The privately-held properties are varied in size with just as varied in management ability: From Tribune Corp.’s ham-fisted senior executives to General Media’s Oracle of Omaha. Examining the progress of these companies is like a new form of Kreminology where we watch circulation numbers like tractor production reports and layoff notices like evidence of the latest famine.

Among publicly-owned companies, we know barely more of their operations. Earning reports for the oft-scourged Patch.com and Huffington Post are hidden beneath a mountain of modems while Woodward and Bernstein’s Washington Post floats atop a river of questionable for-profit college tuition money.

The new digital darlings aren’t faring much better. Shiny new ventures like Buzzfeed and Business Insider are built upon legions of twenty-somethings trying to make their New York Media Dream come true. While the new media content producers are too inexperienced to know their jobs provide little future and less security, the founders trumpet their latest venture capital rounds and build Potemkin advertising vehicles while proclaiming themselves The News Future.

In all cases, occasional escapees publish tell-alls of management sins, but most of those fortunate to get over the wall and into decent society just try to blend into well-paying PR jobs and keep their mouth shut. It is a world of defensive postures where after a decade of bleeding everyone is just trying to be the last one out of the Warsaw Pact before it truly collapses.

Those of us on the outside know it’s bad, but there is so little data or information to know the level of badness that we’re left to pick through frightening anecdotes of demented business thinking.

There’s the metro daily losing $80 million a year, the newspaper that held together a wounded city inexplicably losing its daily print edition, the Pulitzer Prize-winning paper turned into a developer’s mouthpiece, and, and, and… the list keeps getting longer.

Since the height of the Industrial Revolution, news has been a business of media barons and Fleet Street lords. We take for granted that the helmsmen of the press are supposed to be bigger than life with who paint with extra wide paintbrushes. The news rolls out, they compete for our loyalty and readers take it all with a grain of salt.

Yet through it all we depended on news organizations to give us authoritative accounts, infused with insight gained from experience and a deeper knowledge than there was space on the screen to convey. But the combination of cutbacks, slashing and just plain terrible business acumen–across an entire industry!–has bled out the best talent, the very ones who could help publications gain back lost audiences and convince readers that they really need news organizations at all.

From Ida Tarbell to H.L. Mencken to Mike Royko to Jim Murray, we savored not young derring-do, but expert craftsmanship. While some news enterprises still hold on to those expensive greybeards, most publications have opted to employ freshfaced “content producers” who can fill pages, run on caffeine and just enough money to pay the rent rather than ask hard questions, build rolodexes of sources and make careers out of explaining our incredibly complicated world.

It’s become a total shit show, to put it mildly.

But through it all news media retains glamor and some elements, or potential at least, of power. So somebody’s still interested.

And so now news is moving into the age of the billionaires.

The venture capital firms that made a bad bet on media at the turn of the last century were the first to unload. Off went the San Diego Union-Times, the Tribune Company, the Chicago Sun Times, the Creative Loafing alternative newspapers, the General Media publications. But then more big metro dailies and news magazines needed to be rescued, like the New York Times (Carlos Slim), Newsweek (Barry Diller), The Atlantic (David Bradley) and The New Republic (Chris Hughes).

Oligarch ownership is not in and of itself a bad thing–after all there are well-meaning rich people out there–but the circumstances of the sales and the purchasers’ backgrounds tend to not portend well for struggling news enterprises.

Let’s be clear: When a news publication is purchased by a rich guy that made his millions in a totally unrelated industry, it is unlikely the new owner will bend themselves to focus on staunching the red-ink and moving extraordinarily complex news businesses into the black.

There’s more than enough evidence to support how media and other business lines don’t mix well. Remember when Gulf + Western bought Paramount? When AOL bought Time Warner? When Yahoo! thought it was becoming a “media company”?

With few exceptions, today’s oligarch media owners are not proving themselves any better than their swashbuckling forebears. In Chicago, the national center of rich-guy media ownership, we have poorly-branded, uncentered news organizations that are still laying off employees, and trying a million-different things just to get a foothold. In New York the Post is operated by grab-your-attention-at-any-cost editors and Hearst’s Chronicles in San Francisco and Houston have become part of Demand Media’s crap-for-eyeballs operation that leverages their once-great news products.

Still though, we don’t really know how well these businesses are doing. Their editors, publishers and owners all tell us things are fine and profitability is just around the corner. Until they close.

For us news consumers, our bullshit meters are way in the red. We see how poor the content is, how little value it adds to our lives and we wonder, who the heck do they think they are they fooling? And then click on to the next website.

The final act, as it always is with billionaires and venture capitalists, is to just turn out the lights. Maybe there’s an interim period where they cut checks to keep their butterfly collection going, as Rupert Murdoch clearly does for his New York Post, but inevitably the top-heavy, no-business-acumen leadership drive their news organizations into the ground as they struggle to keep their golden age empires and high standards of living.

It doesn’t have to be like this. There are plenty of models of successful news media, but they’re boring, staid and profitable. McGraw Hill’s industry newsletter division has had healthy profits for decades. Reed Elsevier’s stable of information products, including Lexis Nexis, chug along just fine. And while Bloomberg is a private company, it behaves like a growing company, making investment and hiring the best people it can find.

What’s the difference between McGraw Hill and most other news companies? They determine what their audience wants, they provide it for a fee and then anything else, like events or advertising, is considered gravy.

The “providing it” part is where most news veterans would protest. Making news costs money, they say, a great feature story can cost tens of thousands. Yes, but do you know what your audience really wants? And what they’re willing to pay?

The answer you get from news executives, from the smallest small-town daily to the top of the New York Times, tends to be, “No.” They don’t. Articles are produced and thrown against the wall to see if they’re received well, like testing pasta against the kitchen wall. Maybe this one will be liked, maybe this one won’t. Publishers, ignoring the Long Tail, media’s most important concept this century, continue to roll out new general interest publications with little heed to the new reality.

There’s a precedent for this in retail. As recently as the 1980’s a plurality of goods in big cities were purchased in massive department stores, emporiums filed with every imaginable desire. But then “category killers” like Best Buy, The Gap and Linens ‘n’ Things came, and eviscerated the department stores’ best profit lines. Department stores, who relied on an interlocking series of subsidies–get women in to buy cheap sheets, but snag them on the first floor with expensive perfume–were decimated and ended up merely a set of brand names offering the latest sales, as Ron Johnson recently discovered.

Major metro newspapers, reduced to making their profit on massive inserts, are the media equivalent of department stories while the likes of Grantland.com and Ain’t It Cool News are the new Best Buys. Ask yourself which group knows what part of their editorial draws their audience and you’ll predict the one with a profitable future.

Most of today’s news organizations, reduced to trading in on their glamor for billionaire backing, still have no impetus to really find out who their audience is, because billionaires are sold on the glamorous, big audiences of yesteryear. But soon, after years of red ink, no real solutions, continuing declining readership and no clear way out, the rich guys will either shut things down or sell them to the next set of chumps, who will probably have less patience than earlier oligarchs.

Not until news media’s billionaire owners make the really hard choices–like casting aside fame and glamor for green eyeshades and much smaller paying audiences–will they even have half a chance at making it into the next decade.

News That Entertains –  The least compelling, but the most often consumed, entertainment news is the light stuff we seek out when the going is rough and we just want a “guilty pleasure.” Entertainment Weekly, People magazine, and most newspaper feature profiles are what we’re talking about here. While this kind of news attracts the broadest audience, it also claims the least loyal and most fickle readers.

News That Edifies –  Most of what you might find in a metro daily’s City Hall coverage or anything in the New York Times falls in this category. Most readers don’t need to know any of the content, but it aims one feel smarter and more aware. The power of these publications are often in their brands and perceived authority. When a reader drops the name, they are saying something about themselves, as in, “I read in the Economist that…”

News That Alters – Readers of these publications expect to learn something that will change how they live their lives or how they do business. As a consequence, these publications command high subscription prices, since they are meant to prove their value. Every trade publication falls into this category, as do some lifestyle magazines like Living Simple. The key to the Wall Street Journal‘s steady circulation rates has been its success at convincing readers that it falls in this category.

As the news landscape shifts, which one of these would you like to be a part of?

In the pre-internet age, advertisers and audiences lacked information about each other, alternative news sources and alternative products. As a young boy, getting my monthly National Geographic was exciting. As far as I knew, it was the only way to learn about the exotic world beyond the oceans. Of course there were other publications, but learning about them required a special effort beyond my means.

Advertisers, in turn, had few methods for reaching people interested in the broader world back then. So, the few advertisements NatGeo carried were for cruises and other travel services. Maybe there were other advertising outlets, but were any as convenient as placing one ad in National Geographic?

And then the internet came, and we all know what happened next.

The result of the internet’s information explosion is often talked about in terms of information availability, but to understand the new reality of the news business, it’s probably more appropriate to talk about information arbitrage.  The most compelling news comes from arbitrage: You are providing information to people who desire that information. The higher the demand, or the lower the availability, the more compelling (or valuable) the news.

In large markets, news tends to be a low barrier to entry business: There are lots of experts and out-of-work reporters available to gather news. The reason is that lots of people want to live or work in these large markets. For example, lots of people want to live and work in New York, Chicago, Los Angeles. As a result, there’s lots of high quality people available to report and produce the news. In Chicago, a significant news event might attract eight local news cameras, four news radio mics, and three or four digital/print news outlets. Smaller events will attract maybe a quarter of that, but still four outlets is nothing to sneeze at.

In Rochester, New York, four news outlets would be a huge turnout.

Which market has more opportunity for arbitrage?

This is exactly what Warren Buffett is talking about when he talks about his purchase of General Media, which mostly consists of small market newspapers:

If you want to know what’s going on in your town – whether the news is about the mayor or taxes or high school football – there is no substitute for a local newspaper that is doing its job.

The context here is important: In small markets, Buffett says there no other good way to learn about what’s happening in your community, at all. 

His is a tricky distinction, since news of all kinds tends to have a great deal of indirect competition. City Hall news bleeds into neighborhood news bleeds into prep sports news bleeds into city sports news. In a major market, the lines tend to blur and everyone becomes a competitor at some level (basically what Patch and DNAInfo are counting on). But in smaller markets, there are fewer distinctions and thus less competition.

Many, many news startups miss the concept of information arbitrage: What new information are they providing that no other outlet is not already? Worse yet, there are many large news organizations that continue to miss this distinction too, believing that by simply building up a big audience, they can make the big bucks. For instance in 2010, Business Insider had over 6 million monthly uniques with only $2,127 in profit for the year. Sure they’re in growth mode, but when does the money really roll in?

Henry Luce famously soaked up red ink from Sports Illustrated for ten years before it became profitable, and a five year runway was de rigeur for most magazines before they became profitable back in the day: But once print magazines found an audience, they were expected to coast along profitably for 20-30 years. But that model is out the window now; how can anyone plan for more than two years at a time?

Another example, Huffington Post, has a reported 45 million monthly uniques but hasn’t made a profit since 2010. Sure it’s a huge audience, but from an advertiser’s perspective, so what? With today’s ad exchanges a buyer can order up any audience desired with just about any demo/psychographic imaginable. What is Huffington Post arbitraging for advertisers? Nothing.

The simple question of, “How are you going to make money?” keeps getting avoided. And the list of offenders is getting longer: AOL with HuffPo and Patch.com, Joe Ricketts with DNAInfo, Chris Hughes with The New Republic, Sam Zell with Tribune.  Billionaire backing is not the same as a business model.

If you’re running a news operation, if you know what you’re arbitraging, then you know how you can make money. That’s what Warren Buffett was talking about.

At least that’s what it seemed like to me as an arts consumer. So since I wanted to know what was going on, I picked up the Phoenix every week and listened to ‘FNX when I couldn’t stand hearing Billy Joel and Boston played yet one more time on WAAF.

Like hundreds of thousands of consumers, I was a passive supporter of Mindich’s media properties. They covered a certain niche and expected me and people like me to read/listen to their content and glance at/listen to their advertising along the way. It was a fine arrangement for a poor student like me, as well as for Newbury Comics and Fishbone’s tour organizers because we were connected to each other for a moderately low price.

That whole system, free content for audiences paid for by display advertising, is a wreckage now, as evidenced by yesterday’s closure of the Boston Phoenix. It’s hard to see since there are still big, recognized brands supported by large sales operations, but the clock is ticking for display ad supported content. Display advertising won’t go the way of the dodo, but the impact it has on our ecosystem may end up more panda-like: A few rare display ad-supported operations in the wild, with a few more kept alive in media zoos, mostly supported by more vibrant revenue streams.

Display advertising is being pummeled from every direction. Last week Destructoid announced that half of their readers block ads in their browsers (much less overall, but certainly trending up). Meanwhile, the Safari browser has already and Mozilla plans to make third-party cookie blocking their default setting, throwing publishers and ad exchanges into a tizzy as they stand to lose their targeting ability. Finally, CPM rates seems to be staying steady at best, but likely declining, as ad exchanges gain efficiency and more web sites add display advertising.

What’s a publisher to do?

Alt weeklies, usually more nimble and entrepreneurial than their magazine or newspaper brethren, have been examining every potential revenue stream with a magnifying glass, from creating digital business directories to targeted events. And yet, the very real truth when spoken, is shocking. Here’s Association of Alternative Newspapers Executive Director Lisa Schackelford talking to the Boston Globe yesterday:

In general, however, alternative newspapers in large markets, like Boston, are not flourishing at the level of their counterparts in smaller, less competitive cities, Shackelford added. It makes sense, she said, that the Portland Phoenix will remain open, as will the Providence Phoenix, which plans to add four full-time reporters.

Shackelford’s statement matches my experience with my hyperlocal Center Square Journal in Chicago, as well as what I’ve heard from other hyperlocal start up owners across the country. Readers in big markets have lots of choices. Free doesn’t work so well anymore when readers are free to choose from lots of other free news sources.

All of this coincides with hard-core media consumers’ hue and cry over Google’s announced plans to shut down Google Reader. Most of the complaints have been about Google’s pulling the rug out from millions who enjoyed their product and their love of reading uncluttered (i.e. “no ads”) content.

What strikes me is that Google, for once, is doing publishers a favor by trying to force more readers to look at ads. As a publisher myself, I could never understand why Google would support a product that bypasses its main revenue generator, display ads. Talk about getting your milk for free. Not only do most media consumers not pay a subscription fee, but they essentially clip away all the ads from the newspaper before reading the content. How can anyone think that system is sustainable in the long-term?

Yet the internet is an intensely libertarian force, which means that most Google Reader users will find an alternative, ad blockers will continue their rise in popularity and cookie blocking will become the norm. Soon, there will be no real way for readers to passively support their favorite publications by occasionally glancing at ads. Readers will have to make active choices about which publications they support.

In the very near future, only those with the largest or most psychographically-targeted audiences will find display advertising a viable income source. The rest of the publishing world, especially start-up operations that lack a strong brand and ad sales team to support them (i.e. non- Condé Nast/Gawker/Disney/Tribune), will need to build their revenue plans around active reader interactions. Subscriptions are an obvious path, but so are ticketed events, survey participation and merely attending free events sponsored by publications. We will have to consciously choose to support publications either with our wallets, our feet or our data.

This intensely interactive future is likely concerning for big publishers and advertisers. It upends the commodification of advertising that has reigned since the Mad Men era and creates situations where almost every consumer interaction requires a creative lure. In other words, it’s a very expensive future.

Big media and advertising will ride this future out one way or another. Brands need to reach audiences and ad agencies and big publishers are paid to adapt. But what happens to small publishers in large markets as passive reader support disappears?

This is a serious question. We’re attempting to address it at Center Square Journal and others are attempting similar solutions. Hopefully subscriptions will become in vogue. Or a cottage market of event planners that work with small publishers will spring up.

For now though, Boston Phoenix won’t likely fly again since it has become our canary in the coal mine.

But this video of a Clayton Christensen talk about figuring out what job we “hire” products to do is revealing. Watch it. It’s only four and a half minutes.

Now consider news products: If you’re older than 30 and you ride public transportation, you probably remember a time when you had to move a newspaper off your seat to sit down. How often does that happen now? The reason is that newspapers and magazines are no longer “hired” to fill idle time. Games and long-form reading on digital devices have now taken that place.

Newspapers have been whacked hard, but print magazines, mostly produced to fill idle time, have been especially hard hit.

Anyone creating or managing a news publication now has to ask the question: What job does my news publication do? It’s not enough to say, “Inform!” since news consumers today are inundated with choices.

Make a mental list of what’s in your daily news diet. Ten sites? Now include blogs. Twenty?

Almost nine years ago Chris Anderson postulated that the Long Tail would mean a media future swamped by a zillion niche markets. That future is here.

The chart above shows the relentless power of Anderson’s Long Tail theory. That truth, along with the brutal questions forced by Christensen’s “Job To Do” lecture force anyone interested in news to ask, what future do general interest news publications have?

Three new sites that have shown tremendous readership growth, Grantland, The Verge and Buzzfeed, have two things in common: niche focus and long-form writing. Grantland has in-depth sports and pop culture writing, the Verge has in-depth technology news, reviews and “geek lifestyle” while Buzzfeed started as an “I can haz cheezburger” copy to include to medium-form (interesting-but-not-too-deep) stories in politics, entertainment and technology.

Grandland and The Verge both launched in 2011, while Buzzfeed chugged along for a couple years before hitting on their winning formula of linkbait and longer form articles.

It’s too early to say since all three sites are still in their growth phase, but it is clear that niche news and long-form writing is a power combination, enough so that totally new brands can break through the clutter in a big way.

The polar opposite of general interest news.

Everyblock’s progenitor, ChicagoCrime.com, was what got me first thinking about hyperlocal news. The idea that a person could get such specific information about their community was revolutionary. In Chicago, if you wanted crime information, you had to get it by ward or by police district, an even bigger area. And even then it was usually out of date or incomplete. Everyblock’s beautiful maps and great user interface changed everything. All of a sudden getting information was easy.

Then, the social sharing function changed everything again. My hyperlocal sites saw the results immediately, as commenters were totally drawn to Everyblock’s intuitive interface and rapid-fire discussions. Suddenly, every neighborhood, especially ones with no other digital connections, were connected and talking. Whole neighborhood groups sprung out of Everyblock.

I’m biased, since so many of Everyblock’s founders were/are neighbors, became friends, and did a lot to support Center Square Journal. Adrian, Paul Wilson and Dan X. O’Neill lived in or near Lincoln Square. Paul Wilson has even written some great articles for CSJ. They graciously allowed me to interview them in early 2010, an article that gave CSJ some of its first real exposure (warning: bad writing), and Adrian and Dan have both given me tons of great advice.

And then the current, out-going president of Everyblock, Brian Addison, actually went to high school with me and has talked me through a number of tough decisions with great insight. I owe him more than a few beers.

I think when time looks back, the Everyblock team will be viewed as some incredibly talented supergroup that just didn’t get their due from their corporate masters.

And yet, there’s an important niggling point: Everyblock was not cash flow positive.

Let’s consider that for a minute. This company, with fewer than 50 employees, deployed in dozens of cities and had the backing of a major media organization, could not be revenue positive. Granted, they hadn’t really focused on profit until the last year. And the native ads introduced a month ago were interesting. But still…

If Everyblock, with barely any costs and a sizable user base could not be revenue positive, what does it say for Main Street Connect, Patch and DNAInfo?

The details behind those facts might bring the most important lessons this closure could offer.

However, as I’ve spent a great deal of my time trying to figure out what makes a hyperlocal site financially viable, I’ve come upon one way of categorizing sites that, in my opinion, clearly breaks apart sites. They are:

1. The Progenitors. These sites are the ones founded in the early days of internet blogging, and they have the strongest reputations: West Seattle Blog (est. 2006), RedBankGreen (est. 2006), BaristaNet (est. 2004) and Gapers Block (est. 2003). Coming up on ten years of operation, these sites have thrived and survived so long because they are great products with deep community roots. But because they started in the early days of the interwebs their success will likely never be duplicated.

Digital news sites launching today compete with a kajillion more places calling for reader’s attention than the ones that started back in the day. They will never get the word of mouth the earliest news sites once got. Pointing to these sites as typical hyperlocal examples is akin to citing The New York Times as a typical newspaper.

2. The Small Marketers. If news in a metro area or town can be generally characterized by four mediocre local TV stations, an aging local daily newspaper and maybe a rapidly thinning independent weekly, you’re talking about what I call a small market. It could be in a town of 30,000 or a small city of 400,000. Either way, readers and businesses have relatively few places to turn to advertise their products and services.

These markets don’t have Everyblock, Patch, probably not Craigslist, Yelp or multiple ZIP Code-focused magazines competing for eyeballs and segmenting interest into a thousand different categories. In these towns it is still possible to serve the geographically general public with a general interest publication, which is essentially what local news is.

There are many thriving hyperlocal news sites in these kinds of communities, such as Riverhead Local, The Batavian, Magic City Post and Altadena Blog.

If you’re dead set on starting a hyperlocal news site, then my advice would be to choose a town under 100,000 that’s at least a three-hour drive from a big metro area (preferably more) and set up shop. You won’t have nearly as much ad competition as you would in a big metro and because most local news outlets will be sparse on content, you’ll be able to make a quick splash just by doing good reporting.

3. The Big Metros.The jury is still out on whether this is fertile hyperlocal ground (Center Square Journal’s example not withstanding). There are a few thriving major metro area suburban hyperlocals, such as Gazebo News and Berkeleyside. There are even fewer thriving hyperlocals in major metro cities-proper. South Brooklyn’s Sheepshead Bites does well in an immigrant community largely ignored by daily newspapers and Arlington Now benefits from D.C. media’s general disinterest in local news. But there are few other revenue-supported independent news sites in Chicago, New York, Los Angeles, Houston or any other top ten major metro areas.

Why is it that communities with the biggest talent pools have the fewest hyperlocal news sites?

Americans living in major metro areas are constantly assaulted with a blizzard of information choices. Those of us in “hip neighborhoods” or highly desirable suburbs even more so. For example, a young couple in Chicago’s Wicker Park neighborhood would be able to turn to the following places for local entertainment news: Chicago Social,  Metromix, DailyCandy, Thrillist, Chicago Tribune, Chicago Sun Times, Time Out: Chicago, Red Eye, Chicago Reader, Chicago Parent, Neighborhood Parent Network (remember the kids!), Chicago Magazine, Wicker Park-Bucktown Patch, Wicker Park Bucktown Chamber of Commerce and many more I am sure I have overlooked. If you’re a local bar or restaurant advertising specials, which one do you choose? Of course: You pick the one with the biggest marketing budget.

Suburbs have a bit less competition, but even they can have intense competition. Oak Park, Illinois, a prosperous close-in Chicago suburb with 52,000 souls is served by Oak Park Patch, the Wednesday Journal and Oak Leaves, as well as the major metro dailies and other regional publications.

Here, in easily digestible list form, and in no particular order, are 21 things I learned while running hyperlocal news sites.

1. Building an audience is getting harder.

As a member of the original writing crew for Chicagoist in 2004, I was stunned at how I could write a post at 8:00 a.m. and by noon thousands of people had read it. Good content got lots of word of mouth, and nine years ago there were few competing outlets.

Contrast that experience with Lakeviewing.com, a recent project carried out by Andrew Huff of Gapers Block and I. Focused on Lakeview entertainment news, the site was backed by advertising and social media promotion on our sites (where many of Lakeview’s readers frequent), L stop flyers and billboards as well as stickers in a thousand Lakeview business doorways. After six months, we’d barely broken past 200 daily readers, a tiny number for a community with over 90,000 residents.

What changed in nine years? Competition, direct and indirect. Readers in 2013 have thousands of news sites to choose from, as well as social media, electronic books, and so much more. Launching a new brand and gaining mind share is getting logarithmically more difficult to do. (Remember when local TV would do segments on bloggers?)

2. Building an audience is easier than selling ads to small and medium businesses.

Even though #1 is getting harder, selling digital advertising to SMBs is getting more difficult (see #3). The result is that there’s plenty of folks (small and big publications included) drawn in by the lure of creating an audience. Because it’s relatively easy, you can see lots of progress in early stages as the audience grows. Then, when the time comes to sell ads, the audience might still be there, but the ad sales aren’t.

3. There is a lot of competition for SMB marketing dollars in large markets.

Center Square Journal’s strongest ad competition did not come from other digital news sites. For instance, I learned that I’ll never get a funeral home to advertise, because in Chicago there’s a company that sells ads for most of the Catholic parish bulletins and they’ve that vertical locked up tight. Local radio is a competitor, as are CTA billboards, Groupon, ZIP code coupon mailers, and the latest big entry: Loyalty management systems like Belly and Ox & Pen.

An example: Belly, which is founded by former Grouponers and funded by the Groupon founders’ investment fund, showed up at a local merchant group meeting unannounced. They brought a pile of iPads for businesses that sign up, and  thus signed up everyone in the room in a flash. Now Belly is a major competitor for neighborhood marketing dollars.

Anecdotally I don’t hear similar stories from operators of suburban or smaller market hyperlocals. Maybe it’s just a matter of time, but it seems that in larger markets, there’s more competitors trying to carve up the same pie.

4. Social media outreach has become a major business in the last three years.

Two years ago I heard a new sales objection, “I spend most of my marketing dollars on a social media consultant who promotes my store.” When I first started Center Square Journal I knew of a few people that managed social media clients on an independent basis, but for the most part that sort of work was limited to small brands.

No more. Now it is common for retail businesses with $500k annual business to pay a social media consultant $1,000 a month to promote their brand on the web. Restaurants and bars especially do this.

5. Community needs are incredibly diverse.

There is a tendency to think about community diversity in terms of economic, racial or ethnic terms, but Chicago neighborhoods have major cultural differences, even compared to adjacent communities. For instance, Lincoln Square has a very activist community, intensely interested in every aspect of local politics. (Someone once told me Lincoln Square’s ZIP code, 60625, has Illinois’ highest density of Sierra Club members. I believe that.) On the other hand, West Lakeview, less than a mile away, tends to be much more disconnected. Neighborhood meetings don’t attract nearly as much attendance.

My experience is that for West Lakeview, readers are more likely to respond to a story about a new store opening, whereas Lincoln Square readers want to know every last detail of a zoning change.

6. Community engagement can build readership, but readers move on.

Early on I spent a lot energy on community engagement through parade marches, events and inviting local activists to write editorials. It paid off with readership and helped CSJ‘s traffic grow. But, I don’t get the impression that it kept readers long-term. As a neighborhood publication, you’re always striving to attract new readers, since residents move or lose interest. If you’re going to have a community engagement plan, it needs to be consistent and something you can plan on doing year-in-year-out.

7. Readers go to where the information is, and are generally not brand loyal.

This was a tough lesson to learn. While CSJ and every other publication has a core group of devotees, that group was never more than 20% of our total readership. Our reader surveys, analytics results and discussions with readers over the years showed that news consumers go where they see useful information – first. This could be from SEO, Google News or it could be from an aggregated list of stories.

I had two important takeaways from this experience. First, in order to keep a build readership, a big investment in pumping out large volumes of stories first (regardless of how little information you might have) is necessary for SEO. Second, aggregation and linked lists do draw readers, but making those lists often takes as much energy as writing an original news piece.

8. Local news was created to solve a business problem that has been solved and superseded.

Another tough lesson that required learning a bit of history to understand.

The original business model for news, back in Ben Franklin’s day, was to create handbills that people would read because it had interesting material on it. Local businesses liked handbills because it enabled them to get their sales message out to local consumers. That model, modified by the subscriber system, essentially stayed strong for two hundred years.

Direct mail and electronic media dented the newspaper model, but neither could challenge the ubiquitous demand for news shared by every consumer. But then, the cost effectiveness of creating direct connections between businesses and consumers through the internet has obliterated most of the “consumer aggregation” news organizations used to provide to businesses.

I found many local businesses in CSJ’s coverage area with email or social media lists of thousands of local consumers. One martini bar has tens of thousands of email subscribers. Under these circumstances, these local businesses (who also tend to be the ones most likely to have a marketing budget) are no longer looking to throw a wide net, but actually target by psychographic even more than before.

9. Readers want local news but businesses don’t necessarily want local customers.

One of my original concepts was that by creating a series of neighborhood news sites across Chicago’s North Side, I would be able to serve readers who wanted targeted news and businesses who wanted to target consumers around the corner. In fact, “Reach Shoppers Around the Corner” was one of my first sales pitches. Outside of Realtors, it had almost no resonance among experienced small business owners. In fact, I found most small neighborhood business owners wanted to purchase ads that covered as much as the North Side as they could get.

The reason is that true or not, local retail business owners believe they are reaching across most of the city for their customers. Except for the most experienced and savvy business owners, it was hard to convince them that their marketing dollars would be better spent locally in a concentrated fashion, as opposed to across the North Side or the whole city. It’s hard to compete with people’s dreams.

10. It isn’t complicated to build a good custom website. But it does take a lot of thought.

I knew a bit of HTML and the basics of WordPress when I started working on CSJ in late 2009, but I really didn’t know much about design or using the Facebook socialgraph. My first stab at a news site design was atrocious, the second still bloggy, but better. Finally, the third iteration, what you see on CSJ today, was cleaner, functional, and played well with social media. It’s far from the best, but I think it’s better than most.

In short, anyone can put up a news website. But the line between good and great is pretty wide.

11. 20% of consumers consume 80% of your product. Make sure that 20% is big enough.

One of the challenges of running a neighborhood news site is that ultimately, there is a limited demand for the kind of news you provide. Only so many people live and work in the neighborhood: The good residents of Chatham really don’t care much of about Northcenter’s parking meter problems.

Now and then traffic would go up when there are items of interest that go beyond picayune neighborhood interests, like when a new Target plans to move in, a surprising Aldermanic challenger defeats the machine candidate or people want to learn more about the big Ribfest streetfest. But other than that, there is a clearly definable baseline of readership. For CSJ, that was about 900 unique readers a day. For RVJ, it was about 500. No matter how much reader development we did, those baseline numbers would not go up.

Then, we knew that about 30% of our readers checked our site every day. Another 50% checked at least once a week. Even though we had some really dedicated readers, the pool wasn’t big enough to generate lots of ad click-throughs.

While those numbers were highly geographically targeted, our reader surveys showed that about 70% of readers lived and worked in the neighborhood, the total numbers were never exciting to business owners who imagined themselves as having a city-wide clientele (see #9).

In short, for all the great targeted content we generated, our audience could never get big or broad enough to generate enough clicks for our advertisers.

12. Nobody has the answers.

I had a sneaking suspicion of this fact early on, but it wasn’t until my short tenure at Journatic that I became convinced of it. The truth is that reader habits are still shifting so much, and the habits of 50-year olds versus people in the 30s, versus people in their 20′s are so different. Each reader and consumer group has such difference expectations of convenience, privacy and how they consume information that the news and ad markets are still dealing with new seismic shifts every month.

The result is terrifying for anyone with anything to defend, but exciting for anyone looking for a new way to innovate.

13. The barriers to entry are virtually non-existant in news now.

With a free WordPress template and a sense of what’s interesting to readers, you can create a news site that attracts thousands of readers. It may not be any good, but it will attract readers. CSJ and it’s sister sites follow more traditional journalistic methods (inverted triangle, multiple sources, on/off-record interviews, etc.) but two of Chicago’s more popular local news sites, Uptown Update and Chicago News Report, make no effort to do so what-so-ever.

Regardless of whether they are making money – or even selling ads – these sites are competitors for local news eyeballs. They make it necessary for other local news sites to adopt their methods, because without readers there’s no advertising.

14. There’s a big difference between small and medium businesses’ marketing practices.

Lumping together small and medium-sized businesses as “SMBs” is a mistake when it comes to marketing practices. I’d break those groups into three pools, each with different habits.

The smallest retail businesses, with less than $250k in annual sales mostly make cash register decisions on marketing. If there’s money in the till, they’ll try it out. But they want quick results. If the marketing doesn’t result in more customers within a couple of weeks, they don’t want to do it again. They rarely market, if ever.

The next up, small businesses with sub-$1 million annual sales usually have an actual marketing budget. But it’s likely no more than $2-3,000 a month, so there is not much room for experimentation. They stick with what they know, as much as what works. Unless you can offer something for less than $250 to try out for a month that will show instant results, you probably won’t make a sale.

Finally, medium-sized businesses with annual sales above $1 million tend to have large enough marketing budgets that they’ve been scooped up by a one or two person marketing shop. In Chicago, these tend to be boutique agencies run by former large ad agency folks who offer ad buying, creative services and maybe also social media management. There are literally dozens of these shops. Some are experimental, but all of them have thin margins and are thus looking for the tried and true for their clients. Back to square one.

15. Small business owners are constantly fighting off salespeople with a stick.

It took me a while to appreciate this, but the bane of small local business owners seems to be the cold-call salesman. They are selling credit card processing, new products to stock, marketing opportunities, you name it. It took at least a year of publishing useful neighborhood news before a majority of local businesses acknowledged me and our salespeople as something other than a nuisance.

16. It’s easier to find a good writer than a good sales person. Great writers and great salespeople are both hard to find.

Lots of people like to write. Very few people like to sell. Even fewer people want to do the hard work of honing their craft so they attain a new level of ability. It’s a cynical statement, but true. Worse yet for managers, there is no sure fire way to identify the people who want to go to a new level.

17. Small business owners rarely market themselves and even more rarely experiment with marketing because they’re so cash poor.

Building on #14, so many hyperlocal news sites’ dreams (including my own) are built on the idea that local businesses are ready and willing to advertise. They aren’t, because most don’t have much money, especially in this economic climate.

One relatively successful small business owner put it to me this way, “If I buy a $300 ad, I need to make $3,000 of new sales that month, just to break even, since I have a 10% markup. Why would I take that risk?” Of course I responded with talk about making an investment, growing their brand, etc., but those are luxuries for businesses that have cashflow to spare.

Another important difference between the smallest businesses and larger ones: They’re usually set up as sole proprietors or S-corps. So, when they spend money on marketing, the owner is taking home less pay. In the owner’s mind, either they spend money on you, or on their kids. That’s a tough sale to make.

18. Big publications and small publications have the same problems.

This builds on #12, confirmed by my time at Journatic. The decline of display ad revenue, and the importance of fostering audiences you can sell to through events, deals or whatever, is increasing. Publications of all sizes are struggling to diversify their revenue streams, and it isn’t getting easier.

On the readership side, while big publications are dealing with the thousand-Lilliputians threat of hyperlocal sites popping up everywhere, hyperlocal sites like CSJ struggle with dozens of personal blogs popping up across neighborhoods. Some are very popular with no reason to team up with anyone. It’s not getting easier to keep a steady audience.

19. I’m not sure if real innovation in news or advertising is possible. Most things seem to be merely iteration, and maybe that’s all that’s possible.

I’ve linked news and advertising together here because really, they are just two sides of the same coin. News exists to sell ads, and ads exist to be paired with content (you could say direct mail and billboards are an exception). Ultimately this space is dependent on human social interaction, whether it in response to the ads or content or with other people to discuss the ads or content. And there’s the rub: Humans have a limited number of ways they can interact with things, what merely changes are ways to amplify or accelerate how we have social interactions.

And here’s my big thought: I think we humans have to learn how to use these new tools, these new interactions before we go to the next level. For instance, I’m sure something like Google Glass is coming, and one day lots of people will use it. But I’m not sure our human society is ready to take on such an acceleration of interactions. For instance, can you imagine someone from the 1940′s using Facebook? It would be a big adjustment, and one of the reasons why many people in their 70′s and 80′s are having a hard time adjusting to the media environment today.

Pure innovation, something radially world changing, like the steam engine and AC power, is not possible when it comes to news and advertising, I think. Things will have to move slowly.

20. The most interesting stuff is coming from the little guys.

All of the most interesting things in news, content and advertising have come from small players,. My favorites are Flipboard, Instapaper, The Magazine, and Buzzfeed. I know the last one isn’t small now, but they were a year ago. Note that none of these projects came out of Google or The New York Times Co.

Yes, there are cases of big media doing interesting content stuff, like last month’s avalanche story in NYT or Brian Boyer’s always great work, but what stands out for me is that these projects are not tied to any kind of revenue creation. They are just great content, the modern equivalent of a beautiful coffee table book, but one that’s free. In this environment, that doesn’t make any kind of sense to me at all.

 21. Pretty much everyone that works in news is passionate about it.

I can’t emphasize how big a deal this is. Probably the number one thing about working in news is that no matter where you go or what you do, you quickly meet people in the industry that care a great deal about practically every aspect. True, it has made the business somewhat conservative (change is anathema for mature industries), but people care, and that counts for so much.

I’ve met so many great people in American news and marketing in the past three years, and I wouldn’t give that up for the world. If anything, it’s their spirit that makes me believe the world will be a better place soon.

The thought of just shutting them down pains me. I’ve seen other people do it, and I’ve read this TechCrunch post on killing start ups too many times to count. I believe we’ve created a public trust, so I decided to invite the public to a community meeting to decide what they want to do.

You’re invited, if you want to join the discussion.

Real money will be needed to keep it going, and it can’t be run by just volunteers. But let’s be frank: The communities I cover are of means, and if there’s people that want the sites to continue, I’m sure ideas will pop up.

As for my role, I’m ready to pass it along completely, or play some sort of advisory/transition role, whatever may be asked of me. But I don’t harbor any need to hold it and control it. I guess really I’d like to see if this bird can fly on its own.

I’ve also been working on what comes next for me, but I’ll save that discussion for later.

Why do media companies produce news?  To induce readers to look at advertising.

Why do businesses advertise? To building new relationships with paying consumers.

So, news is produced in order to increase advertising and thus increase sales.

Advertising, or any kind of marketing, is essentially leveraging an existing relationship (a trusted news brand) to help a second brand increase its value.

Looked at it this way, news is a step away from the real problem: How does one build relationships with people who want to buy stuff?

This is an old question for media companies. They know that their traditional business, selling eyeballs, has been eroded in favor of dozens of different approaches. And as a sales person for my little group of hyperlocals I hear it every day through sales objections: “I only use PR to promote events in my shop.” “We’ve had a lot of success with daily deals.” “We market ourselves through our email list and events.” “Our sales have been boosted by teaming up with local charities.” “We use Google Ads and search.”

Events, daily deals, personal connections, co-op marketing and Google. With the exception of the last, each marketing approach pares two levels away from the old-fashion news approach.

Large media companies see the change and have been adding services to respond. In 2010 Tribune launched 435 Digital,  a “Digital Marketing Services Group” that could build websites, manage social media campaigns and improve SEO.

But what if media companies were skipped altogether? What if brands build connections with consumers directly? That has been the promise of SEO and social media. But SEO comes into play when consumers are already approaching the point of purchase. Social media is much more hit or miss, and requires a loyal consumer base to promote your brand adequately. News is supposed to reach out to those people in between casually interested and ready to buy.

So what if brands ran their own niche news organizations?