Startups try new models for local online news

In this Friday, June 17, 2016, photograph, members of the Denverite, a news startup based in Denver, pose for a picture in the venture's office. Editor Dave Burdick, front, is flanked by some of the site's co-workers, from left, Chloe Aiello, Ashley Dean, Adrian Garcia and Erica Meltzer.
In this Friday, June 17, 2016, photograph, members of the Denverite, a news startup based in Denver, pose for a picture in the venture's office. Editor Dave Burdick, front, is flanked by some of the site's co-workers, from left, Chloe Aiello, Ashley Dean, Adrian Garcia and Erica Meltzer.

NEW YORK -- A few new startups are tackling a thorny problem that AOL couldn't solve: How to cover local news in different cities without going broke.

Some see a news hole left behind by the shrinking newsrooms of traditional city newspapers and alt-weeklies. Others want to woo smartphone-addicted millennial readers. They're using newsletters and social media like Instagram to build an audience for their sites.

The latest entrant is the brainchild of three media executives who want to start a string of sites in midsize cities, starting with Denver. Their first site, Denverite, went live June 14 with a staff of nine and an expected annual budget of $1 million.

The site aims to cover development and how Denver is changing as a city, said editor Dave Burdick. It runs both original stories and posts that basically rewrite pieces from other outlets (with links), a model inspired by the online business-news site Business Insider.

All three Denverite investors were also Business Insider investors. One, Kevin Ryan, was a Business Insider founder. The business site, known for its snappy style, sold last fall for nearly $400 million to a German publisher, Axel Springer.

Local news still seems like an unlikely area of growth. The sector labors under the failure of Patch, an AOL-funded string of "hyperlocal" news sites that reportedly lost at least $200 million before its owner mostly sold it off in 2014. It grew too fast and relied too much on national advertisers rather than local businesses, said Michele McLellan, a digital-news consultant in Chicago.

There are still hundreds of tiny online news outlets, McLellan said. One wave arose after the last recession devastated newsrooms with layoffs; another formed when Patch editors struck out on their own after the site's sale.

But Denverite and others like Charlotte Agenda, which started in North Carolina last year, have mini-Patch ambitions: To serve up local news in several cities at once.

These startups join deeper-pocketed operations such as Voice of San Diego and Texas Tribune, that focus on local public policy and investigative reports.

Challenges, of course, are everywhere. Digital advertising is a $60 billion business in the U.S., but tech companies like Google and Facebook pull in a growing majority of that revenue. Research firm eMarketer predicts Facebook alone will account for 31 percent of all display-ad revenue in 2016. Ad-blockers are also increasingly popular among readers.

Big advertisers tend to rely on national websites and ad networks. That's why Patch didn't work, said Rich Gordon, a professor of digital innovation at Northwestern's Medill journalism school. But the alternative -- selling ads to local businesses -- requires finding a good salesman with that expertise, which also isn't easy.

Several new local-news sites are looking beyond traditional boxy Web ads. One popular alternative: native ads that resemble news stories much the way old magazine "advertorials" did. Charlotte Agenda, for instance, does ad deals that put corporate logos on its site along with native ads and promoted job postings.

Subscriptions aren't dead, either. The Frontier, launched last year in Tulsa by the former publisher of the Tulsa World, charges $30 a month for the investigative stories on its site.

Denverite, meanwhile, won't show ads at all for at least the first six months, said Gordon Crovitz, one of its backers and a former Wall Street Journal publisher. Down the road, the company is considering other possible revenue sources including subscriptions.

"We don't think the problems of local journalism are going to get solved in a day," Crovitz said. "We're patient."

SundayMonday Business on 06/27/2016

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