Homesteading on the digital frontier
The concept of online communities has proved a winner with users (it is free, after all), with the largest provider of free home pages, GeoCities, reporting an 5,000 additional "homesteaders" a day.
There's only one catch: no one knows how to make free Web pages pay off as a business proposition.
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'There's kind of a voyeuristic thing here' -- Analyst Patrick Keane |
That has not disturbed GeoCities in its plans to make an initial offering of stock to the public this week. And given the still-euphoric climate for Internet stocks, most expect that the GeoCities IPO will do well. And in the mean time, the company's success at drawing an audience has encouraged all kinds of companies to enter the business of free home pages.
So what is the appeal here?
Basically, people go to GeoCities, or similar sites such as Tripod or Xoom, to check out people's home pages, or make their own. The sites are arranged into subject-oriented categories so that people can browse for the subject they're interested in.
A really big business
Subjects range from the Georgia Association of Family and Consumer Sciences to GypsyKnight's Folklore and Mythology Page, a list of occult Web links.
"There's kind of a voyeuristic thing here," said analyst Patrick Keane of Jupiter Communications. "You see other people's sites, or create your own and be seen."
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Keane noted that about 10 percent of America Online's 12.5 million users have created their own home pages. "If there's the same demand over the entire Internet population, this could be a really big business."
GeoCities is a success in purely Internet terms: the praise and attention heaped upon it are a result of its sharply-growing traffic figures. In August 1996, about 2.1 million individuals visited GeoCities, according to Media Metrix. As of this June, Media Metrix reported 10.3 million GeoCities visitors, and other ratings firms peg that number even higher.
Eyeballs the thing
In business terms, it is as much of a money-losing proposition as any Internet company: GeoCities made only $4.6 million in 1997, and has accumulated losses of $15.7 million since it was founded in 1995.
But observers say the eyeballs are the thing.
"When you have a community, you have content that draws traffic," said industry analyst Alexis dePlanque of Meta Group. "Secondly, you have a guaranteed user base. These people have invested time in putting together this information, and they're now part of that community online. They have a vested interest in coming back again and again."
So far, the best way GeoCities has found to exploit that recurring audience has been advertising, which makes up 90 percent of its revenues, according to the company's public filing. But it plans to expand into other areas, particularly online commerce: GeoCities now encourages its users to set up their own shops on their home pages, with the host getting a cut of each sale.
Money from the public markets could give it the opportunity to try a tactic borrowed from the so-called portal sites, such as Yahoo! Inc. and Excite Inc. Those sites, built around Internet search engines, offer features such as e-mail, maps and personalized news and information as a way of making users stick around longer, increasing the value of their advertising inventory.
Premium services
GeoCities already offers free e-mail and has begun adding licensed content to subject areas.
A third source of revenue could be selling premium services, such as additional Web site storage, for a fee.
"We call that the crack cocaine method of marketing, offer them something free to get them hooked, and then get them to pay," said analyst dePlanque. The method has not, however, brought in much revenue so far.
GeoCities has the advantage, at the moment, of hosting the largest number of home pages -- important when those pages are your biggest attraction. But it has no shortage of competitors, and their ranks could soon be joined by the largest sites online, the portals.
Indeed, Lycos Inc. has already bought Tripod, GeoCities' closest competitor. Other rivals include Angelfire Inc., Xoom Inc. and theglobe.com. Talk City, which centers around chat rooms, has recently expanded into free Web pages.
Can GeoCities survive?
More worryingly, perhaps, sites such as Yahoo! and Excite, which already offer many of the features on GeoCities, could soon develop their own home-page communities. With as much as three times the monthly visitors of GeoCities, these portals could quickly rob the community service of its main competitive advantage.
Are the guides to the Internet also about to start doling out virtual real estate?
"All I can say is, we are very interested in going in that direction," said an Excite representative.