Down And Out In The 'Burbs

Turns out it's tough to make local work on the Web

There are media geeks who have been waiting ten years for the Web to take over community news. Pick a town, preferably one in a well-heeled suburb, that's underserved by the big metro newspaper. (What suburban town isn't underserved by the big metro newspaper?) Set up a site incorporating the superstructure of this online age: blogs, places to post video, interactivity everywhere. Stoke audience participation, use some variant of the phrase "citizens' media" at every opportunity, keep staffs small, sell ads to tightly clustered readers. Repeat. "Whoever can get this thing right—there's a lot of money there," says Josh Grotstein, co-founder of venture capital firm SAS Investors.

Note the conditional. SAS invested in ultralocal player Backfence, which launched in 2005. It was the brainchild of veteran Mark Potts and Susan DeFife, and backed by $3 million in VC funding. Potts resigned in September, 2006—he won't discuss why—when Backfence had 13 sites covering the 'burbs of Washington, Chicago, and the Bay Area, and was talking about rolling out more. DeFife left in early January and was replaced by...Potts. He now runs what's left of it while mulling the next move. A staff of about 30, as of late last year, is down to around five. Today, DeFife boasts that almost 600 local advertisers signed on. But Potts concedes that ad response was "not what we wanted it to be" and that the money is running out.

THERE ARE DOT-COM ERA ECHOES in Backfence's saga. Take last December's holiday party at DeFife's suburban Virginia digs: All staffers, who were spread across three time zones, were told to attend—barely three weeks before a massive layoff. So you can't extrapolate from Backfence's example that there's nothing to the niche. Still, even exemplary players confess the business end has proved tough. "We have not been able to determine a revenue-generating stream from that traffic," says Robin Saul, president of the Greensboro News & Record, a paper noted for its smart, locally grounded Web strategies.

Beloved backyard media efforts dot the U.S. There are scruffy independents, like in Vermont or in New Jersey. There are those attached to extant operations, à la the News & Record. But, as Backfence found, to build a site from scratch is very difficult. (A former Backfencer says explaining the site to potential users left them feeling they were being sold something, as opposed to being given something.) And building one site successfully does not make it easier to build another elsewhere. "The virality that works nationally doesn't work locally," says Potts. In other words, the national echo chamber that can spur massive growth on MySpace (NWS ) won't work for separate community sites. All the more so for Backfence, which sought to let users create much of the content. It's easier for sites driven by a talented, semi-obsessed writer or two, like baristanet, to gain traction: Readers return for a stylish voice or a dependable hit of news.

"The beauty of the Web is that it is very efficient and very inexpensive to create [local] communities," says DeFife. But that didn't help Backfence make a buck. Today, Potts sounds most bullish on a partnership with a larger media company in which Backfence's technology gets licensed to a bigger player. This is a step back from January, when Potts promised making the sites more robust.

But Backfence's technology cannot handle video, which is where big opportunities lie. Meanwhile, some established players are Backfencing their operations. The nation's largest newspaper chain, Gannett, is now enabling and ramping up local participation on its sites. It's easier for a local daily to promote these efforts than a new face with a new name. Backfence's executives thought they saw a sweet spot but ended up flanked by the solo entrepreneurs on one side and the Gannetts on the other. They found that the middle of the road is often nowhere at all.

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By Jon Fine

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