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Check out www.Hoboken411.com for another example of a vibrant micro community.
thing is, the community could be vibrant and the citizen reporting could be great, but it doesn't make up for the fact that many cit j sites are looking to create revenu *only* from advertising. At first blush it looks like there's less overhead for online, and the ads can be less costly than for print. But the thing is, most ads generate only pennies per click (that is, unless you find a great way to commit click fraud).
Many free small-town print pubs have other revenue streams from other services to support their ad revenue. This makes complete sense for any small, independent venture (most freelance writers, too, are encouraged to have more than one revenue stream.)
I hate to see Backfence fold, but I think its problems only highlight basic problems of trying to create sufficient sustainable revenue from a free, hyperlocal product with only one revenue source.
Some communities might even be able to get away with tiers of service, with some subscription content. But I still think having a strong community is the most important thing, and that everything else flows from that. Thanks for the comment.
One of the local newspapers out here in Western Mass, the Daily Hampshire Gazette has put all its content behind a pay wall. I'm not sure how its effecting their bottom line, but I do know that some friends have converted print subscriptions to online.
So, that can work--but right now is working only for converting a print product to online...
But I think that hyperlocal c.j. sites have to be thought of in the same way that many "personal" blogs are thought. They will have readership, but because they're very niche, the readership will be limited. Not every hyperlocal site can be TechCrunch the way every "personal" blogger can't be Dooce. :-)
(btw, I just posted on the issue at my blog)
At E-Democracy.Org, we've been hosting very active online local Issues Forums for over a decade with extremely limited resources. We are now in seven communities in Minnesota and England. Our model starts with the low low cost "forum" at the center including a local volunteer forum manager and steering committee (think Rotary) and builds out from there. See: http://e-democracy.org/if
I think the starting point for local citizen media should be what can you do online for almost nothing that is sustainable and engaging. Then build up from there as your grow your participatory audience. Starting first with "news" the generates ad revenue might be the wrong starting point.
Steven Clift
E-Democracy.Org