have to have a TV station with a station-branded website?

Our stations have a strong, incredible brands and it certainly has helped tremendously in closing advertising arrangements because we’re recognized and people want to do business with us and they trust us.

It is one of the most key reasons for success. I really believe that. All the other little guys are going to just struggle. They will have some success. But I just think that once you bring a brand into it like as we’ve done with KATU2 in Portland, KVAL in Eugene and KOMO here in Seattle, it’s very hard to beat.

We have served these communities for years and years and years, decades, and we care about them. We care about these communities, we know cross streets, we know people. I mean this is just what we do. You know, I get pretty darn passionate about service to the community and this is a pretty cool way to do it.

What are you learning about the kinds of content that work on hyperlocal sites?

It’s much less sensational than you might assume. There will be a story about the fourth bank going into a very small neighborhood and all everybody’s talking about is that should be a restaurant because they don’t have a restaurant in that neighborhood. In my own neighborhood, often times the top story is the length of the ferry line, which matters. That is certainly nothing that makes it to the top of our main site.

Now, on the other hand, when something tragic, big, significant does happen, it is an amazing thing to watch. When the officers were shot and killed at a coffee shop in Lakewood in January, that site took off. We had 200,000 hits in two days. I mean it just took off. We had so much contribution and so much input to that site from people who live in Lakewood.

So, it’s very different. It’s the routine stuff, the everyday thing that matters to you in your neighborhood, all the way up to the big stuff. When something does happen it gives people an outlet.     

Is most of the content on any given neighborhood site from the users themselves?

It’s a combination. I really like the user-generated material if it’s legitimate, good content. The rants and raves are always fun to read. We get a lot of user-generated comments when it comes to public events like how much fun it was to go to the antique car show or how much fun it was to see the big ships sail into port. We get a lot of user-generated photos that way as well.

Now I understand that you are making an investment into DataSphere?

We did announce a $1.5 million investment in their Series B fundraising.

How big a stake does that buy you?

Well what was disclosed was that their Series B was $10.8 million. We have not disclosed what portion of the company we have, but it’s pretty small. The purpose is really to put some money where our mouth is and have some say in the direction of the company. Also, because I’m spending time developing this, to be fair to the shareholders, we needed to have a stake in this.

Now you want to take this to other broadcasters.

Yes. It has already been picked up by a few: The Las Vegas Landmark station [KLAS] announced already. Cowles [California Media Co.] has announced already. Morgan Murphy in Madison [Wis.] and Spokane [Wash.]. There are more in the queue.

The entire Cowles group?

Where they don’t compete with us.

So you’ve got market exclusivity built into the deal?

Oh, yeah. It only makes sense to do one of these per market for a lot of reasons. It would be too confusing otherwise. It only makes sense to do it in an exclusive way.

You have more than 100 sites in four markets. Are we going to see more sites within those markets?

Oh, absolutely. We haven’t even begun to touch all the neighborhoods that we can. We’ve just done what we could get to. It’s going to continue to grow.

At the end of the day how many hyperlocal sites will you have in your eight markets? Are you going to have 500 or 1,000 across your eight markets?

I couldn’t even project that. We will have far more than we do today because it really doesn’t cost any more for us to support them. It’s just a matter of making sure we can have fresh content on them. We have to look at each neighborhood and try to determine if it’s going to be a vibrant site.

For NetNewsCheck.com’s complete coverage of last week’s Local Online Advertising Conference, where Fisher’s Colleen Brown was honored for the company’s hyperlocal online strategy, click here.