by James Albrecht
Having run product development at a Silicon Valley portal in the late ‘90s, I thought I would present some food for thought as the CHCA considers venturing into the “local portal” business. According to the Local, the portal was suggested by a board member as a way to close the CHCA’s budget gap. If that is the goal, I can save you all a lot of time: Quit now. Or at the very least recognize the harsh realities of the business you’re choosing to enter:
1. Lack of scale: Web portals rely on scale to make their businesses profitable – that is, if they ever become profitable at all. The idea is that you pay for product development once and for content once and then monetize it a million times over. Obviously, this is tough to do with local content, even if you’re operating nationally like AOL’s Patch. Remember Microsoft “Sidewalk?” The Cox Interactive’s “Insider” sites? Like those defunct local portals, Patch still has to have employees everywhere. They have to crank out new sausage every day in every neighborhood and only people in that neighborhood will buy it. (Patch is trying to make up for this shortcoming by creating what one of their editors called a “sweatshop” environment. You can read about it here: http://www.businessinsider.com/aols-patch-is-a-sweatshop-of-70-hour-work-weeks-with-no-vacation-editors-email-suggests-2010-8)
But at least their platform and engineering is paid for once and leveraged across the country. Of course, the CHCA will have none of these advantages. Everything that is built will have to be supported by the businesses in Chestnut Hill – or more likely, the members of the CHCA.
2. Revenue: Presumably the CHCA venture will be ad-supported. But the same ills that afflict the business district generally will afflict the portal. In short, there aren’t enough businesses making enough money and Chestnut Hill isn’t enough of a destination. If this were a regional or national shopping or tourist destination, the economics would be different. (A shore town, for instance, might have a better shot at making a go of it.)
3. Online CPMs are a falling knife: the value of online ads has been falling steadily over the past decade. In five minutes I can put an ad for house wares on Google targeted to people in my zip code who search for “steak knives.” I can reach a thousand of those people for less than a dollar. In light of that, what is the value proposition you’re bringing to your potential advertisers? Undoubtedly, a human sales force can bring in better terms, but what about when Patch starts undercutting?
4. Lack of expertise and funding: I’m not in love with the AOL strategy, frankly, but I like it better than the idea of competing with them as a local community association with a budget deficit. I mean, really? This is how you want to spend your money? I know the executive who runs mobile at AOL. He’s one of the most brilliant engineers I’ve worked with. You can be sure that they will have some very slick iPhone integration into Patch in short order. (And they will only have to build an app once before launching it in their hundreds of neighborhoods.) Can the CHCA keep up? And what happens when you spend a bunch of money only to find that the cash doesn’t pour in and what you really need is to spend even more money to keep up with the competition, which, by the way, has millions of dollars in its war chest? No telling what Patch will be able to do with all that money, but I can tell you one thing they won’t do, at least in the near term: turn a profit.
5. Should the CHCA be entrepreneurial at all? I’m sure you get by now that I consider the idea of a neighborhood portal as a near-term profit center to be fully delusional. But the larger issue is this: Should the CHCA be involved in speculative business enterprises at all? Should it open restaurants or start a vineyard or try to invent better mousetraps? Well, starting a Web portal makes all that look like investing in T-bills.
A Different Vision
Board member Arthur Howe raised a different notion of the neighborhood portal. Howe seems to understand that the point of any such project is not the creation of a new profit center, but the defense of an old one. For what stands to lose with the imminent arrival of Patch is not the neighborhood – after all, Patch only succeeds if they make themselves useful to us – but the Local.
Needless to say, this vulnerability has been an open secret for years, as every newspaper in the country has struggled to reinvent itself online, usually amid painful layoffs and diminished ambitions. The committee that the CHCA should have formed, long ago, is one that would try to imagine a survival strategy for the Local. Of course thinking about the slow erosion of the print business model has never been as much fun as bickering about editorial matters. But better late than never, I suppose. Patch still has the “coming soon” label up next to Chestnut Hill.
In line with Howe’s notion, the CHCA should consider incremental changes, short of investing in a full-blown “portal,” that would make the Local more viable on the Web, including better integration of restaurant listings, business listings and the news archive; an expanded community forum; social media integration, and abandoning the weekly news cycle on the website.
Coverage would have to include shorter blurbs about events and about stories that are yet in progress. At the same time, it’s critical that the Local be able to recognize uniquely interesting stories and go deep on them. Patch simply won’t be able to follow. Maybe it would be worthwhile to spend a couple thousand dollars hooking the business listings up to an iPhone app, so that Hillers who choose could be able to be notified of local events and specials on their mobiles and businesses and be able to update similarly. In any event, spending a few dollars on a coherent redesign makes much more sense than spending a lot on a speculative new portal.
But the best strategy might be a completely different approach. I don’t know what the Local makes off of its website, but it’s bound to be pretty pitiful. What about giving the Local‘s online presence to Patch in exchange for the budget that they would be spending on their own operation? The personnel and content budget for a Patch neighborhood is small, but surely must be in the neighborhood of $70K to $100K (ex sales staff) – far more than the Local will be able to generate from ad sales on its website.
The print version of the Local becomes, essentially, a weekly summary of the website, perhaps with additional special content. This strategy is a big bet against AOL’s success. It suggests that online local content will not generate the dollars they are paying to acquire it. If true, Patch eventually goes away, and the Local has gotten the better half of the deal for a decade or so. If false – if AOL really can make a go of hyper-local content on the Internet – the Chestnut Hill Local, for want of reach and expertise and investment capital, was bound to perish anyway.
James Albrecht, a Chestnut Hill residen, was director of content development for the @Home Network and served as vice president of product design after @Home acquired Excite.com.