I don't see any point in joining the snarkfest that is unfolding on some blogs in the wake of the Wall Street Journal's highly critical article about LoudounExtra.com. But it does make me want to pass on some basic points that should be absorbed by anyone thinking about hyperlocal and citizen media.
"Hyperlocal" on the Web really has to do with finding natural geocommunities, where interpersonal connections (or great potential for connections) coincide with geography. Natural communities are hard to identify. It's more art than science.
Natural communities may be smaller than you expect. In fact, they may be too small to sustain a media business. That doesn't mean you can't build a business out of a network of hyperlocal products. Don't think monolithic.
Natural communities often don't map to political subdivisions. This is something I learned decades ago in St. Louis, a tangle of overlapping governmental districts that don't supply simple answers the simple question: "Where do you live?"
Natural communities don't necessarily map to the needs of marketers (the people formerly known as "advertisers.") This is increasingly true as America becomes Generica, land of fast-food franchises and big-box retailers. If you're a journalist thinking about doing this, you need to make yourself into a business planner first.
Natural communities have great potential for developing participative Web experiences (the practice formerly and poorly known as "user-generated content.") But it does not happen by accident. If you want to be a convener of community, you'd better be ready to get off your duff, away from the computer, and out in front of people. This is something you have to build by selling it in person to the people you want to engage.
And one last point. Geographic community ties are not as strong in this century as in previous centuries. You can do something about that (see Putnam and BetterTogether.org) but be aware that you're working against a climate shift.