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The vision for Hyperlocal — if you believe in it — boils down to two camps. The first camp says it is a labor of love that must be hand-curated to work with merchants and engage the citizenry, town by town. Perhaps sites can use shopping and other directory tools, like Local Thunder and ShopCity, to tie things together and scale.

That’s The Batavian for you. GoLocal24. The Magic City Post. And Baristanet. That goes for hypervertical sites too, like MedCity.

The second camp says that that the only realistic and scalable opportunity is in a centrally managed operation, providing tools, strategy and branding. Local managers and writers — and sometimes local media brands, for credibility — might also be involved. With 864 local sites, that’s what AOL’s Patch is. And on a smaller scale, Main Street Connect and DataSphere.

Some people think of these sites as money holes, suffering very high churn from very needy SMB customers, and very small, fragmented audiences. Others think they have the kind of vision that will lead to real success.

Today we focus on DataSphere, whose funding has now reached $32.5 million, with an $8 million infusion this week by First Analysis as well as existing venture capital partners Ignition Partners and OVP Venture Partners. Fisher Communications, the northwestern TV station group, participated in earlier rounds.

DataSphere’s been working with TV stations around the U.S., using their brands and promotional capability to sell services to local SMBs. For the TV stations, these are all new dollars — the TV stations don’t traditionally sell to them.

To work with DataSphere, the stations (and other media partners) essentially had to reach the conclusion that they were never going to attack this market themselves, and that they didn’t mind splitting revenues they would not have otherwise made. These are probably fair assumptions: more so for a TV station than a newspaper.

In a recent discussion with us, SVP Gary Cowan said that DataSphere has found a sweet spot with SMBs, focusing on expertly targeted coupons and other features to show “clear and demonstrable value.” The coupons are broadly distributed, not only on local landing pages, but across a larger network of relevant sites, such as

The company now boasts 100 media partners, and its ads are now targeted across more than 1,900 neighborhoods. Gannett, Fisher and Meredith are among its largest customers. It has 420 employees overall, mostly sales, and the majority of them work phone banks in Bellevue, WA, and Tempe, AZ.

Hyperlocal is a core focus at ILM East, which features AOL Local’s Mark Josephson, consultant Merrill Brown, Main Street Connect’s Zohar Yardeni, GoLocal24’s Josh Fenton and Fisher Communications’ Randa Minkarah. Register here.

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  1. The scalability of hyperlocal news operations that believe relationships drive true online community engagement are tied in large part to lack of funding. In the ‘hard work’ camp, you’d be very hard pressed to find a hyperlocal news operation that is either highly leveraged or has taken on debt/equity funding. These are bootstrappers, and many of them came from the journalism track (perhaps working in digital) in traditional media that was highly leveraged. Maybe they learned a lesson or two in that. Many of them certainly know how to scale from working at those operations.

    When the right type of funding does become available to hyperlocal bootstrappers, it’s going to be quite interesting to watch what happens because I’m convinced that you can’t be sustainable without the relationships (and the job is quite boring without them too).

    Newspapers (& radio, & tv) weren’t just disrupted by a change in consumption (i.e. the internet). It was a cultural interruption tied to the view that maximizing shareholder value alone doesn’t get you to where you need to be anymore, and many still don’t realize this. Maximizing stakeholder (employees, advertisers, audience, community) value is something that the bootstrappers in hyperlocal news operations understand quite well. It’s the funding community that needs to be educated to these changes so they make smart decisions about where to put their cash.

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