Local news cooperatives are now in development in San Diego, Chicago, Hawaii and San Francisco. The latter, known as The Bay Area News Project, is building up with a $5 million investment from philanthropist Warren Hellman, who apparently thought it would be a better idea to start fresh than buy The San Francisco Chronicle.

According to an article by James Rainey in the Los Angeles Times today, the 15-person BANP (a placeholder name) envisions potential revenues of $12 million a year with a four-pronged strategy developed by CEO Lisa Frazier, a former McKinsey consultant who is getting paid $400,000 a year.

Revenues are expected to come from multiple sources, including public radio style members and syndication payments from news outlets that use the project’s content. The New York Times, for instance, has lined up to run stories twice a week in its Bay Area edition (as it has in Chicago as well).

The site has snared New West founder and Industry Standard Editor Jon Weber as its editor. It will rely partly on paid interns from UC Berkeley, and is operating out of donated law office space. We’ll follow it — and the others — with interest. With enough of a bankroll, and much lower costs, there is no reason why these sites can’t compete against newspapers, win new types of users and advertising, and save the day for journalism.

A couple of stories caught my attention today. First, Reach Media Group (RMG), a digital out-of-home company that we’ve previously written about, signed a deal to push New York Times content to its network of 800 coffee shops, cafes and eateries in New York, Los Angeles, Chicago, Boston and San Francisco.

According to the press release, RMG’s digital place-based network (formerly known as “Danoo”) has been entirely re-envisioned to emulate the familiar, trusted design of NYTimes.com. We think this move will add considerable credibility to the fledgling network. It can offer a more compelling content experience (assuming you find the NYTimes content compelling) and ultimately, a more legitimate advertising sales proposition.

For some time now, we’ve said that digital out-of-home or digital place-based advertising models will develop rapidly over the next five years. But this scenario relies on the consolidation of the market, more standardized advertising options, and more targeting and mobile content connectivity.

We think we’ll get there. The potential for consumers to view condensed content on a screen and then connect to www.NYT2day.com for the full story offers advertisers a proxy for performance, and the user a simple way to more fully engage in the content.

The second interesting story today comes from The Omaha World Herald, which reports that New York equity firm CCMP Capital Advisors has made an offer to purchase Omaha-based InfoGroup — formerly known as InfoUSA. A deal like this has been expected since late last year, when the company hired an advisor to essentially find a buyer.

According to The World Herald, the sale of InfoGroup has been supported by Vin Gupta, the company’s founder and former CEO. While Gupta is no longer an officer of the company, he still sits on the board of directors. In our view, InfoGroup’s sale makes good sense for the company and the shareholders. Taking it private will enable the company to continue its re-branding process from InfoUSA to InfoGroup.

For years we’ve been asked by companies around the globe if InfoUSA or any of its competitors offered similar business listing information. Shifting the name to InfoGroup would certainly enable the company to expand it offerings beyond its current borders.

Should this deal be finalized, it would presumably be the end of Gupta’s involvement, active or passive, in the company he founded almost 40 years ago with $100 and the vision to compile, aggregate and verify the names, addresses and telephone numbers of millions of businesses in America. Certainly, it has been a difficult job. But Gupta and his pioneering colleagues can proudly take credit for delivering hundreds of millions of qualified leads to SMBs.

Wired on the iPad, via All Things D

Next month, Apple’s iPad comes out (and I will buy one). But what will be the impact of iPads and tablets from other companies on traditional media? Many are considering it to be the new magazine form factor. In theory, the iPad would make online ads compelling, and better enable digital subscriptions and a la carte buys. Wired Magazine, for one,  has been showing off a good-looking prototype. I highly recommend this video from The Wall Street Journal’s All Things D site.

Newspapers will look great, too. Look at The New York Times’ demo. My guess, however, is that the iPad’s impact on newspapers’ bottom line will be marginal for several years — and then, it may be too late. While the iPad should have excellent introductory sales, most sales will likely be low-end units without communications, so their usage will be mostly home and coffee shop based. Low-end units, limited to Wi-Fi Internet, are $499. Wireless Communications adds $130, plus $30 a month. Wi-Fi-only won’t provide a big lift to newspapers, because it doesn’t get the product onto commuter trains.

Newspaper companies, of course, are better positioned to participate in the mobile revolution than a year ago by virtue of their vertical properties, such as Classified Ventures’ Cars.com and Apartments.com. Both are “on the go” media sites that allow users to get information on a 24/7 basis, but more importantly, while they are out and about shopping for their category.

Other newspaper niche sites, like The Envelope from the LA Times, bring newspapers into an entirely new domain with the addition of online App games based on news and entertainment. These might ultimately play a role in the transformation of newspapers.

For now, I’m not counting on significant advertising or circulation revenues to develop for newspapers directly because of their investments in tablet devices, or mobile generally.

The debate about the future of journalism reached the height of silliness last year when journalist turned banker Steven Rattner suggested that The New York Times be subsidized by the government like the BBC. But the economics of journalism has always driven the format, aside from journalistic labors of love ranging from penny savers in colonial times to hyperlocal blogs today.

As recounted in Ken Doctor’s valuable new book, Newsonomics, “the institution of American journalism owes more to the institution of the department store than the First Amendment” — a 1988 comment attributed to Knight Ridder exec Jim Batten.

But what’s happened? The department stores have consolidated and shifted much of their marketing; big chunks of paid classifieds have been Craigslisted; and the circulation (audience) has increasingly moved down the slippery slope to a potpourri of “continuous partial attention” news channels. Indeed, the details found in newsprint aren’t always especially sought after. As Doctor notes, just 44 percent can be bothered to click past the headlines in news aggregators like Google News to get to the original source.

Dead. Dead. Dead. Nobody in his right mind would plan a future at a newspaper or TV news broadcast anymore, right? But then there is this inconvenient statistic: Applications to journalism schools have more than doubled in the past several years — even with tuition bills exceeding $50,000 at the elite institutions.

For the journalist who will pursue his or her avocation, plentiful options exist, notes Doctor, a former Knight Ridder Digital exec and publisher at newspapers and alternative weeklies who currently does analysis for Outsell and writes the Content Bridges blog. The solutions are structured in the book as “twelve new trends that will shape the news you get.”

The trends are right on and more than familiar to our BIA/Kelsey audience (“Itch the Niche!”). But happily, Doctor avoids the blue sky and covers the bases with the aplomb of an all star. His comprehensive review, interesting detail and demand that the relationships between business and journalism be creatively re-explored make this a valuable book for those who care about the future of journalism, and its critical role in democratic societies.

EBay founder Pierre Omidyar  and former eBay VP Randy Ching are setting up a local public affairs and civic news site in Hawaii, where Omidyar lives, according to a post on Omidyar’s blog that was picked up by paidContent. Former Rocky Mountain News Editor and Publisher John Temple has been hired as its editor, and the site is being advised by former McClatchy VP of News Howard Weaver.

Omidyar, the French-born engineer whose brainstorm that there wasn’t an easy way to sell Pez dispensers led to the creation of eBay, said the site was only in “early planning stages” but will debut in 2Q 2010. A central goal is to prove that local news is sustainable.

Omidyar is hardly new to grassroots local media efforts. The Omidyar Network, a foundation, has been an investor in BackFence and Dan Gillmor’s Bayosphere, and also was a sponsor of The Media Giraffe Project in 2006, among other activities.

Weaver, in a blog post of his own, says “the new venture intends to demonstrate that a digitally native, technologically fluent web organization can profitably serve targeted readers who want sophisticated journalism focused on local civic affairs.”

Digital media is more cannibalistic than complementary and is seriously eating into the demand for traditional news sources such as newspapers, TV and news magazines, according to the third annual survey of news users done by Outsell Inc.

The survey findings are based on almost 3,000 consumers and are fully detailed in Outsell’s “News Users 2009” report, written by former Knight Ridder executive Ken Doctor. It essentially pours water on hopes that online traffic from Google and other news aggregators represents new growth opportunities for traditional publishers that ultimately outweigh any cannibalism. In fact, 44 percent said news headlines on aggregator products such as Google News suffice in themselves.

Indeed, such aggregator products are increasingly competing with traditional news products as primary “morning” news sources. They’re tied with newspapers and catching up with TV, which leads with a 30 percent share, a drop-off from 36 percent three years ago.

Long-term trends may be worse than the broad numbers suggest, as a segmentation analysis by Outsell found that “Power Users,” who represent slightly less than half of the market, are increasingly relying more on digital products. These users have “omnivorous” appetites for news, simultaneously serving as core newspaper subscribers while relying more heavily on news aggregator products.

Outsell, however, found they are spending less time with print publications. Moreover, they are increasingly inclined to drop their newspaper subscriptions.

“It’s worth watching the trends set by power news users — they tend to foreshadow where all news usage is moving,” notes Outsell. “The daily newspaper and news magazine habit is quickly ebbing.”

The survey also suggests that paid content may not be a panacea — something that The New York Times is betting on, as it implements plans to move to paid online models in early 2011.  Analysts (like me) would argue that The Times exists in a class of its own as a news source and may prove the exception. Another industry hope –shared by Apple, Amazon, HP and others — is that large computer tablets might entice people to pay for a la carte or subscription content.

Without thinking about the exceptionalism of The Times, or the future of tablets, 75 percent of news users told Outsell that they would get their local news from a different source if a pay wall was put up. Only a small minority said they would be willing to pay for some type of paid content (i.e., online access included with print subscription, online-only access or some other type of “press pass.”).

When the time comes, however, many users will surely reconsider. Just look at the evolution of pay per call, and more recently, paid iPhone apps. None of this, however, undermines the challenges that traditional media face with/and against Google and other digital sources.

Neil Budde of DailyMe and Mike Orren of Pegasus News helped the ILM:09 audience understand what it takes to offer a truly customized news offering that is engaging and relevant.

One of the key takeaways both Orren and Budde discussed was the idea that not everything can or should be customized on the news site. Orren pointed out, “if we customize too much for the customer we take away those items they might stumble upon and become interested in following in the future.” Early days of customization meant sites were built and rebuilt for users as their choices and interests changed, requiring more administration and oversight to make things work effectively. One of the side effects of too much customization is that people were not aware of the level of customization, which took away from users promoting the value of the site to others.

Behavioral tracking is a necessary level of customization as people often say one thing and their behaviors might suggest another. Orren joked that “some people say they like champagne and opera then do searches on cheap beer and honky-tonks.” Without behavioral tracking the site would not have the flexibility to react and adapt to new interests. Budde added “there needs to be a mix of traditional editorial that is constant with personalized choices and behaviorally driven content to make it relevant and valuable.” Behavioral targeting is also valuable in advertising delivery not only for consumers to see items of interest but in more specific targeting for advertisers to reach those who might be more engaged in their products or services.

Orren pointed out, “the goal is to reach those consumers with high levels of interest and engagement to drive more value to advertisers in the way of sign-ups, redemption or attendance.”

Editorial content is one of the greatest drivers and one of the greatest cost issues for localized new sites. Data analytics is becoming a significant tool in helping to identify content trends based on what people are searching for and what they might be reading.

“DailyMe analyzes topics of interest and queries to determine editorial gaps to drive editorial focus or the need for additional freelance writer support to meet emerging needs,” Budde said. The reality of making a hyper-local news site work is a small dedicated editorial staff that not only creates new editorial but can be the aggregators of relevant news from other resources or local bloggers who are viewed as content experts.

The trend in news is definitely focused on delivering personalized content and local information in a single location to make it relevant and easy to access. The goal is to strike a balance between what consumers ask to be shown and what might be of interest either at the moment or what might be an emerging interest.

Google CEO Eric Schmidt addressed newspaper publishers this morning at the NAA Annual Convention in San Diego, giving a high-level, thought-provoking talk (without apparent notes) about the future of information and the role that newspapers, search and consumers will play in it. (While I attended the event, the talk was streamed online here.)

Schmidt noted that there are basically two models of information: the newspaper of record and Wikipedia/user-generated content. Given the rapid shifts in technology and consumer patterns, there’s going to be some integration between the two, and we are going to have to relearn what a “newspaper of record” means. Reporting “is what newspapers are ultimately about,” he says. “Knowing all things that happen in a local environment, a national environment and a global environment.”

Schmidt suggests that it will be marriage of reporting and reliable networks of communication, such as cloud computing. One example of such a marriage was Google’s mapping this year of Flu Trends. “It provided early, instantaneous analysts that gets ahead of everyone else” and had real societal importance, says Schmidt. Looking forward, Schmidt anticipates databases providing instant “BS detectors” for politicians in debates and other forums. “It’s the most obvious,” he says.

Mobile also plays an essential role in Schmidt’s vision of user empowerment. “It isn’t obvious, but it represents a fundamental change — all in a local context. If you like history, you can walk down the street in San Diego, and the phone can tell you the history of every building,” he says. “We never had these kinds of tools before to use, and perhaps, misuse.”

The ultimate goal is “to get 1 billion people with this kind of power in their hands. It is easy. That many mobile phones are being built in the next couple of years with this kind of capability. The underlying platform has now been built, and all the mobile operators are now building services with the kinds of capabilities I am describing.”

While the Web and mobile is our future, right now, Schmidt concedes the UI needs a lot of work. “The Web is still relatively unpleasant to read,” he says. “Think of the joy of reading a magazine. It is the most wonderful experience. Why can’t we recreate the same thing on the Web? The online experience is terrible compared to the wonderful experience of magazines and newspapers. It is a fundamental thing we don’t do very well on my side of the world.”

But personalization will be a factor in making the Web better to use, he says. “People consume information in many, many ways. Now we have the opportunity” to get away from one size fits all. And “we need new formats for journalism that will work for all platforms.”

The newspapers’ lack of knowledge about their readers especially has to evolve, says Schmidt. “Why doesn’t the newspaper know what I read yesterday? It is easy to remember this kind of thing. The new model is knowing you have already read this … you can tell me what has changed.”

User-generated content also plays a major role in all this. “The reality is the vast majority of information is not being produced by any traditional means. It is being produced user-to-user. That’s another fundamental change. People care a lot about what their friends are doing.”

But what is the business model, going forward? Schmidt notes that “the Internet doesn’t respect traditional scarcity structures. We think the answer is advertising,” he says. “Of course we have a bias. Ninety-eight percent of our revenue comes from advertising.”

While Google’s cash cow is text ads, Schmidt says the company has to keep pushing the envelope of better story telling — “ads with narrative and engagement.” User engagement is key to all this. “When you go the movie theater, people will be twittering: ‘Oh, I think he is wrong,’ or ‘this is going to happen next.’ We’ll have mood mapping in real time,” he says. (Google is rumored to be in talks to buy Twitter.)

But Schmidt also sees subscription-based models making a comeback, perhaps using Kindle as a core platform. “Kindle is very successful,” he says. “It is another example of cloud computing for specialists. It is a model that works, economically and technologically.”

Schmidt noted that the model for subscriptions going forward is probably television, which is segmented into free TV, cable TV and on-demand paid TV. “The vast majority [of this] deals with the free model. But micropayments are getting to be possible.” Before, transaction costs were so high that you couldn’t do things that cost one or two cents. But now, “with aggregation, you can do this.”

So — given the venue, does Google believe there is a future for newspapers? Schmidt gives newspapers kudos for being early to embrace the Web. “They understood repurposing of the Web. They had their reporters blog. But there wasn’t an act after that. The act after that is much harder. How do you keep a user’s engagement? How do you keep from being disintermediated?”

The “Deconstructing Internet Yellow Pages” panel at DMS ’08 revealed a number of areas in which IYPs need to evolve. Based on Kelsey’s IYP research, conference chair and TKG Program Director Charles Laughlin said, “IYPs appear too conservative and unwilling to do what it takes to win in the local search space.”

One of the key areas consumers value in IYPs remains accuracy of data, but items like look and feel and the ability to add and share information have risen to the top. Two of the “new breed” IYP sites, Brownbook.net and YellowBot, are certainly listening to consumers and responding with uniquely positioned sites. 

While major IYPs have advanced, they appear more oriented to supporting advertisers than the consumer. According to David Ingram, CEO of Brownbook.net: “There seems to be a mismatch between what consumers want and what the directory industry sees as important. Consumers want ease of use and accuracy versus publishers, who seem to focus more on advertiser-driven needs.” 

The need to structure data to make searching for and finding relevant information easier was viewed by most of the panelists to be vital in providing a satisfying experience on their sites. The challenge is structuring the content you control amid the vast amount of information on the Web, such as user reviews, consumer-generated content and other disparate data.  According to Morgan Zimmerman, VP business development for Exalead, “Consumers are looking for more localized information and demanding it from the sites they use and prefer — in an easy to digest manner.”

Taking a counterpoint was Erron Silverstein, cofounder and CEO of YellowBot, who felt consumers alter the way they search too frequently to adequately structure local search. “Tagging listing information shows you how to classify the information and how people are searching and offers suggestions to the advertiser base on how to connect. You need to let the consumer direct the structure.” 

The conclusion of the panel is that the current view of an IYP site needs to evolve with a more consumer-focused approach, which in turn will drive more traffic and ultimately better quality leads for advertisers. James Ashford, president of Yellow Assistance, summed it up when he said: “The user experience is key, and how they want to use your site will dictate how best to design and set up your functionality. Ultimately the users will supply the appropriate content and how they want it served up; this will drive the traffic your advertisers need.”   

The Huffington Post has a certain glamour about it and is able to attract an “A” list of contributors. There is always something interesting on it, and its readership is apparently between 3 million and 8 million unique.

Now it is going to go local, with a launch in Chicago this summer, and at least a dozen local sites in all, per founder Arianna Huffington in an audio interview by The Guardian. Presumably, local will be another button on the site, along with “Politics,” “Media,” “Business,” “Living,” “Entertainment,” “Green” and “23/6” (a news summary).

Local, however, is just one of many new verticals. “Books,” “International” and “Sports” are also planned.

Huffington says the HuffPo is “an aspiring newspaper.” In Chicago, the initial launch will consist of a single page, with “Chicago news, Chicago bloggers, Chicago food, Chicago crime, everything.” After some experimentation, “we’ll have a template which we want to roll out.” Huffington is raising money now to do this. “We have been incredibly good at not expanding too fast,” she says.

John Wilpers, who knows a thing or two about building local media after editor stints with The Examiner and AOL, warns local media companies in his blog that “with her clout and visibility, she may succeed at the aggregation game where others have failed or are struggling. She plans to grab YOUR content and the best local bloggers and citizen journalists – something we should have done long ago. (It’s not too late, but it’s ALMOST too late.) “And she won’t be blowing large amounts of investor money, either. One editor. One reporter. That’s it.”

Who knows? Maybe the HuffPo will serve as a better foundation for compelling local discussions than the local newspaper or standalone hyperlocal sites. Being disciplined/elitist about what and who is interesting is the quality it brings to the table. Or maybe Huffington will raise a lot of money and buy Outside.in or Topix. But the latter site, with its small market orientation, doesn’t appeal to the influentials that she has focused on reaching.

My guess is the “local” part of it might be like an alternative newsweekly column and find some readers. Then we’ll see if Huffington wants to build up local sales or not (probably the latter).