Has Citizen Conn got the ticket?

August 13, 1999, Charles Conn Has Citizen Conn got the ticket? By Tim Clark Staff Writer, CNET NEWS.COM Charles Conn's Ticketmaster Online-CitySearch is a survivor in the online local guide war, but these days Conn has national dominance on his mind. CitySearch will soon have a total of 77 Web sites devoted to local entertainment after swapping equity with Microsoft for its 40-some local guides. Nailing the Microsoft Sidewalk deal was a coup for Conn, giving CitySearch a true national presence, along with the clout to cut bigger, national advertising deals that could help make the company profitable. "CitySearch's Achilles heel has been its inability to expand its reach," said analyst Peter Krasilovsky, who follows the local Web market for Kelsey Group. Online, the beefed-up CitySearch competes neck-and-neck with America Online's Digital Cities network of 60-plus local sites. But Conn doesn't lose sleep over AOL. What worries him more is other media companies, particularly newspaper chains, trying to move their local franchises to the Web. For now, Cox Interactive and Knight Ridder's Real Cities networks, each with about 30 city sites, are the most active. Zip2, now a part of the Altavista empire, also is cutting deals with local publishers. Against all competitors, Conn argues that CitySearch's "tools to get things done" differentiate its local sites. Ticketmaster Online sells tickets, CityAuction runs local auctions, and Match.com can connect kindred spirits for fun or romance. CitySearch also boasts a variety of revenue sources. Ticket sales of $17.8 million accounted for most of its $25.5 million in revenue last quarter. The company also harvests cash from subscriptions to Match.com, fees for auctions, money for hosting local small-business sites, and a smattering of ad revenue. The ticketing income exemplifies the importance of CitySearch's merger last August with Ticketmaster Online. CitySearch was literally pitching institutional buyers for its IPO when Barry Diller proposed a merger. They married, then took the combined companies public. Diller is CitySearch's biggest shareholder, and likely has ambitious plans for fitting CitySearch with his other properties. Likewise, Conn has big plans for CitySearch, too. In recent conversations with News.com's Tim Clark and Michelle Mahoney of CNET TV, Conn discussed some of those plans--and his persistent worries about looming competition. News.com: It's called the World Wide Web, yet your sites are intensely local. How do you explain that paradox? Conn: The Web has shifted quietly and persistently from being just about discovery. It's become much more about practical tools. That shift has occurred quietly behind the scenes, but you've seen it in the growth of sites like Amazon, eBay, E*Trade, and CitySearch. How do you compare CitySearch with Yahoo or AOL? National portals help you find out about what's on the Web. Local portals really help you find out what's happening in your own community, and since people spend 90 percent of their time and money within 10 or 15 miles of their own homes, local portals make a lot more sense than national portals do over time. Do you see national portals becoming pass?? Pass? is probably too strong because people are always going to want to navigate around the Web. How do you intend to exploit that local trend? Our theme for this year is getting things done. We've done a really good job providing comprehensive information on what's happening. We intend to go beyond ticketing to move into areas like scheduling and reservations. You should be able to book a golf tee time online, get a tennis court, maybe even book your doctor online. You should certainly be able to pay your parking tickets or renew your license instead of having to go into the DMV. NEXT: The future in view Stats Age: 37 Last job: Partner with consulting firm McKinsey in Sydney, Australia. Previously at Boston Consulting Group. Education: Boston University, bachelor degrees in economics and politics. Rhodes Scholar, Oxford University, philosophy and economics. MBA, Harvard Business School. Roots: Massachusetts. Personal: Married 14 years. Three children, two boys and a girl, ages 8, 6, and 1. Hobbies: Fly fishing, woodworking, mountain, and rock climbing. Mentor: Bill Gross, cofounder of CitySearch and Net start-up king. "He's helped many of us think of new ways to start companies, very much focusing on getting in front of consumers rather than elaborate planning." Boss: "Barry Diller doesn't act like a boss but like a board member and seasoned adviser. I deal with him almost every day, but not as a boss. He's more an idea generator and performance manager." August 12, 1999, Charles Conn The future in view What else lies ahead? Scheduling, reservations, registration, memberships--all these things in the past were either paper-based or involved standing in a line, they really work well online. We like those businesses. We've done a very successful trial with an employment site in San Francisco. We are also interested in food delivery, groceries, video, bill paying, and getting chores done online. That sounds dramatically different for consumer spending and economic life. [Consumers] will increasingly buy physical goods, particularly in commodity categories like books and music, nationally. That has implications for local retailers that are probably not good. But for access to services locally, and that's mostly what we are about, the Web is terrific. We'd like to be able to help you with virtually any reason you'd go out your front door. And what will our local strip mall look like? It's hard for local businesses to compete with folks that operate at high scale and with narrow margins that work well on the Web. But where there is specialized knowledge of the proprietor, like rare bookshops, for example, those businesses won't be damaged. You can't deliver a hot meal unless it is actually produced locally. Talk about the Sidewalk deal. Microsoft was one of your biggest competitors. I like what one of the investment analysts wrote: We simultaneously remove a major rival, we expand our reach from 33 to 77 cities, and finally we secure a major branded distribution deal with one of the portal companies. It's a fundamentally different sort of deal than we have negotiated before. I can't think of a bigger deal that we could have done. After the Sidewalk deal, how do you see competition in the local content-and-commerce market? Obviously we compete against national aggregators of local content--Digital Cities of AOL, Yahoo, and other link-based services like Infospace. But they don't have local editorial presences so they don't generate original content. Typically they don't have recommendations on what to do locally. It's usually not up to date and [without] integrated transactions. They tend to be an amalgamation of content links. We also compete with one-off and two-off local guides, some by local entrepreneurs, many by local media companies. But it's no longer about high-quality, locally produced information. It's about transactions--tools that let people get things done locally. Who are your biggest competitors? Our competitors now are more likely to be a very focused local player, often a traditional media company that really gets it. Those are the people we pay most attention to. How about the Yellow Pages companies? Everyone thought they would be big players. They didn't turn out to be very effective competitors, fortunately. You never turn your back on them, but the Yellow Pages companies of the telcos were slow to innovate and tended to put up online what was in the Yellow Pages. It was also hard for them to originate high-quality local content. Plus, they haven't found a way for their Yellow Pages sales agents to sell online media advertising. NEXT: Making deals work August 12, 1999, Charles Conn Making deals work How many people are actually buying tickets online? In the first quarter of 1998, we sold about 2 percent of all of Ticketmaster's tickets through Ticketmaster Online. In the first quarter of 1999, we sold nearly 10 percent of all the tickets that Ticketmaster sold, and we're actually at a higher run rate now. It's growing at great leaps and bounds, as more people become comfortable with using their credit cards online. How will Diller's USA Home Shopping Network come into play? HSN is in the process of going online now, and we'd like to offer people who use CitySearch a "deal of the day." On our Denver site, for example, you can find a deal of the day that's offered from First Auction [another USA Networks property]. HSN is this incredible infrastructure of operators, shipping, and merchandise services. We'd like that to be available to the CitySearch folks. When USA Networks was trying to buy Lycos, you waged a hard public fight for the deal, even though you probably didn't have to. Do you regret that? I'm someone who believes that once you agree to do something, you do it with all your heart. I believe intellectually in what was trying to be created, a new kind of media and commerce company that would genuinely integrate commerce and information-gathering, that would be a genuine link of national and local, and use the broadcast properties. I shared the concerns that many did about the integration, but I decided I'd back the deal. I must freely admit that because we remain independent, it makes it easier to make a motivated, excited CitySearch team. Even though we were going to be an independent part of the new venture, because our management and back office weren't going to be absorbed in Lycos as a unit, it's easier to keep an excited staff if it's focused on CitySearch. Did the deal's failure help you? I wouldn't say it helps us, but fortunately we crafted a good deal with Lycos coming out of the break-up of the larger deal. There was a lot of promise and excitement in the larger deal, and it's disappointing that Internet investors weren't ready for something that combined real broadcast assets and real retail assets with online assets. So what changed and scuttled the deal? I don't think anything changed. A day-trading class of stockholders thought there should be a larger premium, even though the stock had tripled in nine months.