There's gold in them thar cities, and companies are a-rushin' in to mine it.
CitySearch, Microsoft's Sidewalk, and America Online's Digital Cities are leading the rush into the local content business, hoping to capture some of the billions of dollars generated by local advertising every year.
Today CitySearch, an independent start-up, announced media partners for its new local online service in Austin, Texas, which is scheduled for a late February launch.
Digital Cities launched several months ago and Microsoft plans to launch its first Sidewalk--for Seattle--in late March, according to Doug Duffield, an account supervisor for Sidewalk.
There's no wondering why these companies are lining up to give Internet users a local place to surf. "It's all about money," said Bill Bass, an analyst with Forrester Research. In 1995, the advertising firm McCann-Erickson estimated that advertisers spent $66 billion on local advertising primarily in newspapers, yellow pages, and broadcast media, he said.
"People that aren't even traditional local media companies--Microsoft and America Online--they look and say, 'Hey, if we can break into this business we can tap into some serious dollars.'"
That's true, according to Charles Conn, CEO of CitySearch. But Conn stressed that CitySearch's revenue model is not solely based on traditional advertising. Instead, CitySearch creates a Web page for the small and medium-sized businesses which it lists on the site, and charges them a monthly fee from $29 to $100 to host the site, he said. "We are focusing on small and medium sized businesses," Conn said.
Sites that don't pay still get listings.
Like Sidewalk and Digital Cities, CitySearch provides its own editorial content and has local marketing staffs selling the ads.
Though Sidewalk, CitySearch, and Digital Cities are leading the drive to provide original content with their own editorial staffs, several other businesses are hopping onto the local content bandwagon.
Newspapers are putting up their local content on sites such as Boston.com; search engines like Yahoo are aggregating information and allowing users to search creatively; and yellow pages are getting into the act, creating sites around their content such as Pacific Bell's At Hand.
These companies "are all looking at ways that interactive media might service consumers at the local level," said Peter Krasilovsky, an analyst with Arlen Communications,
But getting that money won't be as easy at it appears, Bass said. "We said Digital Cities is going to fail," Bass said. "CitySearch is going to fail. Microsoft is going to fail but will end up staying in the game because they have enough money."
Bass thinks local advertisers won't necessarily go to Web sites with local identities but instead will head toward sites that aggregate lots of information according to topics.
"Most of the money is going to flow into the targeted national sites that cherry-pick the most lucrative parts of the advertising world," Bass said.
Others disagree with Bass, saying the model looks extremely lucrative.
Van Baker, an analyst with Dataquest said he's referred to CitySearch "as a money machine."
"It's an alternative to newspapers," Baker said. "Local content is what people care about the most and it appeals to a sense of community."
While Baker expects models like CitySearch to be successful, he and others added that each city has only enough business for one or two of these types of service.
"It's very much an issue of who gets there first," Baker said.