Delivering digital news to local markets seems like a simple idea. So how come every single attempt to do that has failed? Will Lookout Local find success?
Earlier this year a possibly over-refreshed long-time colleague of mine had a brain wave.
After years of commentating on the decline of newspapers and the emergence of “news deserts” in towns and cities around the country, my pal Ken Doctor bravely decided to put his money where his mouth is. He announced the founding of a network of local news sites called “Lookout Local.” The first site launched just last week, in Santa Cruz, California.
“Yeah, right,” I thought when I first heard about it. But what the heck do I know? Since the announcement a lot of people have said he might be on to something.
For example, somebody on the “Twipe” blog claimed such ventures will be successful because the pandemic has reinforced the value of local news through the role it plays in disseminating valuable information. She was being serious. I think.
Somebody else wrote the timing is right because “technology has taken the cost out of packaging and delivering news,” so that small, independent digital publishers can build audiences now more cost-effectively than ever before. I’ve been hearing that since the Netscape IPO in 1995. The fact that you can deliver your version of news less expensively than before doesn’t mean you can make a business out of doing so.
Most of the reaction though centered on the idea that the quickening decline of local newspapers creates an opportunity for digital local news start-ups like his. This is claimed with no apparent sense of irony. And as if to prove the point, even Axios, my favorite news outfit, has recently announced it intends to enter the local news marketplace: https://www.axios.com/local/
Newspaper deserts are not news deserts
I say they had better be very careful. Most people who write learned articles about the emergence of “news deserts” in markets around the country seem to be confusing the death of local newspapers with the death of local news. It’s a convenient confusion, for it creates the artifice of market need – and simultaneously the opportunity for pretentious lamentation on the decline of western civilization. “Newspaper deserts” would be a more accurate and intellectually honest term for them to use. And I don’t think many consumers really care that they now find themselves living in such a desert. They’re voting with their feet – just look at the falling rate of subscriptions to local newspapers, print or digital. Is the decline of local newspapers really a “pain point,” as they say out in Silicon Valley? Is it a problem that needs solving? Really? I’m not so sure.
I don’t know about you, but I’m drowning in news. On top of my social feeds and select newsletters and favorite national and international news sites and a host of vertical sites like bleachernation and fcbarcelona and insidemedia and the spinoff.co.nz and others that I visit often because, well, that’s me and what I like, I also have lots of local information sources I can access with just a click – and I live out here on Georgetown Island in Maine, year-round population a thousand people or so. Compared to me, you readers living in the big smoke must have trouble keeping your head above water. Out here, the General Store, the Town Office and the Community Center each have their own Facebook page. A group of locals runs a Facebook news page. On Instagram you can find lots of photos and videos of life on our beautiful island. The lobster shack at Five Islands Wharf has its own website.
I can track the menu at Grey Havens Inn by checking their Instagram page. The day following the monthly selectmen’s meeting I get an email newsletter summarizing the discussion and the outcome and any votes taken. I get text updates if the power goes out in a storm. Courtesy of the Historical Society, I get monthly updates on island life, including obituaries. This is just a little island in Maine and we are getting news and updates on island life delivered through a variety of channels, some social, some direct, some push, some pull. Nowhere is a professional editor or journalist involved.
It’s marvelous, this groundswell of local content, offered humbly and without opinionation, and it’s exploding in every market in the country.
With that reality in mind, I suggest that if you want to jump into the local news business today, you had better
1) understand how the market for news has changed, fundamentally and forever, and 2) be thoroughly steeped in the art and science of start-up product development.
Without mastery of each of them, despite all the best intentions and hard work in the world, you’re dead.
The cheapest, quickest progress you can make is to learn from the successes and failures of others. I stay in regular touch with several founders of digital news startups, and I’m forever telling them that very thing. They are good people, earnest and committed, but mostly they are bringing to today’s media marketplace the same hidebound thinking that got newspapers into trouble on the internet beginning 25 years ago – and everybody else since. They don’t seem to grasp how much the market has shifted.
Journalists are not product experts
That’s because they’re journalists. If you bridle at that point, take another look at the performance of local newspapers in transitioning to the digital age. There are just a few exceptions – Ezra Klein of Vox and fivethirtyeight.com being one, and Jim Vanderhei and Mick Allen, co-founders of both Politico and Axios, too. At the local level, another exception is of course Mark Henderson and what he’s doing on a shoestring with The016.com in Worcester, Mass. But mainly, the process of developing a news product hasn’t changed for 50 years.
The essential issue is one of definition. For most of the people trying to solve the local news puzzle, “local news” is a grab-bag phrase for coverage of city hall, court hearings, career promotions, high school sports, the weather forecast, real estate sales, restaurant reviews, obituaries and the rest. This is called “editorial judgment” and this is where they always start, with a whiteboard list and powerpoint deck like this. But editorial judgement is not marketing insight. Editorial judgment is intuition layered on experience, and experience unexamined is lethal. It hangs the albatross of print mass media around your neck. It results in generic news coverage delivered with but a hazy idea of the nature of the intended audience. It is “publishing” as a transitive word, the same thing out and down to all the inhabitants of a town, whether they want it, or not. It’s their civic duty to consume it, it’s essential to democracy and it’s good for them too, like eating spinach, or in my case, like eating peanut butter instead of vegemite on my toast in the morning. They’ll come to like it, eventually. But you know, by now it’s clear they never do come to like it enough.
This legacy thinking hails from a time when newspapers reigned over a market whose boundaries were defined by how far their trucks could get by sunrise. The monopoly was great while it lasted, but it put the journalist not the reading customer first. And so it fostered the kind of myopic thinking that will kill any prospect of reinvention. Just like it did with AOL Digital Cities, Real Cities, CIM Cities, CitySearch, Yahoo Local and all the others. It is a rare journalist who can throw off the drag of this legacy and, instead of looking at digital distribution as a chance to do old things better, looks at it as a chance to do some brand new thing that has never been done before.
It’s like the difference between bookings.com and Airbnb. Bookings is just an online travel agent. Airbnb is a unique, even revolutionary product that would not be possible without the internet.
There is no reason why a digital news product should conform to the traditional newspaper conception of news. Is there?
How has the market for local news changed? Well, first of all, as I mentioned at the outset, it has broadened and deepened as digital sources of news and information have proliferated. You may not regard the FB page of the Georgetown Community center as “news,” but we here sure do.
More specifically, if you want to create a local news business, you will quickly find that the market has also changed in these five ways:
Time matters. Keep it short, keep it punchy, summarize, don’t explore. Journalists hate this idea. When USA Today launched, they called it “McPaper.” By comparison to local daily newspapers, it was light, quick, and easily digestible. Turns out those are key attributes for a news product in the digital age. You can always add a link to depth if you think your market wants that and that it might help you hold a reader for longer.
Utility matters. The internet is a purposeful medium. It is functional. It is used to buy things, find things, do things, save time, save money. You no longer browse the news pages, awaiting serendipitous discovery while you enjoy a second cup of coffee. Squinting through the constricted porthole of a mobile screen is not conducive to browsing. Users (note that word) are looking for what interests them, now and what they need, now. And they are expecting to find exactly what they came for, efficiently and easily.
Personality matters. Traditional news products are plain vanilla in tone, mundane, bland and as expectable as the layout and design of any McDonalds franchise. These days I don’t go to McDonalds, but if I did wander in, I’d like to have my expectations upended. I’d like to find white linen tablecloths and a spot of Pachelbel on the sound system. This notion scares journalists, they think personality is inimical to “objectivity.” But without a distinctive voice, you cannot build the kind of mutual customer relationship that drives subscriptions and reduces churn.
Channel matters. When you have endless options for product scope and distribution, the challenge is focus – and figuring out where to start. You must have a clear idea of what constitutes a product benefit, and what is merely a technology feature. No matter what audience segment you elect to serve, your new product must be designed for delivery to mobile devices. Will you deliver an email newsletter? Direct texting back to stories on a website? A Twitter feed? Social media placement? Local aggregation? What criteria will inform such decisions? Saying “no” is more important than saying “yes” here. After all, you can do anything you want. Just remember that the delivery channel you select and technology features you are so proud of will not determine success – only the product itself will do that
Market definition matters most of all. The first question I ask in my conversations with news start-up founders is “tell me about your market?” They usually have just a hazy idea of the three basics of market segmentation; age, income, and lifestyle. But in the age of digital, everybody between 35 and 65 who happens to live within a particular town and have annual household income of $100,000 does not constitute a “market.” It’s just a collection of different folks who live in the same zip code. They may have little in common beyond that zip code.
Yet data is everywhere. Not market research. Certainly not focus groups. Data. Take Santa Cruz. You might start here: https://www.datasharescc.org/tiles/index/display?id=162299224317186245
Or, you may sign-up to use one of a number of consumer data analytic companies, like Zignal, whose insights have been used by Axios and the New York Times, or this one, which is used by the Discovery brands: https://www.askattest.com/product?
Here’s why this is important. There is this belief abroad that traditional local news is of irresistible appeal, and that consumers are clamoring for it so much that despite the panoply of digital options contesting for their time and money, they will plonk down five bucks or more a month to gain access to it.
But it’s not.
“Local” is, in fact, a weak differentiator.
This is not exactly a surprise. Years ago, in another life, I worked for a newspaper marketing agency. We employed the best researchers in the business. From them I learned that of all the offerings in the newspaper bundle, the local pages attracted the lowest readership. Back then, in the late 80s, the monopoly was at its height and the local newspaper was, literally, the window on the world. The local desk was competing for eyeballs and resources with everyone else in the newsroom and every other section in the paper. It was always the poor cousin.
Differentiated value is everything
If you think it was hard for local to win then, think of the competition today. Local gets just a sliver of any consumer’s daily digital consumption. Of all the structural upheaval in the media marketplace wrought by the internet, the most consequential is the elimination of physical monopoly. On Netflix, every show is equally accessible relative to every other show; there is no fighting for prime time slots or seasons. It’s the same dynamic on Google or Facebook: all content is treated the same. This is a problem for companies like newspapers that used to rule the roost when physical distribution mattered, but it offers nothing but upside for those trying to build new digital franchises in local news – if, that is, they can figure out how to offer genuine differentiated value. It’s hard to build a business around a sliver unless you know how to make it irresistible. And indispensable.
To do that, you need to have a very clear idea about who you are helping, what exactly they need, and why they need it. These days local news start-ups stop at “I am helping people get the local news they need now that newspapers are disappearing.” In reality, they should be able to say something like “I am helping young adults get the news they need to manage their busy lives in this town. They are both male and female, aged between 30 and 39, each making an average of $60,000 each a year. They are young professionals who spend the majority of their day doing A, B, and C, and the biggest problems they have are X, Y and Z. They have these goals, they buy these products, they shop here and here and their identity is based on these beliefs. Currently they subscribe to this and that, but those news products do not allow them to do these three critical things. By leveraging digital distribution, I can solve that problem for them.”
The more specific you can get, the more likely it is that you will succeed. Remember: Narrowing the market like this does not mean you are constricting the financial opportunity. What it means is that you are increasing the chances of building a productive audience. If instead you stumble around trying to find a market for local news by accident, all you will find is a disparate group of old, white, liberally-minded individuals who will not visit with sufficient frequency to create the base of advertising impressions you can sell, the commerce you can profit from or the committed readership you need to underpin a subscription business.
You cannot force them to love you enough.
This is precisely why so many local news start-ups resort to not-for-profit status, begging for shekels from starry-eyed foundations and do-good benefactors who know nothing of the media business, godbless’em.
You simply must be the expert in your market. You must engulf yourself in it. Chris Dixon of the venture firm Andreessen Horowitz has said that you need to devote at least 10,000 hours on your market to get the insight you need – by working in it, living the problem you intend to solve and by devoting time to analysis and research. Editorial judgment and the dreaded whiteboard list won’t cut it. And no matter what technology and channel you employ, it won’t compensate for a product nobody wants and nobody uses.
Here’s the thing. I’ve been involved in the development of digital news products in a variety of settings for a very long time. I’ve had big success and many failures. What has always puzzled me about the ventures that failed is that the people working on them did not themselves use them. Most great businesses are formed from personal need. If you don’t find your product indispensable to your daily life, if you don’t love your own product, no-one else will.
The key I think is to stop looking at yourself as a publisher. You’re actually in the consumer product development business. These are not just fancy words. They define what you’re trying to do, not in the old, market-removed, rarified world of publishing but in the real world of multi-channel marketing. Do you speak the language of that world? For example, do you know how to differentiate your news product from every other news product competing for your customer’s time?
I’ve written about differentiation previously, here: https://blastofwinter.com/2015/04/09/local-news-is-a-weak-differentiator/
And here: How well do you know your market?
You cannot imagine what your market might want. You have to find out what it wants. If you want to develop a digital news product for consumers in their thirties – which makes sense, their discretionary income is building and they’re beginning to get interested in the world, the future of it and the role they will play within it – then you had better not be thinking of offering them a newspaper-like website. Evidence of that folly is everywhere around you.
This potential audience watches movies on Netflix, streams music on Spotify and gets updates from friends on social media. Can you design a news product that provides then with a similar experience? That, right there, is your challenge. A news product is just that, a product, and is therefore subject to the same rules of product development that apply in Silicon Valley and hubs of entrepreneurship everywhere. Ignore them at your peril.
Seven basic rules that apply to any start-up
What are those rules? Here’s synopsis of the notes I used for a recent two-hour zoom call with the founding team of a local news start-up that is early in the planning cycle. This is what we talked about:
- Painkillers sell, vitamins don’t. What have you found that consumers desperately want? A must-have is always preferable to a nice-to-have. Are you bringing to the market an order-of magnitude improvement that will help you put the finishing touches on the death of the local newspaper? Or are you merely offering a soft alternative to that newspaper, where the value distinction between you is amorphous and the differentiation weak? And, what is your original secret sauce? What secret do you know, what exclusive insight do you have, that will help you win and offer competitive insulation – building a product without a plan to differentiate from the outset is foolish. And, how will you promote your product? How will you frame the need you have identified, and secure trial? How will you help move it from early adoption to scale penetration? How much of your promotional investment will be spent on performance advertising, and how much on branding? By the way, as you do your pre-testing and talk to your potential customers, (they’re not readers, they’re “customers”) do you listen to them, or do you pitch them? If you find yourself explaining your value, you have no value. You will have to admit that to yourself. And change your approach
- How committed are you to delivering the solution you believe in? Do you have the resources and personal fortitude to sustain you on an endless roller-coaster ride of 12-hour days? Are you in it for the long haul, no matter what? The passion of those trying to resuscitate the news business is extraordinary, even if it’s poorly directed. You will need every ounce of that. If you miss your number in year 1 are you flexible enough to adjust? Startup marketing is all about experimentation and educated guesses. It’s about constant iteration. Most entrepreneurs get rigidly wedded to their idea and can’t adapt when they meet market resistance. So as you plan, try to kill your idea. What fatal event might put your company under? Can you eliminate the prospect of that event happening? Be careful here, it’s very easy to fall in love with your product idea, after all, it’s your baby, but because it’s your baby even your best friend won’t tell you it’s ugly
- What is the business proposition? Are you going to sell advertising, or sell subscriptions? I have a problem with that very question, as it happens. In the early stages you should be laser-focused on just one clear, singular revenue stream, large enough to support the whole business. If you’re going to sell advertising, do you know the basics of selling? (Sorry, prior experience tells me I have to ask, you are not buying a lottery ticket here) So, for example, do you understand that the worst mistake you can make at the outset is to cave on price just to get a deal? If you educate your advertising customers that you have limited value, it’s almost impossible to recover. Besides, bleeding capital on every sale – spending a buck to make a dime – is no joke. You must hold rate or you will never build a consistent revenue stream. And do you understand that advertisers will pay more for access to a qualified audience that conforms to their own customer profile? If you’re selling subscriptions, what will be your offer and what will be the idealized path from trial through conversion to long-term subscription? What retention number must you maintain to make your revenue target?
- What kind of a leader are you? Do you understand the art and science of management? No matter how great the solution you have come up with, it’s people who will build it. Investing in your relationships with them will drain and divert you. Are you ready for that? And are you ready to SWOT yourself and post the results? Because purpose matters more than perks, are you ready to talk every hour of every day about the mission you are all on, and what you’re learning? And you understand the importance of hiring the right kind of person, right? Ambition and low ego is as important as skillset in a start-up. Firing quickly is important, too, when you make a hiring mistake. Most founders wait far too long, usually out of misguided loyalty. Big mistake
- How well do you understand the product development process? Your most important hire is your product manager. This person sits at the intersection of competing business interests: user needs, commercial interests, editorial positioning and technology resources. But you yourself have to get up to speed with the product development process, too. Are you familiar with concepts like “minimal viable product,” or “quick up and quick down,” or “feedback loop,” or “use case” or “network effect?” Do you know how to apply them to your new business? Do you know how to set the correct metrics to track progress on consumption, and how to adjust them over time? What CRM will you use to underpin your database marketing process? This is at least as important as the CMS you’re going to use, if not more so, because it will inform your promotional strategy and your product strategy as you move forward.
- You need to know your financial numbers and their independencies by heart. This includes income statement, cash flow statement, balance sheet, working capital schedule, debt and cash schedule. The financial goals must be aligned with your business goals, so that, for example, you avoid too much discounting to get new subscribers because that may not be sustainable in the long run. “Be disciplined or the market will discipline you,” the old saying goes. Unit economics reveal whether your business is viable. Business model assumptions need to be tested carefully, because, for example, free trial offers only work if there is, in fact, a market for your razor. Here’s an important piece of advice I wish somebody had taught me: Deliberately try to limit the number of steps to revenue. Ask yourself, what has to happen before you make a buck? Simple and quick is best, because there are many ways of interpreting the growth of a startup, but cash is king. “Net income is an opinion, but cash flow is a fact.”
- You will need external capital, just remember that it comes at a price, in the form of a meaningful percentage of your company. You aren’t just raising money; you are selling ownership and so, in a sense, you are hiring your boss. Great investors help you ride through rough times rather than abandon you. But they are not just cheerleaders, if they bring valuable operational and entrepreneurial experience they can be gamechangers by accelerating the learning curve. News start-ups should avoid “domain investors,” their experience in traditional publishing will hinder rather than help. Finally, and you would be surprised at how often this is not clear, what is the liquidity event you see that might make it all worthwhile in the future, for you and your team? An IPO? A sale? What’s the end game?
If you understand the new, news marketplace you are entering, and you have your arms around the basics of the start-up process, then maybe, just maybe, you have a shot.
Here’s one final piece of advice. I always suggest that founders sit down at the end of each day and ask themselves these three basic questions:
Why this?
Why now?
Why me?
I’m pretty sure my pal in Santa Cruz has the Why Me? covered, and some. I’m sure he’s smart enough to step outside his journalism background, and he’s seen an awful lot, up close.
And now may be the right time.
It’s that first question I worry about the most. Here’s a link to the first Lookout site in Santa Cruz, so you can see for yourself if it offers anything truly differentiated and indispensable : https://lookout.co/santacruz/
We’ll keep an eye on it too, and report back.
I wish him all the best whatever happens. After all, like I said, not many have the guts to put their money where their mouth is…
BlastofWinter 