Shopping for the perfect niche market? Consider a small town
For publishers looking for their next niche start-up or acquisition, a list of small towns may be a great place to start. As Ryan Dohrn, CEO of Brainswell Media, put it, “The smaller the niche, the more valuable it is.”
But which niches can support successful media launches? Factors include size (smaller can be better), exclusivity (lack of competition), revenues per advertiser (higher CPMs), growth (rising total spend) and, of course, the management team (leveraged for additional opportunities, either vertically or horizontally).
One of the hardest niches to find and occupy, but also one of the most satisfying, is hyper-local media. There is much to learn from what we know about very successful niches in very small towns.
Our sister company, LocalMediaInsider, explored the phenomenon and concluded that economic factors, in addition to market size is also important.
Entrepreneurial family-owned businesses with close ties to the local community did better than media owned by public companies.
Other locational aspects include the ability to centralize operations: Is there a drivable radius to centralize sales and the ability to lower costs by sharing a news bureau, distribution, and/or printing facility?
A start-up in a contiguous small town may produce only a few hundred thousand a year but have a 50% margin, as Carolina Marketing Company found when they launched a fourth lifestyle publication, Topsail Magazine, in 2020, at the height of the Pandemic.
Exclusivity is key, and that includes not much competition
One thing local media share with verticalized niche media is often a lack of competition.
The lack of supply alone produced a higher Cost Per Thousand (CPM). A magazine that targets an exclusive audience – heart surgeons are often used as an example – can charge a 10x premium. The same priniciple holds true in local markets.
Local advertisers have smaller budgets but an interesting whole-dollar sensitivity based on their revenue size. They may be able to pay $250 for a quarter page – to reach the whole town, whether that reach is 10,000, 20,000, or 80,000 people. So smaller gives the local media an advantage, and tiny-town media remain affordable to advertisers.
Put a few publications together, and it can be a high-margin business.
Strong economic factors
Once the advantages of exclusivity are factored in, what makes one tiny town, county, or city a better media market than another one?
How much of a media company’s success is management versus market? Is it nature or nurture?
First, let’s look at nature.
In the hyper-local universe, Thad Swiderski, president of Etype Services, which provides platforms for 500-plus print media, mainly in towns with less than 20,000 people, says he sees newspapers thriving in two kinds of markets. Let’s call them edge cities and big, small towns.
“I think of San Marcos, Texas; Norman, Oklahoma or Lawrence, Kansas. Those are edge cities where people leave the (metropolitan) city and move to new suburban areas 30 to 50 miles away. These regional metro centers are growing.”
And then there are the big, small towns. “You would know that Wichita is the big city in Kansas, but Salina, about 100 miles west of Topeka, is the big boy in the central part of the state.” The population there is just under 50,000 countywide.
These small cities in the heartland also have what researcher Gordon Borrell calls “an interesting exclusivity” that is hard to fathom in a big city with multiple media options, including several radio stations, TV channels, and a big-city daily.
But something more than size makes Youngstown, Ohio, whose daily failed, different from Vail. The calculations are not always simplistic.
Bill Fruth, an economic consultant and owner of Politicom, has created an index to rate the best small markets with more than 10,000 and less than 50,000 residents (that number, by the way, is a somewhat arbitrary size criteria developed by the U.S. Census Bureau to define a micropolis).
Fruth claims the most important factors is “money flowing into the area” for whatever reason. He subtracts points for social service dependencies – such as retirement areas dependent on smallish social security checks – and considers the core unit in his methodology to be not population growth or even jobs per se, but ¨what people earn.”
The type of growth is essential, he says. “If you create a million minimum wage jobs, you will not have helped the economy. It’s not enough to live on, so (local governments) need to subsidize those people. But the impact is enormous if you create $100,000 a year jobs.”
Cities with cheap land can also attract quality corporations to move in. At the same time, coastal towns like St. Petersburg, a boomtown built on a peninsula in Pinellas County, Florida, with a population of 280,000, may not sustain continued long-term job growth simply because there is no place for new companies to build. Fruth said companies there must expand in an edge city, further towards Orlando, with its sprawling suburbs in the middle of the state. “I know; I used to work for Pinellas County,” he said.
Retirement destinations like Martin County, Florida, where Fruth now lives, also do not rate high on his scale. “Social Security and Medicare are the biggest importers of money here, but that creates low-paid medical service and retail jobs,” he said. “Wages in Wooster, Ohio are three times that of wages in Martin County… We haven´t had a new company move here in two years.”
Dickinson, North Dakota, on the other hand, hit a top spot in the index when they struck oil and gas, literally. The oil production discovered in the Bukkan formations beneath the state in 2006 was extended by horizontal drilling and fracturing innovations, peaking in 2013. By then, the state, with a population of about 725,000, had amassed a billion-dollar budget surplus and an income 29% above the national average.
Top-ranked Wooster and Bozeman did not have oil but an aggressive economic development plan to attract industry. In Wooster, it was primarily manufacturing. In Bosemen, it was tech.
Boseman is still at the top of the list in 2023, along with Heber, Utah, and Lebanon, New Hampshire/Vermont.
“San Jose, this is not,” begins an article in Fast Company on the tech boom in Bozeman, but points out lifestyle advantages – the scenery, the skiing, the shorter commute. “It’s only 15 minutes to get anywhere in Bozeman,” one exec pointed out.
The Bozeman Daily Chronicle is part of the acquisition strategy of a local media success story largely unknown outside of the local media industry; Adams Publishing Group – APG as it is colloquially known – a start-up founded in 2014 by Mark Adams, the third-generation scion of a newspaper family, long after the great recession chewed off another massive chunk of a shrunken industry. Since then, APG has quietly purchased 170 small weeklies and dailies, including the Boseman Daily Chronicle, The Dundalk Eagle, The Cecil Whig (Maryland), and the Pike County News Watchman (Ohio).
President of APG West, Eric Johnston, told LocalMediaInsider that APG’s acquisition choices are loosely based on market size and quality – a university, a corporate headquarters, or a county seat is a plus – a good relationship with the community and an in-tact newsroom, i.e., one that a public company has not gutted.
Ultimately, it’s clear that nature is winning the nature versus nurture battle regarding market success.
One publishing executive discussing the issue Gordon Borrell on LinkedIn commented,“Do you think papers in Vail and Jackson Hole are better managed than those in places like Warroad and Youngstown? That better-trained salesperson would have saved those newspapers? Because I can think of some other differences between those communities.”
Borrell replied that not every great local media market has a ski resort.
“While many resort communities top the list for healthy newspapers (Florida and Colorado come to mind), it’s not always the case. Many other healthy small towns have healthy newspapers likewise. They have an interesting exclusivity that seems forgotten if you don’t live in the heartland.”
“Where else can you find out who died, who’s kid made Eagle Scout, who just got engaged, and what the Lieutenant Governor said at the Garden Club luncheon last week? Facebook? Google? The local radio station?”
Whether it’s Heart Surgeon’s Journal, Vale Winter Sports, or The Mariposa Flyer, the central ingredients remain the same: An exclusive audience, and delivering information that they can’t find anywhere else.
