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Behind the community boom

Community features are all the rage among portals, but analysts wonder whether the traffic those features draw will also attract advertising.

The bevy of technology and service features that Internet portals aggregate on their sites reads like a laundry list of online fads.

Features such as free email, chat rooms, stock quotes, news headlines, and personalization gained enough popularity that other portals had to either acquire the product or develop it themselves to remain competitive in the space. When one portal gets it, all the others end rush to follow.

Now there is a new rage among leading Web portals: community builders. These are user-controlled virtual communities where members can invite friends, family, or business acquaintances to interact on a discussion forum. The services are attractive because they allow users to communicate using popular Web tools such as message boards, chat rooms, and email.

On Monday, Excite announced a public beta version of Excite Communities, which was developed by recently acquired Throw.

The very next day, Yahoo launched an almost identical service called Yahoo Clubs, based on its own technology. Next on the list--Infoseek is expected to announce its own version, powered by 280, which it acquired in June for $800,000 in cash.

But behind all the hype about these online communities is the potential loyalty they can create as well as increasing revenue through targeted advertising.

Given the number of users who pass through portals every day, the Portalopoly idea behind community builders is similar to other personalization services. In registering for personalized content, the user provides the portal with demographic information in exchange for the ability to customize news, sign up for a free email account, or participate in chat rooms.

Users who register and personalize end up returning to the portals more frequently, companies say. Indeed, according to a recent study by Media Metrix, the top ten fastest-growing sites for the first half of 1998 all offer community-oriented services.

By boosting registered users who return often, portals hope to develop a loyal user base. Community-building features then lead those loyal users to, essentially, bring their friends.

"If they can employ you and I to get our friends to come to their site and make it my site instead of Excite's site, that's what they're after," said Abhishek Gami, an analyst at William Blair & Company, using Excite as an example.

The question is: Will the high volume of traffic translate to dollars for the firms?

"It's their users who are doing their selling for them," Gami noted. "People will feel like its their own online services, not Excite's. Ultimately, your ability to plug in merchandise sales in communities, that's the key on the revenue side of things."

Some analysts are skeptical, however, questioning whether advertisers will be willing to serve their banner ads on pages hosting often chaotic content found in chat rooms and message boards. While the idea behind giving users their own forum to communicate may help in user retention, community builders still need advertising to generate the lion's share of revenue.

"How do you really monetize this kind of audience?" Patrick Keane, an analyst at Jupiter Communications, asked rhetorically. "Do advertisers want to tie their ad message to un-editorially checked and often amateur content?"

The emergence of these community builders also may pose a challenge to the home page-building services made popular by companies such as GeoCities. Last week, Lycos made its own commitment in the space by acquiring WhoWhere, which adds Angelfire to Tripod under Lycos's network of home page builders.

America Online, one of first out the gates with its Member.AOL Web page hosting service, is expected to launch its Hometown AOL soon to challenge the current leaders in the space.