Why can't anyone make money in hyperlocal news?

Hyperlocal news coverage on the Web has been touted as conventional journalism's best hope in the digital era. One big problem: No one has figured out how to make money from it.

In metro Chicago, the suburban Patch network has shrunk to a sixth of its former size to stem losses. Startup news organization DNAInfo Chicago has been pumping out neighborhood coverage on its website since 2012, while losing millions of dollars. And EveryBlock isn't even trying to make money.

No matter how compelling the news next door is, readers don't want to pay for it and local businesses -- the universally hoped-for sponsors of local content -- can't afford to advertise, or they pay so little that sales reps can't earn a living. As a result, when the starry-eyed backers of hyperlocal ventures get a grip on the mounting labor and overhead expenses, the experiments often end badly.