Backfence Update With CEO Susan DeFife
Backfence may be the biggest laboratory out there for community networks. It reads like a newspaper written by citizens, and its hyper-local coverage features community-by-community Yellow Pages, special sections, business reviews, event calendars, classifieds, blogs and user-generated photos.
The company raised $3 million at this time last year from SAS Investors and The Omidyar Network, and has been spending it for all to see, moving beyond several suburbs in the Washington, D.C., metro to similar locales in the Bay Area and now Chicago as well. There are 13 Backfence locations in all and more to come.
It also has been attracting some high-profile talent from the social network scene, including Andy Vogel from The Journal Sentinel in Milwaukee, and Darian Patchin from Tribe Nets and Homestead. At the same time, Backfence recently lost cofounder Mark Potts, a pioneer in social nets with The Washington Post and other companies, who has gone back to consulting although he remains on the board.
In the wake of Potts' departure, I asked CEO Susan DeFife to update me on the company's progress. “We set out to prove three things,” she says. “That the community will come. That they'll buy advertising. And that the sites can scale.” Based on those criteria, the company is succeeding.
Usage-wise, DeFife says that more than 10 percent of local residents in the site's communities are logging on, and 1 percent are posting. “We don't have as many posts as we'd like to have,” but the site has made real inroads in its communities, she says.
As for sales, “We've been selling since April, and have 360 local advertisers,” says DeFife. The advertisers are spread among its localities, with most in the D.C. area, where Backfence has been operating the longest. Of the charter advertisers, 80 percent are display advertisers. The average value is $540, and the majority of these 69 percent have entered into long-term, 12-month contracts. Some are longer. The other 20 percent are Yellow Pages, which pay $120 per year.
By my calculations, that means the site now has 288 display advertisers, with annual revenues of $155,520, and 72 Yellow Pages advertisers bringing in $8,640. The total adds up to $164,160 not bad for a start-up.
“Businesses have proved very receptive to the advertising. It is very affordable,” says DeFife. But the company has learned some important lessons along the way. One is that a hyper-local site had better be scoped along hyper-local lines. “Arlington hasn't done as well as Bethesda because it is a bigger area,” notes DeFife. “Arlington is actually (four) communities Clarendon, Ballston, and North and South Arlington. It shows us what (is likely to) happen when we go into counties,” and that it’s important to keep the hyper-local focus.
A test of a county-wide mission, in fact, is coming up, as Backfence has formed a media partnership with The Loudon Independent, a new tabloid-style newspaper serving eastern Loudon County, a fast-growing exurb of the D.C. area. The newspaper has a circulation of 65,000. Under terms of the deal, Backfence will feed the paper’s Web site with stories and services, and will receive promotion in return.
DeFife says the company is experimenting with additional forms of promotion as well. “We have search engine keyword buys, and we're testing some things. Advertising on movie theater slides in Reston, for instance. The slides flash three times before feature movies. In the Bay Area, we have coffee sleeves. And in Chicago, we're testing Backfence branded ice scrapers.”
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The hyper-local strategy certainly has growth potential. Too many companies looking at global domination. Regional/Local websites might garner more coverage since they allow advertisers to drill down to the local level. Our strategy is similar by having a regional front door at http:www.southland.la/ that contains classifed ads at the regional level and 200+ city urls (with a handfull of subdomain urls) that contain classified ads at the city level. See small sample below. Local opportunities are starting to look more interesting.
http://www.southland.la/ (regional classified ads in Southland)
http://www.anaheim.la/ (city classified ads – Anaheim)
http://www.burbank.la/ (city classified ads – Burbank)
http://www.longbeach.la/ (city classified ads – Long Beach)
http://www.losangeles.southland.la/ (city classified ads – LA)
http://www.malibu.la/ (city classified ads – Malibu)
http://www.orange.la/ (city classified ads – Orange)
http://www.pasadena.la/ (city classified ads – Pasadena)
http://www.riverside.la/ (city classified ads – Riverside)
http://www.sanbernardino.la/ (city classified ads – San Bernardino
http://www.santamonica.la/ (city classified ads – Santa Monica)
http://www.ventura.la/ (city classified ads – Ventura)
"By my calculations, that means the site now has 288 display advertisers, with annual revenues of $155,520, and 72 Yellow Pages advertisers bringing in $8,640. The total adds up to $164,160 — not bad for a start-up. "
Not to be negative, but by MY calculations that adds up to approximately $13,000 in annual revenue per BackFence site. They are obviously spending a lot more than that on each site, every year, on staffing alone. $164,160 is one site manager’s salary!
I get email from BackFence, and I look at their on-line paper. While the editorial is ….OK, I don’t see much prime space available for more ads on the site’s pages. It’s definitely VERY limited. Plus who knows if the current advertisers will renew when they are told the "real" rates, as opposed to the "introductory" rates they are no doubt paying now? I just see red ink all the way out.
And what happens in a year or two when the newspapers finally pull their heads out of the sand, copy BackFence and build their own micro-sites in their back yards? Newspapers have massive promotional ability, can cross-sell into their other media properties, and have a highly experienced sales force. If BackFence ever starts making money in a market, the local monopoly newspaper will simply build its own microsite(s), offer BackFence advertisers their ads for free, plus a discount in the print product or for ads on the paper’s primary website and that’s the end of BackFence in that market. Gone in 60 seconds.