With the closure of Backfence, people are beginning to doubt the viability of hyperlocal sites as anything beyond a hobby for a few dedicated people.

That hasn’t stopped mega-dailies from getting into the market. The Chicago Tribune launched TribLocal earlier this year, and The Washington Post will be launching LoudounExtra this month. LoudounExtra is a much more in-depth hyperlocal site, and it will take a heftier investment from the Pot.

It’s a bigger risk, but it may prove a bigger reward. Or it just might be a much bigger failure.

But why has hyper local been such a mystery?

Paul Farhi sheds some light on the subject in the American Journalism Review this month:

In fact, many operators don’t really have a business model. The first wave of hyperlocal sites has featured seat-of-the-pants operations, staffed part-time by dedicated volunteers, community activists and impassioned gadflies. About half of the 141 respondents to the J-Lab survey said they didn’t need to earn revenue to stay afloat, thanks to self-funding and volunteer labor. A full 80 percent said their sites either weren’t covering their operating costs–or that they just weren’t sure. Only 10 of the 141 said they were breaking even or earning a profit.

For many hyperlocal sites, the idea was never to become rich and famous. Many of the sites were launched because of a dearth of quality local coverage by existing media outlets. With newspaper cuts in recent years, the first thing to go is local coverage, and that coverage is usually replaced by wire stories.

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