The recent change in Local People’s business model is very significant. To recap, rather than they paying you to run their sites now you have to pay them. Sounds good but actually it means they are giving up on their attempt to grow a credible national network of sites.
This wasn’t a universally popular decision within the organisation but the higher ups wanted cash flow fast and it was decided that this was the best way to do it. They are probably right in the short term.
For hyperlocal in the UK it is very bad news. Local People has got a bit of a whipping from the hyperlocal twitterati and journalism dons but there was nothing wrong with the concept. There was cause for optimism that out of the many sites they have launched some might have been curated by effective editors who would use the expensively bespoke designed software to build a substantial network of users in their local community. The UGC slant of the applications should have meant that these provided a lively insight to life in the area they cover..
Although one or two of the sites have started to be moderately successful most have tumbleweed blowing through them. Very few of them appear to be capable of generating the £400-500 per month they were reportedly paying their editors.
It is safe to assume that the enterprise was bleeding cash and so the plug was pulled. For me my dislike of the Daily Mail was overridden by the desire to see a success story in this sector. If Local People had worked investment in this section of the industry would have exploded
The switch in strategy will generate more cash. This turnkey type of local web site franchise has been around for years and it is surprising how many mug punters are will to part with substantial amounts of cash. Counter-intuitively the existence of a joining fee seems to encourage more people to come forward as it gives franchisees some comfort that what they are getting is worth something. This ‘opportunity’ will now be widely pushed through franchise magazines which cater to the feckless and desperate. Northcliffe won’t care about the standards of these new editors. Whatever they say, as long as you pay you are in. This business is no longer about building local communities online; it is about selling franchises and a few years later selling the same franchise again after the existing owner gives up. It is a business model which some companies have been operating ‘successfully’ for some time.
Does this herald the end of scaled hyperlocal in the UK and perhaps give an early indication of what will happen to Patch? This is a strong possibility. Nobody in hyperlocal should take comfort in this news. It is not wrong to suggest big media has some disadvantages in this sphere but they are significantly outweighed by their advantages – bespoke software, corporate expertise, existing sales contacts, billing systems in place, content from the existing print, and online operations are just a small selection of the reasons why they would be more likely to succeed. The arguments against big media are usually spurious and everything ultimately boils down to the quality of the individual running the shop.
Local People’s strategy may have been, in hindsight, flawed. Their sites were geographically fragmented – they should have clustered them. They underused their group online content – although it is understood this might have been more down to internal politics than choice. They opened up in areas where there was not yet a credible local site – it would have been better to have picked areas with active but technically deficient sites so as to focus on areas where demand had been demonstrated. In the current environment for larger media companies in the UK this is probably the last attempt for now to set up a large network of hyperlocal sites with enough funding to make it successful.
This doesn’t proved commercialisation of hyperlocal in the UK is impossible – smaller operations have already proved that it is. However it does show that it is difficult and scaling is even more difficult and venture capitalist aren’t going to be interested in the sector as a result. The figures released this week showing the decline in revenues and staffing in local news by Clare Enders were stunning. Local People’s change of strategy suggests that the growing local news deficit isn’t going to be filled by digital.