Yes, our work assumes that “in a metro market of 5 million people, the hyperlocal network will be able to get 1.75 million readers (35 percent penetration) in Year 1, growing to 3 million readers (60 percent penetration) in Year 3,” as TechCrunch points out.

That would allow a large blog to increase its gross revenue from $126,976 in the first year to $331,640 in the third, while growing its net income from $42,277 to $148,269 in the same period — assuming that staffing costs will also increase. Some sites are already coming close to those figures without optimization and efficiencies we believe ad networks and the framework would provide. Click here to view the Hyperlocal & Framework models as a Google Document. Be sure to click on the Revenues for Blogs and the Income Statement for Blogs tabs at the bottom of the spreadsheet to view all figures related to this post.)

We’ve compiled our numbers for each market size based on several revenue opportunities, including advertising, business-to-business services and e-commerce. While not all of these opportunities would work for all sites, our team found enough revenue models to support our assumptions.

And from what we’ve been reading, there is certainly strong interest in hyperlocal news these days. See the PBS Engage/Knight Commission online survey about community information needs published in April, as well as our post on ESPN going local. As a final note: to cover the largest targeted readerships we extended the taxonomy of hyperlocal to include vertical sites such as music, food, sports and mom blogs.

Again, we welcome readers to play with these numbers and see what they can come up with. (The New Business Models for News Project has been funded by the Knight Foundation.)

Download the Hyperlocal/Framework Excel file here.

What have you done to build your advertiser roster?
We’re involved in the chamber of commerce; we joined more than a year ago. We sponsor a number of community events. It sounds mercenary, but there’s a lot of ways that you end up networking out of those. We run a banner on a local foot ferry to downtown Seattle.

We offered a free seminar to help businesses interact with their customers on the web. It wasn’t an advertising pitch, we provided some basic information like setting Google alerts so you know if your business is being discussed someplace on the web. Way before you get to Facebook and Twitter, that’s something that a lot of people don’t really know a lot about.

So, how much hand-holding do you end up doing with your advertisers?
That’s my husband’s full-time job. He explains how this is going to work and how we’re going to build a relationship with the business.

I have this disagreement with several people here—we don’t believe people are ready for self-service advertising yet. In some contexts they are, but a larger portion need service. I’m not being stupid like the travel industry that said people are always going to need travel agents. It’ll get to the point where people are ready for self-serve, but it isn’t there yet.

We have learned over the year and a half to better explain to people upfront, before they ever make a commitment, what this is all about and how it might work for them. This is display advt, this is not click-through, this is not conversions.

Overall, as the site gains more of an audience, it becomes something that people are proud of, they say I want to be part of WestSeattleBlog.

Also, when people join, we offer them the chance to have a little advertorial story published, just a couple of paragraphs and a picture. We thought the most interesting reaction came from readers who say it helps them learn about local businesses they didn’t know were here.

What is the big challenge, the big obstacle, you’d most like to get over?
It’s been a struggle invoicing and we’ve just hired a part-time bookkeeper, because it’s clearly getting beyond something we can deal with ourselves. If you try to do that too, besides dealing with clients and covering the news, it just gets out of control.

But, the next obstacle is finding additional advertising opportunities on the site without clutter.

We’ve had inquiries about sponsoring certain parts of the site, but right now it would require some design work.

We also want to be fair. We’ve set up a first come, first served positioning. And to say we’re adding a feature at the top of the page that is a sponsored traffic camera, do we need to tell all 60 advertisers that we have this opportunity and we’d like to offer it to all of you?

People on the business side would say, “Don’t worry about that, we’ll build enough inventory to provide other sponsorship opportunities and that’s the fairness.”
Possibly, but it’s the same challenge that I’m sure our parents faced in running their small businesses. We’re at that point where you know you are going to have to broaden the fold, to bring in someone, whether its on the business side or a Saturday editor, and that person is going to have some thoughts and some ideas. You know it’s not going to be just your little thing anymore.

We know that we’re at that point and we’re trying to figure out the right way to go about it. We feel blessed to get to that point.

You’ve provided a deep dive into your editorial process elsewhere, but do you use citizen journalists to provide coverage of certain events?
It’s a point of pride for us that we don’t ask people to do this volunteer, which even the local newspaper apparently does. If you’re going to write something for us then we’re going to pay you. So, if there’s something that needs news coverage that’s what we do, or we’ll pay a freelancer.

When it comes to reporting something you saw, either crime reports or a little league game, we have a fair amount of that. But, what we don’t do is say “here’s an upload tool, come and give us your stuff automatically.” All of it is done with actual human contact or via email where we write back to say thank you or to ask follow-up questions.