The 12 new markets include Harrisburg-York, Pennsylvania; Buffalo and Albany-Troy, New York; Jacksonville, Florida; San Antonio, Texas; Oklahoma City, Oklahoma; Albuquerque-Santa Fe, New Mexico; Richmond, Virginia; Columbus, Ohio; Grand Rapids, Michigan; Milwaukee, Wisconsin; and Nashville, Tennessee.
With the additions, the network now serves a total of 50 markets.
The local online city guide market has been hyper-competitive, aimed at taking a slice of billions of dollars in advertising. Other contenders in the space include Microsoft's Sidewalk and CitySearch, which, like Digital City, provide proprietary content.
Other Internet heavyweights such as Yahoo also provide listings and categorize content to serve specific cities.
Local broadcasters and media firms also have stepped into the fray, with the added advantage of leveraging an established editorial base, local brand awareness, and a knowledge of local tastes. For example, the New York Times has its own local service, called New York Today. In addition, many television stations have introduced their own offerings, leveraging their extensive reach to promote their Internet services.
However, local efforts have left many users disappointed. On the flip side, many companies that entered the market with great hopes have come to realize the expense it takes to be competitive. Some have faced additional challenges in trying to streamline.
For example, Digital City laid off 80 employees in February. AOL blamed the cuts on position redundancies. In January, Sidewalk also cut staff in an effort to streamline operations in its host cities.
But despite the harsh realities of the space, analysts still point out that Digital City has taken a positive step toward figuring out the cost-growth equation.
It has developed a template that uses broader resources to serve its regional sites, thus cutting down on hefty costs associated with developing an editorial team. AOL has leveraged content, such as mapping services, to serve all its sites instead of building out expensive editorial teams in each of its regions.
Bill Bass, an analyst at Forrester Research, noted that many guides, such as Sidewalk, are headed in the direction of centralizing their content due to the expense of creating a localized service.
"They're trying to leverage things like personal home pages and chat, and have people in local communities build out their personal pages and chat with each other," Bass added. "That's a great way for AOL to have content without labor costs."
Peter Krasilovsky, vice president of research firm Arlen Communications, echoed Bass's analysis. "AOL is taking national resources and localizing it," he said. "That's a model that's sustainable, and they're not spending a lot of money to do it."