March 30, 2005

Valued customers,

We know that publishing a community newspaper means that you don’t have a lot of time to monitor Internet and technology trends. We take seriously our responsibility as your partner in the success of your online publication and we have important information to share with you. Some of the new technology that has helped community newspapers in the past may be turning against us and you need to know about the action we are taking in response to this potential threat. At the same time, we’re issuing a "call to action" to seize the opportunity to produce profits from your website that you may never have even dreamed possible.

In late 2001, the Google search engine began to aggressively index our customers’ newspaper websites. GoogleBots, the array of over 40,000 machines that create the index used for Google searches, requested so many pages per second that we were challenged to handle the volume. The outcome was a surge in traffic as people interested in your newspapers’ topics began to find your websites through the increasingly popular Google search engine.

This was not an unplanned stroke of luck! From the beginning (way back in 1997, a lifetime ago in "Internet years"), we designed our system to work well with search engines, foreseeing that they would one day be the key to standing out in an ever increasing volume of online information. Today, we are pleased to say that virtually 100% of our customers' stories are listed in the search engines very shortly after publication. Our studies show that our competition typically gets less than 20% visibility. Anyone can find a newspaper’s website by searching for the name of the publication. It’s far more powerful when each and every story can bring readers to your site. Combining technology and know-how, Our-Hometown.com ensures that we deliver relevant traffic to your online edition!

In May of 2003, we were fortunate to participate in the beta trial of Google AdSense, a source of third party ads from over 200,000 advertisers. When the program went public in the summer of 2003, Google wrote a case study about the success that we were experiencing and placed it on their website. Being early adopters of this new technology had created a great win-win scenario.

In February of this year, Google released an enhancement called AutoLink to a relatively obscure, but quickly growing, product called the Google Toolbar. We believe this functionality should be deeply disturbing to any publisher. The toolbar is installed on a user's computer, where the AutoLink feature changes the content of the web page being viewed by adding links directly in the page’s content – without the permission of the owner. Google does not provide the content owner the ability to opt-out.

For example, AutoLink will recognize an ISBN number and insert a link to that book on Amazon.com, VIN numbers are linked to CARFAX, and addresses create links to a map of the location on the Google Map site. While we understand the perceived value of this functionality to certain users, we firmly believe that those who own web sites should control what is presented when users connect to their sites. If you are running a paid advertisement for the local book store on your Book Reviews page, you do not want the book’s ISBN number to send a potential customer directly to Amazon.com.

Google states that they make no money from adding these links. However, the Google Toolbar is an evolving product and they give no assurance that this will be the case in the future. Currently, the information that generates an AutoLink is limited, but it establishes the functionality that could allow Google to link any word or phase to commercial websites in the future. Google defended AutoLink to the BBC by saying, "The user can choose never to click on the AutoLink button, and web pages she views will never be modified. In addition, the user can choose to disable the AutoLink feature entirely at any time." We are troubled by the arrogance demonstrated in the failure to even consider the Intellectual Property of the content owner.

As publishers, we cannot support unapproved alterations during the delivery of our copy. Newspapers, in particular, have a responsibility both to our readers and to our advertisers to know that what we place on our pages will be delivered to readers exactly as we issue it. We believe that the AutoLink feature is a violation of US Copyright Law in that it facilitates the creation of an unauthorized infringing derivative work to the sole benefit of Google. Unfortunately, we also believe that it could be years before the Courts rule on this issue.

We are making changes to the Our-Hometown.com system in direct response to the Google AutoLink feature. As a company, we will no longer directly support Google to the level that we have in the past, other than to continue to allow their search engine to index the websites. We have the option to work with a number of alternate service providers and are actively developing those relationships. We believe these decisions will be in the best interests of our customers in both the long and short run.

Our-Hometown.com will no longer automatically implement Google AdSense on our customers' websites and, effective March 31, 2005, we are removing Google AdSense from all existing websites. We are reviewing alternate sources of third party advertisements. To help ease the transition, in April we will use our own funds to match the revenues that your site generated in March.

We are not taking away your options. Publishers may open their own AdSense accounts directly with Google and we will, upon request, implement, operate and maintain AdSense on their websites. Those publishers will receive checks directly from Google. We will charge a service fee of $200 per month per newspaper or an amount equal to 50% of the AdSense revenue (as we do today) if publishers document their Google AdSense revenues in a report to us.

However, it is our recommendation that publishers instead wait until we have identified another suitable source of third party ads.

1. Up-sell all of your print display ads to the web.

The easiest sale you ever make is to an existing customer, and we’ve developed a highly effective up-sell method that minimizes your sales expense. Our "billing insert" method allows you to offer significant added value to your advertisers while increasing your revenues by at least 5% of your display ad sales – with virtually no increase in expenses. This highly effective approach for up-selling has worked for every single publisher who tried it, and we’re here to help you be equally successful! Some publishers used a forced buy approach, and lost no advertisers as a result. Where publishers allowed advertisers to opt-out, 90% found the offer attractive enough to stay with the program!

The product itself delivers maximum benefit to advertisers both in terms of exposures on the newspaper website and in search engines hits based on words in the ads. Taking display ads to the web delivers incremental revenue to you from an ad sale that you’ve already closed. Why not make more money from the same effort?

2. Implement the Paid Online Subscription model (updated 1/4/2006 to reflect current recommendations).

As previously stated, this feature is now available to you at no additional charge. We have ample evidence that you are leaving money on the table if you don't implement paid subscriptions. (Understand that you can do this even if your print edition is free.)

People that want their news online are willing to pay for it. Realistically, today, this is still a small number. Publishers should expect their online subscriptions to only be equal to 1% to 2% of their paid print circulation (or equivalent free circulation). However, it has been shown that for this group of subscribers, price is not a major factor. They are willing to pay the same amount as they would for a print subscription - in fact, we have reason to believe they may be willing to pay more! On the other hand, experiments show that lowering the price will only drive a very small subscriber increase, if any.

Our recommended pricing for our paid online subscription model is here.

3. Promote your website.

You're promoting your print edition every day – it’s time to put some energy into promoting the online edition as well! Learn more about the features of your website and its traffic. We’ve provided information on the Our-Hometown.com website that will help expand your knowledge about publishing on the Internet. Apply what you have learned and promote your website both in print and in your everyday conversations.

4. Give us your special sections to put online.

It’s important to bring the special sections that you print to your web readers as well. Third party advertising on Bridal, Real Estate, Home, Garden, Dining and/or Area Guides all produce 4 to 5 times the revenue (per thousand page views) of straight news - and rightfully so, as the click through rate is 5 to 6 times higher. Supplementing the newspaper publication completes the reader’s experience, increasing the perceived value. More importantly, it significantly increases exposure for your special section advertisers.

5. Give us any papers you own that aren't online already.

You’ve already seen the benefit from taking your current newspaper(s) to the net! Since Our-Hometown.com enables you to use the files you’ve already prepared for printing, it’s easy and inexpensive to bring your other publications to e-life. We’ve seen the move to an online edition actually drive up print circulation as new readers discover the publication. Think of it as a free sample – that costs you nothing to deliver.

6. Tell your peers about us - help us sell to new newspapers.

When we are successful, you are successful. The more newspapers that join Our-Hometown.com, the better able we are to spread operating costs across multiple accounts. There is no better sales lead for us than someone who’s heard about us from a satisfied customer!

7. Be willing to pay for extra support.

The Our-Hometown.com team is here to help maximize the success of your online publication. All of the basic services that you need are included in your current fees. Please understand, however, that some special requests require significant amounts of time from our staffers. They have now been instructed to document time spent on special requests and, in most cases, this work will be billed according to the terms of the contract.

8. Let our people know when they've done a good job.

We’re proud of the Our-Hometown.com team! Help us to recognize their efforts by sharing a "Thumbs up!" when someone’s done a good job for you.

9. Prepay if you can.

The costs of maintaining a competitive system in this rapidly changing environment are high. Our investment in technology is not a one-time expense, but part of an ongoing commitment to deliver the right combination of reliable, up to date software and systems for a reasonable price. These costs make it necessary for us to increase prices for our basic service beginning September 30, 2005. This is an average increase of just under 20%. You will find the details documented on our website at

http://www.our-hometown.com/faq.html#pricing.

You can save money by prepaying your fees. Any accounts that have prepaid by April 30^th, 2005 will be considered paid in full for the duration of that prepayment and exempt from any price increase until their next invoice.

We are willing to discuss a waiver for hardship situations. Possible candidates would be smaller newspapers whose website traffic falls in the lower 1/3 of our sites, or companies in temporary financial difficulties. However, we will expect a serious attempt to monetize website traffic; failure to do so will decrease the chances we will issue such a waiver.

Prepaying your bill provides a double benefit. While our owners, the Larson family, are pleased with the results of their investment in the company's intellectual property, recent monthly double-digit growth in our customer base has required a significant capital influx to cover the corresponding receivables increases. We must now choose whether to expend our resources on covering those receivables or on investing in increased staffing, continued quality improvements, development of new service offerings and positioning ourselves to meet future customer needs. All of those are wise business investments; however, we do have finite resources. If you prepay your account, our receivables constraint is alleviated and we are better able to serve you, our customers.

The Internet is a rapidly expanding media powerhouse. It’s critical that newspapers actively work to make it an important part of their publication strategy. Seize the opportunity to take advantage of new technology instead of competing with it!

We’ve stated that we take seriously our responsibility as a partner in your success, so you’re going to hear from us. Complacency isn’t safe! Will Rogers was right when he said, "Even if you’re on the right track, you’ll get run over if you just sit there." You’ve got one or more of your newspapers online, so you’re on the right track; we’re going to be sure that you don’t just sit there! The reward will be revenues that you may never have dreamed possible from your online publication.

Your partners in success,

The Team at Our-Hometown.com