Yes, Virgina, there is a business model for journalism. For now, however, it’s called “local online.”

Last week’s Interactive Local Media conference in Los Angeles featured two-and-a-half days of presentations and hallway conversations focused on connecting local businesses with local audiences while making money. “Monetizing the local opportunity” was the title of the conference, which is exactly the problem that so many “future of journalism” pessimists and pundits have suggested can’t be solved, leading to another tired discussion of pay walls and non-profit fundraising.

The overall takeaway from last week’s conference, since it was echoed by so many speakers and attendees, was best summed up by Brian Buchwald, Executive VP, Local Integrated Media and NBC Everywhere:

“Local online is a highly immature space.”

In going back through my notes from last week’s conference, I found several nuggets of interest. Taken together, they paint a fairly decent – and optimistic – picture of the state of local online. For more, see Lost Remote, Local Onliner and, for the most comprehensive roundup, the Kelsey blog.

Highlights from the 2009 Interactive Local Media conference (after the jump):

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The good news for local publishers? There is growing demand for local advertising.

The bad news? An entire industry of companies you’ve never heard of (including some giants you have) are laser-focused on connecting local businesses with local consumers and most of them don’t care if a publisher is in the middle of that transaction.

That’s my halftime analysis from the Interactive Local Media conference in Los Angeles. (I’m posting updates to Twitter and you can find the conference stream by searching the hashtag #ILM09.)

Publishers see opportunities, too, of course. NPR and ESPN are moving quickly on locally staffed “franchise” sites. MSNBC.com and CNN are focusing on getting local, too – down to the neighborhood level. The concept is not new: create content that draws an audience, then sell ads around it.

“Our model is to create high quality, high context, in-market ad inventory,” Outside.In CEO Mark Josephson said during a session today. “Local content is a proxy for local ad inventory and there is a fundamental shift that is creating huge opportunities.”

Josephson’s company is one that is trying to assist publishers. But there are so many more companies at this conference, from business directories to search engine marketing firms, that are direct-to-advertiser plays. They do everything from placing location-based mobile ads to tracking social media conversations and buying Google ads for small businesses. And don’t forget about the big G, of course, or MSN, Yelp, Facebook, etc.

If you’re a traditionalist and want to see legacy news media survive, it’s not pretty. Even the Yahoo Newspaper Consortium, which includes TV and radio, has apparently only booked $83 million in ads this year, which isn’t going to save an industry (newspaper) that used to book some $40 billion. (And my outside impression is that Yahoo is getting the most benefit here, boasting about 100,000 local sales reps thanks to the partnership.)

If you’re a forward-thinker and an optimist, it’s exciting. Independent journalism startups have a bevy of potential partners to help them with the advertising side of the business. Sure, these third-party vendors will get a cut, but it might be less than you’d pay to staff up an ad sales team. And any percentage of zero is …

Additionally, there are publisher models worth following. Scott Tobias of Village Voice Media talked about a thriving local media business that includes three important segments: print, digital and street. The street team is a guerrilla marketing effort that can promote Village Voice events (online and offline) or do street-level marketing for big brands.

“Print is not dead for us,” Tobias said. “Village Voice wasn’t bloated like a lot of the metro dailies. And the Web is just an extension for what we’ve been doing for 25-plus years.”

The power of local brands still works, of course. Cory Bergman (MSNBC.com, Next Door Media, Lost Remote), Mike Orren (Pegasus News) and I were talking last night about how few of the companies here have any presence on main street. Local businesses have heard of Google, of course, but Yodle? Methinks not. Yet they claim to have 7,000 customers.

Yesterday, Howard Owens responded to one of Twitter updates with a prediction that “localpreneurs” will win this space in the end. If a local publisher can create, or in the case of newspapers – resuscitate, a recognized local brand, then local businesses are still an open opportunity.

After all, the one big recurring theme throughout all the sessions is that we’re still in the early days of all this. As Jim Pastor of ESPN said: “Anyone who tells you they know what local online looks like 1, 2, or 5 years from now is fooling themselves.”

Several hundred people at a Hyatt in LA this week think so.

And by “local online,” I’m referring specifically to the opportunity for marketing local businesses, not publishing local journalism. Although, as we’ve learned during the almost-completed decade, the latter will have trouble surviving without the former.

I’m at the Interactive Local Media conference in Los Angeles through Friday, analyzing the state of local business marketing online.

I’ll be posting updates to Twitter and you can find the conference stream by searching the hashtag #ILM09. If the morning sessions are any indication, there will be loads of good information presented here.

Already this morning, we heard about data that says that still only 42% of local businesses have a website, only 7% advertise online and only 14% have claimed their free profile page on Google. Clearly, there is opportunity here to connect buyers and sellers online. (And don’t even get me started on mobile.)

The question I’ll be seeking to answer is: will the local business marketing opportunity support new forms of journalism? The last time I attended a Kelsey conference, I bemoaned the fact barely a handful of newspaper companies sent representatives. Now, I’m not wondering where the legacy media companies are today, but where the independent journalism startups will fit into this landscape as they flourish in the future.

Many of the companies here are disintermediating the traditional publishing model. They work directly with local businesses to improve performance on Google, perform email marketing and mobile services. Some work to help publishers with directory listings and other products and services.

Newspapers funded their journalism for decades by connecting local buyers and sellers. If the next generation of journalism models succeed, they will have to compete with – or partner with – the innovative companies and concepts that will be presented at this conference during the next 48 hours. I’ll keep you posted.

(NOTE: I originally published this post on the Serra Blog.)

Expect to see more of this in the coming months: indepdent local news and information sites banding together to form a local/regional advertising network.

The Sacramento Press today announced the most recent version, called SLOAN for Sacramento Local Online Ad Network. It’s an ambitious effort, which should be no surprise coming from a start-up news site that has made a lot of progress in a relatively short time. The site counts some 700 contributors to its news machine and will soon have 18 partners to leverage when selling ads.

“We’ve been working really hard on this,” Ben Ilfeld, co-founder and COO, told me last week. “Hyperlocal ad networks have been talked about at conferences, and in the blogosphere, for some time. We wanted to tap into advertisers like auto dealers or Indian casinos and having a network will make that easier.

“Our goal to support people doing interesting and good hyperlocal journalism.”

Upon launch (in mid-January) SLOAN will include The Rancho Cordova Post, Gold River Online, Elk Grove Online, SacMix, The Sac Rag, MyFolsom.com and The Tomato Pages Network.

The SacPress staff will be the only ones selling into the network and Adify will supply the technology, so each will take cut of the action. But Ilfeld said publishers in the network will still receive 60% of the revenue, which is a pretty good deal if you ask me.

“We want to put together enough unique users to challenge the other news outlets, and eventually, maybe even the (Sacramento) Bee,” Ilfeld added.

Local news, advertising and commerce took center stage at the MIT Enterprise Forum dinner last night in Bellevue. While it was one of many subjects discussed, local (and “hyperlocal” and “microlocal”) strategies and opportunities were given the most attention by the speakers at a dinner called “Breaking News: How will the pieces be put back together again?”

The highlight for me was seeing the founder and editor of West Seattle Blog, Tracy Record, positioned on stage next to MSNBC.com president Charlie Tillinghast. Two years ago, who would have believed that a neighborhood news site would warrant the same consideration as one of the giants in the online news world. (And the event planners did plenty of due diligence in finding and screening speakers, interviewing more than 20 people – including me – to fill four spots.)

The conversation was mostly entertaining and occasionally informative for someone who follows the disruption of news media by technology, but probably more informative to the general audience. Todd Bishop of TechFlash did a masterful job moderating, keeping the conversation flowing while challenging the panelists with more than just softball questions. The most interesting points included:

• Patricia Lee Smith of the Seattle Times repeating time and again that she didn’t have an audience problem, just a revenue problem, and that she needed technology to solve it. She rattled off a host of statistics to illustrate how viable print remains as a medium for advertisers (including the U.S. pre-print business is nearly $6.7 billion a year and up 30% and accounts for 90% of coupons redeemed in-market.)
• Tillinghast reported that MSNBC.com had a record revenue year and profits missed projections by only 1%. “We’re making plenty of money,” he said. Which begged the question (that didn’t get asked): how is MSNBC.com monetizing its audience better than seattletimes.com? Is it the strength of a national brand/audience or simply the lack of a legacy business to support?
• Record said her operation continues to grow and is looking to bring on more people to assist in the growth. So, again, revenue apparently isn’t a problem for a hyperlocal operation – if done right. Which is why big companies like Fisher are jumping into the fray, hoping to tap into some of that marketplace, a strategy Smith didn’t think was too promising. “Where’s the money?” she repeatedly asked when queried about hyperlocal opportunities.
• And even though her business is doing fine, Record didn’t think her operation should be attempted at scale by big companies, either. She cited a letter someone forwarded her from a town on the East Coast that’s the location of a new Patch.com site as an example of how a company like AOL (Patch.com’s owner) is missing the point: the letter told the resident that the new Patch editor couldn’t wait to “learn all about your community.” That’s much different than Record’s model, which grew out of already knowing all about the community.
• Bishop asked Tillinghast about the future plans for hyperlocal aggregator Everyblock, a website and team MSNBC.com recently acquired. Contrary to popular assumption, Tillinghast said Everyblock, which was launched with a $1.1 million Knight News Challenge grant, may not be integrated into the flagship MSNBC.com site but rather grown as an independent entity.

Since the audience allegedly included several investors, Bishop joked at the beginning that if the panelists, which also included 1Cast’s Anthony Bontrager, wanted to form a joint venture, they probably wouldn’t get out of the room without at least a little angel money. Mirroring the recent trend with these discussion, there is more optimism than hand-wringing, which is refreshing. After all, as I’ve often said, the news business isn’t dying, it’s just changing.

Do a couple of self-proclaimed tech guys/news junkies stand a chance competing in a crowded online news media field? While it doesn’t seem plausible, the digital age has made it possible. And sometimes, that’s enough.

In Portland, Ore., the landscape is already crowded with stalwarts Willamette Week and the Portland Tribune and upstarts Portland Sentinel and Portland Mercury battling against the Oregonian and the local TV stations for the local news audience.

Enter ThePortlander. Somehow, without marketing or promotion, it’s catching on, and catching the attention of the big boys.

Jeremiah Kastner and Jeff Martens have no experience in journalism. While the site has been around for some time, a retooled version has struck a chord recently with a growing local audience.Kastner implemented a clean, modern design in less than a week (try that at a news company) and launched it earlier this summer.

Like any good entrepreneurial endeavor, the motivation stemmed from personal frustration. Rule No. 1, after all, in starting a business is to fix your own problem.

“We were really getting frustrated with the local news options,” said Kastner, whom I first met at Digital Journalism Camp Portland in August. “We are the demo we’re going after. We are tech savvy which means we don’t read printed newspapers – it’s just not gonna happen. But we represent a huge demo rising up. We don’t fall into the typical daily newspaper readership, but we don’t go for the alternative press either.”

Think about it: The average age for a reader of the Oregonian or a viewer of local TV news is probably pushing 60. The average age for alternative weeklies, with their focus on bars and live music, is closer to 20. That’s a pretty wide gap for a new publisher to attack.

“It’s  like a newspaper, but it’s not,” Kastner said of ThePortlander. “Nothing locally caters to Generation X or Y. I looked at what the Portland Mercury and Willamette Week were doing and said, ‘they can do it, why can’t I?’”

Kastner, who says he “know just enough about coding to be dangerous,” retooled a Wordpress theme to get the look he wanted a couple months ago. Now he and Martens aggregate links to local news stories and post original content as time allows. They are recruiting local bloggers (10 have signed up so far) and looking for college journalism students as interns to help the operation grow.

They have already struck are negotiating a partnership deal with the Oregon Entrepreneurs Network and are in talks with the Oregonian about a potential collaboration, too. while it takes 12-15 hours a day to keep the site updated (it’s almost 50% original content, 50% cross-posted), the goal is to grow advertising revenues to support 6-8 people.

Technical innovations include an automatic process that posts links to new content on dozens of social networks. And ThePortlander released a functioning Facebook application last week, too.

“Here we are, no experience in journalism and we’re building a news site that is starting to rock the boat in Portland,” Kastner said. “When I look at big newspaper sites, it amazes me they’re having such a big problem.”

Granted, ThePortlander has a way to go catch up to the alternative weeklies, not to mention the big players in town. But there early success suggests there is still room in most cities and towns for new entries in the digital news landscape.

Expect to see similar flowers blossom in the coming months and years.

NOTE: The post was updated to reflect the new ratio of original vs. aggregated content (now 50/50), the number of community bloggers who have signed up (now 10), and the fact that the OEN partnership is still in discussion.

Last Friday, John Cook published a Q&A on TechFlash.com where I discussed the state of hyperlocal (and my own transition from journalist to entrepreneur). The post elicited an email from a weekly newspaper publisher who asked many probing questions. In an attempt to open up the discussion on the current and future business opportunities of hyperlocal, I asked the publisher if I could publish his comments and questions here – along with my response.

If you have ideas, questions or observations, I invite you add them in the comments.

Here is an excerpt of what I received …

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The Detroit Plan is “cutting edge, innovative and based on technology,” according to Paul Anger, who is Vice President, Publisher and Editor of the Detroit Free Press.

While cutting back home delivery to three days a week may sound more “cutting” than “cutting edge,” the plan is showing impressive results. And Anger’s presentation was among the highlights of the 20th annual Interactive Media Conference today in New Orleans.

Side note about the conference: attendance is down 27%, from 304 to 233. Some newspaper companies have had sharper declines in revenue, so all things being relative, that’s not too bad. (It’s easier to meet people and network in a smaller conference, but the sessions feel a little flat when the rooms are half empty.)

The basic business formula of “The Detroit Plan” is to use the remaining three days of home-delivered revenue, growing online revenue, expense savings based on four less days of home delivery and a fully staffed newsroom. The savings on home delivery are huge: Anger said Detroit newspaper’s trucks distributing the Free Press and Detroit News drove the equivalent of “to the moon and back” in a week’s time.

Anger also said the plan is the “good news in Detroit” in a year that the auto industry is crumbling, the mayor was ousted and the Lions went winless.

The results from 6 weeks: 3.5% of print subscribers canceled, 30,000 read the e-Editions online, 7,000 receive a print copy same-day through the mail, and traffic on detnews.com and freep.com has increased.

Anger said the company really had no choice but to make a dramatic change to its operations. The economy in Detroit is so bad and the average age of a print subscriber is 60. Not pretty.

He reported positive feedback from both readers and advertisers (while admitting it’s still very early) and announced plans to lease e-readers by the end of the year. The devices are being developed by Plastic Logic.

However the Detroit Plan ultimately fares, the company’s swift and dramatic action to take control of its future is both impressive and admirable. In Detroit, at least, the future really is now.

Smaller may be better.

The Suburban Newspapers of America held a one-day workshop and pushed through rapid-fire content from almost two dozen speakers in New Orleans today. The smaller newspapers that make up this organization are fighting the same battle as all printed media, but appear to be better positioned to withstand the economic storm that has imperiled large- and medium-sized dailies.

As a recent article from the Wall Street Journal highlights, community newspapers are being bought and sold as if they’re still worth something.

Longtime newspaper executive Michael Schroeder in January bought two Connecticut dailies on the verge of closure. Pennsylvania publisher Richard Connor says he is close to acquiring a group of Maine papers, including the state’s largest daily.

Last month, according to a person familiar with the matter, Tennessee Valley Printing Co., a family-owned publisher of smaller papers, agreed to buy a paper in Florence, Ala., for about $12 million.

Advertising consultant Mike Blinder opened the day by saying he loves this market because local advertisers need help. He also told the group of 40-50 newspaper managers that “most ads on newspaper web sites suck” and that small- and medium-sized businesses are convinced that online and digital will save their business. They just don’t know how.

Smells like opportunity to me. (Blinder’s slides can be found here if you don’t mid filling out a form.)

“Hyperlocal” is a hot topic these days, but as Carl Schindler told the audience: “That’s you.”

It is my impression that community newspapers have done a better job connecting to audiences and advertisers. As ambitious journalists climbed ladders, jumping to the next bigger paper (I did this, too), the reporters and editors who stayed developed an trust and social capital in the community that comes across in the journalism. The same goes for the advertising, which benefits from the absence of quarterly goal pressure felt by publicly traded companies.

The argument that “newspapers” are dying (or dead) needs more nuance. Big-city, corporate dailies are obviously in trouble, but publishers without huge debt loads are a different animal. Peter Conti, an analyst with Borrell & Associates, affirmed this view saying his firm’s data tell different stories for big papers (bad) and small papers (good).

I look forward to discussing this idea with workshop attendees tonight and those coming to town for the E&P Interactive Media conference starting tomorrow. (I’ll be tweeting and blogging it for the next two days.) I’ll report back if hear cofirmation or a different story altogether.

(Note: The following post is drawn from research I’m doing for my new book).

UPDATED 4/16/09 11:15 a.m.: Clarified some dates and details on the Dallas Neighbors project. Thanks, Oscar.

The Dallas Morning News launched a print-only community newspaper called Neighbors in 2005 and, two years later, turned it into neighborsgo and launched a corresponding Web site under the direction of managing editor Oscar Martinez.

The idea behind the project: offer readers a place to publish their news on a separate area of the Morning News Web site with the lure of print publication for the best stuff. In addition to the Web site, 18 different print editions were launched, each targeting a separate geographic area.

The readers responded. Editors were inundated with submissions and emails. And, the way Martinez views it, print provided the motivation for most people.

“The innovation of neighborsgo isn’t the social-media aspect of neighborsgo.com or the amount of content generated by users,” Martinez says. “It’s the resulting print product, which is a mash-up of user- and staff-generated content. Print still has an incredible power to validate shared experiences and strengthen community connections. In 2009, this is a great story for newspapers to tell.”

Another great story for newspapers is how the editors at neighborsgo have gone about getting to know their audience. As Martinez says, “Before you can mobilize an audience, you need to know who they are. More important, they need to know who you are.

“Neighborsgo editors display their personalities online and interact daily with readers across multiple platforms – including prompt e-mail and phone replies, and outreach via external social-media sites such as Facebook and Twitter. Once a month, editors meet with readers face-to-face, informally, over coffee. (A recent event featured nine editors ‘hosting’ more than 120 readers at nine area Starbucks.)”

For the Dallas news company, they have turned the concept of “citizen journalists” on its head. “In our world, editors are ‘journalist citizens,’” Martinez says.

MyCommunityNOW is a similar project launched by the Milwaukee Journal-Sentinel in 25 neighborhood areas. The basic premise is the same: leverage an inexpensive and efficient digital publishing to allow an audience to self-publish, then use the best submissions for localized print editions. The lure of print motivates the audience while the Journal Sentinel recognizes that its reporters and editors can’t be everywhere, nor can it always cover the news and events that readers want. So MyCommunityNOW provides expanded coverage in each community.

“Let’s face it, if there is a ribbon-cutting ceremony at a new grocery store in town, the odds are slim that the newspaper will send out a staff photographer or reporter to cover it,” said Mark Maley, the site’s editor. “But if the chamber of commerce president has a digital camera, we strongly encourage him to take a few shots and post it on the local NOW site. It’s providing a facet of coverage that newspapers — especially in this era of downsizing and staff cuts — often can’t provide.

“But beyond that, we are giving people a chance to actively participate in how their community is being covered and to interact with others in their community through our sites. Just as people like posting videos to YouTube and photos to Flickr, they like to similar tools to interact with other residents in their hometown.”

The lure of print helps motivate NOW contributors, but so does a little friendly competition. So NOW editors frequently send traffic reports to the 130-plus bloggers who voluntarily contribute, with the page views their posts receive and how they rank compared to other NOW bloggers.

“My favorite type of submissions are the kind that surprise the heck out of me in terms of popularity,” Maley said. “Sometimes a small, two- or three-paragraph user-submitted story about a new business in town can get four or five times as many page views as a staff-written story about the city’s budget crunch or a more ‘serious’ issue.

“I’ve found that we can learn something about how we cover a community if we pay attention to what kind of news people are submitting to us – and what people are reading online.”