Making Money Online With

Mainstream media and major film distributors don’t speak “Crowd.” They just don’t seem to get it.

Crowd sourcing and crowd funding, by nature are not mainstream and Netizens happily communicate in their own language and with their own peeps.

Two filmmakers, Karl-Martin Pold and Sarah Noeringberg, are soliciting donations at StartNext online for their documentary, A Man Called Spencer; about the famous Italian actor, Bud Spencer, who is most known for his spaghetti westerns.

When the Italian press got wind of it, one of the newspapers released a misguided story claiming that Spencer was poor and was trying to raise money to support himself. Really?

In the cafe culture of creatives around the world who are familiar with the subject and meaning of crowd sourcing and its counterpart, crowd funding, the subject is still hot. They understand it and are embracing it by the thousands.

To clarify for those who may not yet have entered this democratized medium, crowd sourcing is a way to engage the talented citizens of the Internet in the creative aspects or other elements of a project, i.e., the script, music, effects shots, titles, trailers, etc.

A subset of crowd sourcing is crowd funding, a platform that enables filmmakers or other creatives to solicit monetary donations for their projects.

Perhaps one of the earliest films to appear online for free download was Star Wreck, released in 1997. It was 45 minutes long and message boards caught on fire. The phenomenon had begun.

The same team released one of the first collaborative films to crossover into the mainstream press and become well known, Star Wreck: In the Pirkinning. It was launched in 2000 by maverick filmmakers (five students and several unemployed friends from Tampere) with little money, lots of idealism and their own home computers.

The blue screen used behind many of the scenes of the film, was a piece of linoleum painted with blue chroma key paint and their equipment may not have been the most exotic, but they worked together to make their movie and found themselves in the post production process by 2004, much of which was completed in their homes. (This is a picture of creator and producer Samuli Torssonen’s kitchen that housed the render farm.)

Star Wreck: In the Pirkinning was released online on October 1, 2005, and within four days had over 400,000 downloads. It was subsequently shown on TV in Finland, Sweden and Norway and the DVD came out in the UK on April 4, 2009.

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With the national and international news game more or less dominated by traditional media and web giants like Google and Yahoo, much of the focus for companies that want to grow online is moving toward niches: sports, technology and other topics. But one of the biggest remaining unfilled niches in online content is hyper-local news. AOL has made the biggest investment in this segment, spending an estimated $50 million or so on rolling out its Patch.com network last year to almost a thousand towns. But Topix CEO Chris Tolles — whose company aggregates news and community discussions around thousands of small towns and regions — says that’s likely just the beginning of the hyper-local land rush.

The Topix co-founder says one of the reasons why local content is ripe for investment, and one of the things likely pushing AOL in that direction, is that “local monetizes better than just about anything else” in terms of advertising. “The figures show that ads are about four times as effective if you localize them,” Tolles said. This phenomenon has likely been driving advertisers to work with other avenues like Groupon, which can target individual regions or towns. Topix, meanwhile, has been making an average $4 eCPM (cost per thousand) for its advertising, says Tolles, and has also been getting much more response from large ad agencies than in the past.

Two to three years ago when a sales rep would call on some Madison Avenue firm, the 25-year-old sales guy would say “local sounds like my local news, and that sounds like my mom and dad — so no thanks.” Now they’re saying “local sounds like Foursquare and I have an iPhone and that sounds interesting, so yes.”

Local Advertising Rates are Climbing

The fact that CPMs for local advertising are up means that lots of companies like AOL and Yahoo — which is pursuing a Patch-like strategy with its Associated Content unit, which it acquired last year for an estimated $100 million — are going to be looking to amass as much content as possible so that they can get the scale necessary to make an impact on their businesses, the Topix CEO says. “It’s all about who can create a large local footprint,” he said. “I think we will see acquisitions this year, as part of a land grab from these companies, looking for someone who can deliver a large enough local footprint.”

Not surprisingly, Tolles says Topix is in a pretty good position if that happens. The local news aggregator was profitable for the first time in 2010, he says — with revenues that were up by more than 50 percent compared with the previous year. “We are one of the largest local sites in the U.S.,” the CEO says, “larger than any other except maybe one of the big newspaper chains like Gannett or McClatchy. Not bad for about 30 people in an office in Palo Alto [Calif.].” The site gets about 8 million uniques a month, he said, which is roughly the same as twice what AOL’s Patch is estimated to have across its sites.

Topix doesn’t get much attention when it comes to the online-media space, perhaps because it has been around so long. It was created in 2004 as an automated news aggregator by a team that included Rich Skrenta — who now runs Blekko — and Tolles. They used algorithms to crawl tens of thousands of news sites, blogs and other sources of information and then filtered it into topics. Over time, the company started to focus on location as the main filter, and categorized the information into more than 20,000 towns and cities. In 2005, it got a large investment from several media companies including Gannett Communications, the Tribune Co. and McClatchy.

News Is Easy — Community Is the Hard Part

And what does Tolles think about competing with Patch, as AOL pours more money into the hyper-local effort, which is now in close to a thousand different towns across the U.S.? The Topix CEO says his site doesn’t really compete with Patch in many locations yet — and when Patch has good content from a local area, “we can aggregate that too,” he says. In some ways, Topix approaches local news in the same way that The Huffington Post did with national and international news: the site pulls in and shows excerpts of stories from other news sites. But more important even than the news, says Tolles, is the fact that Topix gives readers from those areas somewhere to discuss the news.

“We started out as a news aggregator, but the thing that we have done a really good job of is giving people a place to come and talk about the content, the news from their local community” the Topix CEO says. During the mid-term elections, for example, the site created pages for every local race, all the way from sheriff to local city council. Across all of its pages, Topix gets about 4 million comments a month from readers, which is roughly the same as The Huffington Post.

“Patch may be able to set up thousands of sites in local towns, but it takes time to develop that kind of community — it doesn’t just happen overnight,” says Tolles.

Related GigaOM Pro content (sub req’d):

• Why Google Should Fear the Social Web


• Lessons From Twitter: How to Play Nice With Ecosystem Partners


• What We Can Learn From the Guardian’s Open Platform

Post and thumbnail courtesy of Flickr user See-ming Lee

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