Got to be honest . . . Sometimes when we tell people what Upside Analytics is focused on, that we are trying to help local news publishers get more subscriptions, some wonder why . . . Here are our answers:
1) We think it is a good business opportunity as there is untapped potential revenue
We see business potential here, even where there is turbulence and closing of older news business models. Local content and connections are increasingly valued, especially post COVD, and in fact people gravitate to good local content on channels like Google or FB properties (note: they are not dumb, that’s why they are investing in this area too). 1,800 communities in the US are now without a local news source.
Hunger / Desire for Local Connected Community Is Strong: NYT (2021): People looking for "Community Place.” Buy Nothing is “the only reason why I’m still on Facebook,” said Mr. Stahl, who has been a member since March. “There is no community meeting place anymore,” he added, except on Buy Nothing, where a member of his group recently offered a half-eaten birthday cake — a gift members were happy to take. Welcome to the wild world of Buy Nothing, a network of social media groups, mostly on Facebook, where people give and receive things, treating the stuff taking up space in their homes as gifts meant to be shared and treasured. Created in 2013 by two women in Bainbridge Island, Wash., it has grown to 6,700 independent Buy Nothing Facebook groups in 44 countries.”
Growth of NextDoor: NextDoor grows 50% you and going public with $4.3B valuation on 108M users. Love this quote inCNBC article“Only Nextdoor can take that message into a local level and make it happen,” Friar said. But in another article: Friar says Nextdoor has no intention of taking the place of local journalism, but noted the platform can bring together civically minded people. Nextdoor has also become a big driver of traffic to both national and news outlets. Patch.com is the top site receiving traffic from the site. CBSLocal and a slew of major city media outlets are among the top 50 sites receiving referral traffic from Nextdoor, per Similarweb.
Our own proprietary analysis of the US market suggests that there is $1.05B in unrealized revenue potential from local news subscriptions today that should be happening but are not. We can help close that gap.
2) Local publishers and their owners will need to grow reader revenue
Ad Revenue Is Fickle, Philanthropy Takes a While, So Reader Revenue Must Continue To Grow and Fill The Void: As ad revenue has declined and gone to other digital platforms, local publishers have looked at other revenue strategies including philanthropy, non-profit status, even public funding grants. And while there are some signs of progress like Salt Lake Tribune, The Guardian and the important bi-partisan work of Senator Amy Klobuchar et al, those approaches cant be seen as the silver bullet. This has been called out by industry expert Steve Waldman: “We talk about philanthropy as the ‘third revenue stream,’ and that’s both to encourage newsrooms to think of it as a revenue stream, and also to underscore it’s not the only revenue stream,” said Waldman, founder/president, Report for America. "The key is thinking of philanthropy not as lightning-bolt-from-the-sky charity, or as the only type of support, but rather as the third revenue stream. It needs to be developed as a persistent, ongoing source of income, alongside subscriptions and advertising, the two primary sources of local news support to date.”
During this transition, many local news organizations have been rolled up by investors and half are now owned by hedge funds. They want to make money from readers and subscriptions are increasingly used method of payment for many digital services. Our belief is that as friction points are removed and local news becomes better at serving the digital audiences as Netflix and The New York Times have done, the growth of the subscription economy will lift local news and even bottom-line minded owners will see evidence that investing in good local content brings in more reader revenue.
3) The discipline of developing more efficient analytics tools for local news can also benefit other types of companies (everyone wants better, faster, cheaper)
While spending in insights and analytics continues to rise ($215B in 2021) the businesses that offer SaaS or DIY approaches (as opposed to more expensive or full consultancy) are gaining value and market share. Recent valuations of SurveyMonkey for $4B and Qualtrics for $27B are two easy to point to examples of this. They bring cheaper easier DIY analytics options to small, medium and very large companies.
4) A healthy local news organization is good for society (and research below shows this)
Local News Is Good For Society: Atlantic (2021): When a local newspaper vanishes, research shows, it tends to correspond with lower voter turnout, increased polarization, and a general erosion of civic engagement. Misinformation proliferates. City budgets balloon, along with corruption and dysfunction. The consequences can influence national politics as well; an analysis by Politico found that Donald Trump performed best during the 2016 election in places with limited access to local news.”
Local news helps make a community vibrant. It's not about one party or policy. It's about people trusting people who know their town, with news about their town, knowing who their neighbors are and how they can work together to make good things happen where they live work and play.
So, for those reasons, we think Upside Analytics is doing important work. We hope you agree :-)
