How a New Jersey lawyer created a scalable model for online local news

tapinto

Recently, a New Jersey woman named Theresa Kuhns called a local gymnastics studio to reserve space for her son’s fifth birthday party. When she visited the studio the next day to sign the paperwork, however, she noticed a line on the form stating that any “special needs” children  would not be permitted to participate at the gym. Kuhns’s son, for whom she was throwing a party, has Down syndrome. After confirming with an employee that her son really was barred from the gym, she later went home and, understandably upset, posted about the incident to her Facebook profile. The post quickly generated interest, and it eventually caught the eye of Jackie Lieberman, the owner of a local news website called TAP into Westfield. “It just so happens that I was busy that evening and I wanted to do the story right away,” she recalled in a phone interview. “So I called my reporter Jill and she did a fantastic story.” Once TAP into Westfield published the piece, the story exploded, promulgating across social media and eventually getting picked up by news outlets across the state. Within days, the studio reversed its position and allowed Kuhns to hold the party for her son.

That Lieberman and TAP into Westfield were able to bring so much attention to the story is no fluke. For over a year now the local news site has become an integral part of the Westfield community and has dominated the town’s news coverage. It is just one of over 30 branches of TAPinto, a network of local community news sites that has been slowly spreading across New Jersey and even into Pennsylvania, proving definitively that scaling profitable online local news is possible.

The network was launched by Mike Shapiro, a Stanford-educated lawyer who, in 2008, had been practicing law in New Jersey and living with his family in a town called New Providence. “When my son was 1, we found out that he needed open heart surgery,” he told me recently. “I was trying to think with my wife what we could do where we could help our community and I could also see my wife and son every now and then, because working in the city and commuting back and forth I barely saw them.” Shapiro, who had always been involved in his local community, noticed that New Providence, which has a population of about 11,000 people, only had one news source devoted to it, a print newspaper that only published once a week. “I thought to myself, ‘Don’t people want to know what’s going on in town more quickly? And isn’t there a better way to do something like this?’” Shapiro had no prior journalism experience, but he thought he could offer a superior product. In October 2008 he launched what was then called The Alternative Press, a local news outlet that covered New Providence, as well as neighboring towns Summit and Berkeley Heights.

That first year, Shapiro was handling both the writing and the ad sales, attending local government meetings and reporting on them while also networking with local business owners. It wasn’t an overnight success, but eventually residents of the town began to take notice and the site amassed a following. And with that following came interested advertisers. As the site slowly generated money in its first year, Shapiro used it to hire freelance journalists to expand coverage. By the middle of the second year The Alternative Press reached break even, and by the end of that year he started turning a profit.

As the readership grew, Shapiro began receiving requests from residents in other nearby towns to launch Alternative Press sites in their communities. But he faced a problem; he knew that much of his success was owed to the fact that he lived in and interacted with his local community. In other towns, he didn’t possess this advantage, and so attempts to expand much more would create a watered-down product. “What I realized was that it’s much better if you can find someone locally to do the site,” he said. “About two years ago I started thinking that maybe what we can do is see if people would be interested in licensing. We would basically rent our platform to people, and they could start their own TAP in their own town.”

Darlene Cullen was one of these early license holders. She and her husband, like Shapiro, aren’t trained journalists, but she was a former town councilwoman for South Plainfield, New Jersey and her husband is the CFO administrator of the town. In other words, the two fit the perfect profile of what Shapiro envisioned for a license owner. The three scheduled a meeting and Shapiro went over all the topics and beats a TAPinto site should cover. “We did hit on everything that Mike suggested but then plus more,” she told me in a phone interview. “We covered everything having to do with the schools. We didn’t necessarily want to target just everything that was popular. Of course we covered football, but we also wanted to cover the tennis team, the gymnastics team, anything that anyone wanted us to cover, because we just wanted to make sure we were bringing joy to the town.”

TAP into South Plainfield launched in June 2013, and Cullen told me that by September she knew they were going to be successful. “I would say within the first month we had three advertisers that came on board,” she said. “They knew us from the town and they knew we were definitely people who were movers and shakers, and that if we were investing our time and money into this product then it would be successful.” One of those initial advertisers now places ads across 13 TAPinto sites, bringing in significant revenue for the company.

She and her husband Glenn remain at their full-time jobs (she’s a bank executive), and so they split up reporting duties at night. She attends every town council meeting and he goes to as many local sporting events as humanly possible. The rest they divide up among freelancers.

How does TAPinto generate revenue? Unsurprisingly, it offers banner advertising, but it incentivizes advertisers to sign up for year-long contracts. Once you have, you gain access to a bevy of benefits that in all probability outweigh the positive effects of the banner ads. “If they have a 12 month contract, with that they have a lot of service,” said Lieberman. “I write a feature story about them —  that’s their advertorial. We promote them on Facebook and Twitter. And throughout the year I’ll keep in touch with them. I ask what’s going on, do you have something interesting I could write about.” Year-long advertisers also receive their own column in the newspaper, and they’re allowed to have as many listings as they want on the weekly events page. Does this all sound familiar? TAPinto has essentially erected a highly effective native advertising platform that’s led to an advertising renewal rate of about 85 percent, according to Shapiro.

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mike shapiro

Mike Shapiro

Though Shapiro was able to start scaling the company via licensing, he was still experiencing growth pains — it turned out that it takes a lot of energy and training to get a new TAPinto site up and running. So in order to scale more effectively, he switched the company over from a licensing model, where participants paid a monthly fee, to a franchise system that allows someone to purchase and open their own site. “The main difference is that we can provide unlimited support,” he explained. “Another is that they actually own the business and they have the right to sell it at a later date.” Now that the publishers were fairly autonomous, they could focus on the content and ad sales while Shapiro took care of all the infrastructure — website upkeep, billing, running the ad network across all sites, and training new recruits.

Shapiro described the growth of the TAPinto network as “exponential.” In the past year, he said, the sites generated 2.8 million unique visitors, and in September they saw a combined 1 million pageviews. His success has come as some media pundits have written off online local news as unscalable. To be sure, there’s no shortage of failed local journalism startups, the most widely-cited being AOL’s Patch, which AOL CEO Tim Armstrong finally gave up on earlier this year, laying off hundreds of Patch journalists.

TAPinto actually competed with several Patch sites from the very beginning. “The first sites that launched were in South Orange, Maplewood, and Milburn,” he said. Milburn just happened to be one of the early TAPinto sites. “When they launched, we didn’t know they were owned by AOL. They started to expand to other towns in our area. By the time we learned they were owned by AOL, they’d expanded all over the country and were spending hundreds of millions of dollars. We said well, we can’t compete in terms of their money or their staffing, but where we can compete is we can try to put out the highest quality local news, and let’s make that be kind of our main objective.”

Why did TAPinto succeed while Patch failed? Well, for one, TAPinto’s growth was much more organic. It would start in one community, grow in influence, and then by the time it spread to a nearby town it already had some name recognition (this sounds familiar to how Facebook originally spread, opening up to one university in a state and then spreading to surrounding universities once it had become firmly entrenched). Patch seemed to drop into communities at random, chosen because of some combination of demographics and business concentration. “We leave it to the franchisee to suggest their territory to us,” Shapiro said. “In some cases it’s one town, in other cases it’s a cluster of towns on one site because they’re all in the same school system and it makes sense for these towns to be together. We didn’t use some algorithm to decide that. We actually put it in the hand of the potential franchisee who suggested their territory to us.”

TAPinto’s most important feature, however, is that it relies entirely on local reporters. In the case of Patch, sometimes an editor lived in the town he was covering — and those Patches tended to do well. Remember that 10 percent of Patch sites were profitable — but just as often he could live 40 minutes away, and that seemingly short distance made all the difference. “It was an  employee who didn’t necessarily have any connection in that town,” Shapiro explained. “And they weren’t invested in the success of the site. They could be laid off at any moment.”

Perhaps Patch’s biggest drawback is that it sat underneath a corporate behemoth, and so lacked the nimbleness needed to find its niche. “We have literally no bureaucracy,” said Shapiro. “One thing that hurt AOL is that their overhead costs for just administration was something like 40 percent. Here, it’s next to nothing. It doesn’t take a lot for a TAP site to be profitable. If they sell two or three ads, they’ve paid their franchise fee and more for the whole year, anything after that is profit.” TAPinto also doesn’t have impatient shareholders, many of whom are looking for some quick growth so they can flip their investment.

Of course, the more a company grows, the more essential that bureaucracy, however unwanted, becomes. For now, Shapiro can place nearly all his focus on improving the reader experience. He’s about to launch a new version of the site; one of its features will be that it’ll remember which town you’re from and will always revert to that town’s TAPinto site.

As for revenue, the company is a shining light in an industry that’s seemingly faced decline: the local newspaper, the kind that sends reporters to government meetings and covers the nitty gritty ins and outs that are increasingly ignored by besieged print newspapers.

To be sure, nobody is making millions of dollars from these sites, but then again that’s not why most journalists get into this business.

“I’m making a decent amount of money,” said Jackie Lieberman. “And as a journalist, that’s a hard thing to do.”

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