The New York Times Will Make Money Online the Jay Leno Way

Last Updated Feb 24, 2010 11:23 AM EST

Lost in all the coverage about the New York Times' latest hyperlocal news effort is whether it will make any money. On Monday, the New York Times Company announced a partnership with New York University's Arthur Carter School of Journalism whereby the school will launch and operate a hyperlocal news site called The Local: East Village. The focus has been on the dynamics of this content deal -- the free content (or, if paid, which will come out of NYU's pocket) that will run under the Times' banner. There are definitely some win-wins.

There's plenty of outrage and applause, too, over plans to let NYU run the editorial side of the business. Choire Sicha at The Awl says, "this set-up suggests that the way to finance local news operations is only on the backs of free labor." (This deal isn't not the first of its kind, either; last year, the paper inked a similar arrangement with the City University of New York's Jeff Jarvis to produce The Local: Fort Greene/Clinton Hill.)

But that's exactly why the New York Times could be the real winners in the hyperlocal game: Not because of any traffic goals it hits (at 50,000 residents, the East Village is much smaller than the NYT's other local efforts in San Francisco, Chicago, or even Brooklyn), but because the margins are going to be massive.

Call it the Jay Leno Show model: Keep the cost of content creation at a minimum, sell some ads, and it doesn't matter how many people actually show up. (As a refresher, NBC's Jeff Zucker defended its airing of the Leno Show in the valuable 10 o'clock hour because it cost less to produce the show than to produce those hour-long dramas.)

Of course, there are other benefits, too. Steve Safran at Lost Remote notes that this site helps the Times get a foothold in the youth market. "The New York Times, while a respectable news organization, does not scream "youth!"," he wrote in an email. "Bringing in a younger, potentially hipper block of writers could help improve its brand image. It will certainly open NYTimes.com to a wider audience."

Borrell Associates estimates that revenue from hyperlocal advertising is expected to hit $16.4 billion in 2014, up from $14.2 billion last year. So far, the Times's The Local: Fort Greene/Clinton Hill carries two Google ads and two promo units for the Times's other content. Local advertisers can use a self-service feature from AdReady, but it doesn't appear that any local ads are running at the moment.

Despite enviable margins on free content, the Times will still need to make money, and some folks will have to show up. After all, even Jay Leno couldn't make it work without more eyeballs.