The Hyperlocal Content Opportunity
So I noticed a few month back where Nokia had acquired MetaCarta and I just finally had a chance to try to have a look and figure out what that was all about. After 10 minutes of digging, I am walking away with the conclusion that they basically have a way to search through natural language documents (ie a bunch of words) discover and recognize location oriented references (“hey guys I am in Newton”) and then apply a geo-tag to them to provide a new dimension and layer in which to organize and discover new information and patterns.
It seems that the folk that have found this most useful so far are governments and energy companies. According to the Metacarta site, there are millions of government documents of which over 70% contain significant geographic references.
I can see how this would be quite valuable for the folks in homeland security who could now potentially connect the dots where a CIA agent writes up a report about a suspicious character on Mott street and another agency transcribes a phone conversation between bad guys referencing a business at a nearby location adjacent to Mott street. It’s information that may not have been connected in the past if it weren’t for the previously unseen geographic/proximity link.
The other category where Metacarta operates is in digital publishing, particularly around news content and this is the area I was interested in poking at a bit more. AOL’s Patch product has been getting a ton of press, Yahoo just plunked down $100 million for Associated Content, and other start ups like Outside.in are all operating in some shape or form in the area of hyper local content creation or aggregation.
Creating or aggregating all of that content for a hyper local audience of what may be just a few thousand people seems like an awful lot of work. So let’s look at some numbers…
Having worked with Associated Content before I suspect that its reasonable to get a 500 word article produced for $30, and let’s say that the article is about something happening in the town of Mamaronek, New York a small bedroom community of NYC with a population of 18,752 (at least as of the last census). So using some oversimplified math… in order to break even on the expense of creating the article assuming un limited advertiser demand for Mamaronek eyeballs at $15 CPM, the article would need to attract 2,000 views, assuming 1 ad per page, or 1,000 views assuming 2 ads per page… or approximately 10.6 or 5.3% of the town population respectively.
Now seeing that Quantcast estimates the domestic use of Google.com at around 157 million monthly unique out of a total population of 307 million people or about 51%, it seems a tad aggressive to assume that one publisher could get 10% of a local population engaged in their content… although just for the heck of it I looked up the circulation of my hometown newspaper the Gainesville Sun which has a circulation of around 45k against a population of around 125k or over 1/3 of the population, so maybe its not so crazy!
You can kinda see where the Excel commandos may be getting excited, saying something like “if we can establish Patch as the next generation local newspaper and get 1/3 of the population reading the site and get articles produced at $30 a pop, we’ll be rich!”
But here are a few potential glitches to that plan. For one, as the barrier to creating local content is lowered, unlike in the traditional newspaper world, the number of competitive neighborhood sites will be more significant, so getting 1/3 of the population to read your website like the Gainesville Sun has accomplished in Gainesville, will be much more challenging… outside.in will be right there challenging Patch for the local eyeballs with a network of other local bloggers.
Second and probably more importantly, is the advertising demand and pricing question. Ad networks are awash in inventory, and geo targeting is just a simple check box away, so the eyeballs are already available at CPMs in the low single digits. While small local businesses will be sold directly and the vast majority have never heard of advertising.com, I am not sure you can expect them to pay large “local content adjacency” premiums over the long run.
A quick perusal through the Patch job listings shows a lot of emphasis on the business directories business, so it seems that AOL may be trying to hedge their bets even further against the premium display CPM ad business and trying to cast a wide net capturing ad dollars previously headed for local premium display, classified, and yellow pages. Then there is the whole behavioral/re targeting opportunities when folks from the local sites show up later elsewhere on an aol property and upgrade the value of that inventory as well.
You can start to see where this local content begins to look like a valuable opportunity once you can get the production costs low enough and local ad sales folks in place… it all makes sense on a spreadsheet at least.
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