OwnLocal nabs new funding from Automattic to resurrect newspaper revenues

Many local newspapers may be teetering on the edge of death, but web publishing service OwnLocal doesn’t think they’ll be meeting their maker anytime soon. The company has just nabbed an undisclosed round of funding to help traditional paper newspapers boost their income.

OwnLocal provides a variety of white-label software services to help newspapers increase their advertising revenues. The new funding was led by WordPress developer Automattic, with participation from 500 Startups, Justin Kitch and other angel investors.

OwnLocal’s target clients are small-town newspapers with a circulation of 4,000 to 5,000 as well as a preexisting sales team that has solid relationships with local businesses. OwnLocal helps train each sales team about the white-label products and how to sell them.

The startup’s products include a Local Hero business directory, a daily deals tool, a web building tool, a print-to-web advertisement conversion tool and a game creation tool (which uses game mechanics to engage newspaper customers). Although OwnLocal does require a unique URL from the newspaper’s web domain name (e.g. dailybugle.com/smythe-pest-control), it doesn’t require the paper to make any alterations to its website in most cases.

OwnLocal can accurately predict how much additional revenue a newspaper can expect to bring in when using the startup’s software services, OwnLocal founder and CEO Lloyd Armbrust told VentureBeat.

“We actually scout out the areas where each newspaper is located and create a comprehensive list of local business types. Then, using our past research data, we can crunch numbers on all the types of business [e.g. 10 percent of doctors will use our services through the newspaper, three percent of mechanics, etc.] to get a pretty accurate reading of how much revenue we can bring them,” Armbrust said.

On average, OwnLocal doubles a newspaper’s annual online revenue, which is typically about $60,000 per year, Armbrust said. One of the company’s most successful clients, York, Nebraska-based publication the York News-Times, managed to bring in $120,000 in revenue last year — that’s with a circulation of 1,500. So, if you think about the startup’s business model in relation to slightly bigger cities, you can see why investors like Automattic and 500 Startups have taken an interest in OwnLocal.

While the amount of funding wasn’t disclosed, the new round does bring the company’s total investment to $2 million to date. However, OwnLocal’s list of past and new investors is arguably just as valuable as the total funding.

Since founding in 2010, OwnLocal has previously secured funding from Y Combinator, Gmail creator Paul Buchheit, Delicious creator Joshua Schachter and an estimated $100,000 from Knight Enterprise Fund for media innovation.

The investment from the Knight Enterprise Fund is particularly interesting because OwnLocal is its first for-profit early-stage investment. The relatively new $10 million venture fund is affiliated with the John S. and James L. Knight Foundation, which is primarily focused on strengthening the field of journalism. The Knight Foundation also sponsors the Knight News Challenge, which awards funding (up to $5 million per year) for innovative digital news-focused ideas.

OwnLocal has over 100 publications in 35 markets using its services, which power the web presence for nearly 1,000 local businesses, according to Armbrust.

As part of the new round, 500 Startups mentor Paul Singh will join OwnLocal as an adviser. The Austin, Texas-based startup has 20 employees. It faces indirect competition from Local.com and Matchbin.