Dave Chase

Dave Chase: I own and run a hyperlocal news site called SunValleyonline.com. While we've managed to be one of the few pureplay local Internet media ventures to eke out a profit, the financial returns aren't anything to write home about. This resulted in a minor epiphany when we decided to pursue an additional revenue stream.

What made newspapers viable for so long was the fact that they had two products/businesses that were largely unrelated but bundled together.

There was the news business -- monetized by display ads -- and the classifieds business -- monetized by classified ads. The classified business was enabled by the distribution and audience of the news franchise. (It couldn't be more clear that the trend line for classified revenues isn't sufficient to sustain the newspaper.)

To date, most local Internet plays have struggled to make it work, relying solely on display ad revenue. It's my belief that it's going to take a similar dual business model to support local media whether it is the Seattle P-I  or any other. Unfortunately for the P-I, it has been more about dueling business models (i.e., worries of cannibalization) than recognizing that what they need is a dual business model to make their online business much more successful.

So the question is: What will be the accompaniment to the display ad business?

We're seeing a few different approaches explored. For example, micropayments and non-profit/foundation support are oft-discussed.

Beyond some exceptional situations, these hold little promise for most media organizations. Transitioning from a for-profit to not-for-profit model is not easy. (It will involve laying off the entire staff and getting the investors to agree to donate the assets of the enterprise to the new nonprofit entity.)

But there are other ideas. Newspaper Web sites could take advantage of their high PageRanks --  a form of "distribution" advantage that they usually don't recognize -- and combine that with a better business directory.

When the Rocky Mountain News shut down, one of their most valuable assets was their high PageRank. (Interestingly, since I started writing this piece, the Rocky Mountain News website's PageRank has dipped from 8 to 4.)

This is a catastrophic loss of value in just a couple weeks.

But if you combined a high PageRank media site with a leading directory solution, the businesses in that directory should show up very high in Internet searches. That means the news site has some unique value to add to those local businesses competing to be found.

The challenge remains in setting up a winning sales model to capitalize on this. Traditional local media salesforces are generally ill-equipped to sell these new online products. After all, the revenue per sale is much lower than print advertising.

When I was at Microsoft and focused on the local space (I was part of the founding team at Sidewalk), we often thought the biggest assets of the incumbent newspaper and yellow page companies were the relationships of the local salesforce.

Having gotten closer to "the last mile" of the Internet, I've come to observe that in most situations the local sales organizations of the incumbent media are more encumbrance than asset.

Consequently, the smart incumbent media should setup a parallel salesforce filled with "hunters," leaving the existing "farmer" salesforce to harvest the longtime advertisers for as long as they can. This new "hunter" sales force would need to be dramatically different than the typical call center that newspapers have for classifieds.

This can be done. Just look at Microsoft's Xbox. It succeeded with a completely different product, sales and marketing strategy than historic businesses. Likewise, local online news businesses need a completely different sales approach that reflects a customer base that's broader but with less revenue per customer than their legacy business.

The sooner local media recognize dual business models -- rather than dueling business models -- the sooner we'll see hiring rather than firing being the storyline of local media.

Dave Chase is a partner at the venture consulting firm Altus Alliance. He's been working in or around local Internet media since 1995 when he joined the Microsoft Sidewalk project. Since leaving Microsoft in 2003, he has been working with emerging businesses. Opinions expressed in guest posts are those of their authors, and don't necessarily reflect the views of TechFlash or its staff.