Monday, July 09, 2007

Hyperlocal Deadpool: Backfence

Hyperlocal takes a hit with the closing of Backfence. Lot's of people have opinions.

From American Journalism Review:

"The idea of virtual town squares seemed so promising that within months Potts (a veteran reporter and editor at the Washington Post and cofounder of its digital division) and DeFife (founder and chief executive of for women in business) had attracted $3 million from two venture capital firms, including one headed by eBay founder Pierre Omidyar.

The money funded an expansion program that would have made Starbucks proud (see "Dotcom Bloom," June/July 2005). By early 2007, Backfence had grown to 13 sites serving towns around Washington, Chicago and the San Francisco Bay area. The partners began talking about creating as many as 160 sites in 16 markets.

And then? And then the bottom dropped out. Backfence's rapid expansion burned up its $3 million war chest. The partners have split; Backfence's staff, which once numbered as many as 25, was laid off. The company's online communities are largely ghost towns now. "We ran out of money," says a somewhat chastened Potts today. "And we ran out of runway."

From Jeff Jarvis:

"I think we need to look at local networks. No one can do it all. Newspapers can’t afford to cover everything. They never could but now they can afford to cover even less. TV and radio stations are covering next to nothing themselves; they have no idea how to get very local. New local ventures, as Backfence proves and Fahri points out, are finding it tough to do it themselves.

Individual bloggers don’t pretend to do it all and need help to get their stuff found and get revenue. And today there just isn’t enough stuff from all these players together to add up to a critical mass of coverage for almost every town and neighborhood in the country. We need more but we don’t yet know how to get it. I believe we can figure this out. But we have to try.

That, to me, is the state of hyperlocal. The work has barely begun.

I think we need a combination of platforms. Everything will not happen in one place; that is why, in my view, both newspaper local sites and independent, stand-alone ventures like Backfence haven’t worked. That is why lone bloggers have trouble making a business of it. They have to work together. They have to become networks that organize, enable, and monetize."

From Lost Remote:

"With 13 sites and $3 million in funding, Backfence is closing down due to two key problems 1) building a loyal user base without breaking the bank and 2) generating significant revenue among small-time advertisers.

Their founder still believes that the keys to success are keeping costs extremely low and bundling multiple sites around common regions.

But few if any sites have really succeeded to date: a study by the J-Lab found that only a handful of the estimated 500 hyperlocal news sites are making money. One of the success stories is which covers the snazzy New York City suburbs of Montclair and Bloomfield in New Jersey. While the site is getting a ton of buzz, it only generated $60K last year — not enough for the two authors to quit their real jobs."


"In smaller towns, there just isn't enough supply or demand. Don't believe me? Check out the classifieds listings on most hyperlocal sites - they're updated very infrequently.

Put another way, there are network effects in cities - sometimes called urban economies - which can explode value creation. This is why most young people hate living in the burbs - it's relatively boring.

The numbers bear this out - there's just not enough news/classified/etc volume/reader (population, whatever) to make hyperlocal strategies work.

Now, lots of other stuff does happen in smaller towns - other kinds of interactions, like intense debate over the allocation of public goods, gossip, etc...these are avenues hyperlocal players should be exploring.

But for the typical news model, the deep economics don't - and I suspect can't - work."

From Terry Heaton:

"There are two big problems with most hyperlocal efforts.

One, we get hung up on content when content isn’t the problem. The question is how do you make money in a disintermediated, distributed media paradigm? Experiments in hyperlocal media don’t fail because of content; they fail, because they can’t deliver the promise of sustainable revenue. It is the advertising paradigm that’s the real problem, not how to make more or “hyperlocal” content that such advertising will support.

This is why I keep harping on organizing the local web and building databases of knowledge at the local level rather than trying to make another content play. Google (the hyperlocal winner) has proven that advertisers will pay a premium for actual business leads, but that has never been a part of mass marketing. How we put advertisers together with users is the key, and “news content” isn’t the only way to do that.

Two, in terms of building sites that appeal to “local” people, we simply cannot begin with revenue assumptions. In fact, I would argue that this guarantees business failure right out of the box, because the whole business of local advertising is evolving. How on earth can we create a business plan based on revenue when we don’t know what that revenue play will be? We simply must have the courage to move forward to build audience before we tackle monetizing that audience. If we do this, we’ll build things differently, because we’ll approach the process differently.

I believe strongly that niches are where it’s at downstream and that the long tail is the economic model for tomorrow’s media, so I very much like the “idea” of hyperlocal. But really, folks, Google is the hyperlocal model and their global mission ought to be our local mission — to organize our community’s information and make it universally accessible and useful."

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