(Update Dec. 10, 2010) Welcome PaidContent readers and other Googlewhackers! If you’re just dropping in on this post, please check out my more recent posts, Patch.com and Portfolio Theory and Is Patch The New Starbucks? and then check out the site that got me thinking about all this, the Center Square Journal.
If you’re doing something in hyperlocal news, stop what you’re doing and read this article in the LA Times.
You’re back? OK. Seems kinda crazy, doesn’t it? Here’s this really experienced journo guy, running around Manhattan Beach, trying to cover every last bit of what’s happening in town for Patch.com. Patch.com is paying him somewhere between $38k and $45k – not enough to live in the super-rich Manhattan Beach, but well enough for the job.
According to the article, Patch.com is also paying for freelance stringers too – about $50 an article. From what this guy says in the article, it sounds like he’s using the freelancers pretty often – at least one a day, probably more.
That’s Patch.com’s expenses. There’s other stuff too probably. Definitely payroll taxes, maybe health care, and probably some gas money. It is SoCal, after all.
Now here’s the crazy part: The revenues aren’t that much. The article reports that Patch.com is charging $15 per CPM – for every 1,000 visits to a page, advertisers pay $15. A quick visit to the advertising page for manhattanbeach.patch.com shows that each page has six slots for ads. Four “Banner Ads” which seem to be targeted at regional or national advertisers, and “Self-Service” ads at the bottom of content, which are clearly meant to be for local advertisers. Currently, there are no ads on the Manhattan Beach site for Patch.com.
As the LA Times points out, there are 40,000 people living in Manhattan Beach. Besides reading the Los Angeles Times for metro news, residents can already pick up the print Easy Reader (with a lame looking, but comprehensive website), which covers “the beaches”, Manhattan, Redondo and Hermosa. Patch.com has got some competition.
It is unlikely that a majority of Manhattan Beach residents will rely on Patch.com for their local news any time soon. In fact, it will probably take a while to build a serious readership. But let’s assume they get a good start, and they have 20,000 page views in their first month, and build up to 60,000 in their sixth month. That’s a fast growth curve, but they’re backed by a lot of buzz, so we can be charitable.
Some more assumptions:
- Our Manhattan Beach editor is making $38k a year ($3,166.67/mo)
- The site uses $50 freelancers 30 times a month ($1,500/mo)
- Payroll taxes amount to about 15% of the editor’s salary, there’s no health care or gas money
- The site always has a full slate of six ads.
To the math!
|Month 1||Month 6|
|Ad per month||225||900|
|Revenue: 6 Ads||$1,350||$5,400|
So, when things are really swinging, Patch.com in Manhattan Beach should be making $33 a month. Does that make sense to you? Imagine if the editor was making $45k!
There are some possible explanations. On the expense side, Patch.com plans to dump freelancers after a short launch period, and after a year or so those experienced $38k editors will be replaced with recent college grad $25k editors.
On the revenue side, Patch.com plans to charge a premium for their ad placement. That’s what we do at Center Square Journal. But how will they determine that premium? And who would be willing to pay that premium? Talbott’s? Albertson’s?
At CSJ, we are able to charge a geographic premium because we only sell ads to local advertisers – who get much better placement that those bottom of the page ads locals get on Patch.com. Local advertisers want to talk to people locally. And, we view local ads as part of the content for the site. If you’re looking for something in the neighborhood, chances are CSJ’s got it.
But I don’t see how Talbott’s and Albertson’s would be interested in a geographic premium. They want to hit a broad spectrum. That’s why the advertise in the LA Times. Maybe Manhattan Beach can attract some Tissot watch ads or other luxury brands who want the rich people. But Patch.com isn’t that kind of site. What is their play here?
I admit, it would be great to have Albertson’s as an advertiser. They’re big. They probably buy a lot of ads all at once, and they probably pay on time.
But what’s the value to our readers? All of a sudden, my hyperlocal site begins to look like yahoo.com. It’s the difference between shopping in a neighborhood and at a minimall.
So is that Patch.com’s plan? To become the minimall of hyperlocal news? Ick.
Update: At least one astute reader has pointed out to me on Twitter that there must be additional revenue streams. One other reader reported that during an interview for a job with Patch.com they were told that there are additional revenue streams, they just can’t tell everyone.
It’s possible there are additional revenue streams, like coupons, affiliate marketing or maybe partnerships with local metro dailies or tv stations. But when you’re planning to make money, shouldn’t the system be obvious?