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Yahoo-GeoCities shadowed by Web publishing woes

Once among the hottest properties in the red-hot dot-com sector, home page community sites are in need of renovation.

Once among the hottest properties in the red-hot dot-com sector, home page community sites are in need of renovation.

Rapidly changing fortunes are nothing new among Internet companies, but few have seen their stars fall faster than those of home page sites.

Hype for online communities see related story: Web portals buy to survive reached a peak a year ago this week, when Yahoo agreed to buy GeoCities in a stock deal eventually worth $4.5 billion--a valuation stoked by TheGlobe.com's then record-setting initial public offering just weeks before the acquisition was announced.

At the time, communities such as GeoCities, Tripod, TheGlobe and Xoom.com were considered the next big thing. The belief was that Web portals needed a way to keep often fickle Web users on their services for longer periods of time and to be appealing enough that they would return every day. Home page communities seemed like the answer, as they showed loyal traffic.

Although home page builders attract millions of Web publishers, analysts now say that personal publishing has little future as a standalone business model. Those that remain, such as TheGlobe and Fortune City, have tweaked their models in an attempt to survive, leaving many to wonder whether home page publishing can endure as a business.

A year after the GeoCities acquisition, Yahoo defends the deal as a traffic-booster with plenty of untapped potential.

"It was about taking the two services and merging them and then creating a ton of opportunities for Yahoo--from getting users to making more money and to creating a greater set of community tools," said Yahoo spokesman Geoff Ralston.

Down the road, Ralston said that Yahoo will continue pursuing its strategy of offering personal home page publishing throughout its other properties. Home page building will become more integrated into Yahoo's shopping and auction products, as the company hopes to transform passive surfers into points of transaction.

But some analysts remain skeptical. For one, using GeoCities to open direct marketing and e-commerce opportunities remains a more difficult task than anticipated. Instead, the real benefit in acquiring GeoCities, analysts agree, comes down to traditional portal metrics.

"That deal was clearly about using (GeoCities') valuation to buy reach and traffic," said Chris Charron, an analyst at Forrester Research. "That was a lot of money, and I don't think they got the return they had expected."

In other words, Yahoo's acquisition of GeoCities, in retrospect, was less about buying a home page publishing community and more about the company's attempt to maintain its dominance as a traffic and page view generator. The publishing piece, analysts say, was just an added perk in the big picture.

"It was not something that was meant to propel Yahoo into a new area that would give it a strategic advantage," said Safa Rashtchy, a financial analyst at Piper Jaffray. " I personally view it as buying the traffic that GeoCities had."

Rashtchy added that Yahoo's traffic surged as much as 63 percent to 64 percent reach after the GeoCities deal was completed. That, according to him, is "important for advertisers and for competing with AOL for reach."

"I don't think the $4.5 billion price would've been justified if it was just for publishing," he said.

The picture is even bleaker for home page sites unable to partner with larger portals. According to analysts, companies focusing specifically on home page publishing cannot remain standing on their own. Instead, they will have to sell their businesses to larger Web properties to stay alive.

"They're only an acquisition target," said Patrick Keane, an analyst at Jupiter Communications. "I don't see them as standalone, sustainable businesses."

Most of the remaining independent players have had to tweak their business models. That's because many have found that simply selling advertising banners on member home pages will not cut it if there is no critical mass.

As a result, sites are diversifying into new revenue streams, such as licensing, and they are creating different ways to lure new users.

Privately held Homestead, for example, has turned to other Web sites, not users, as its revenue source. The company strikes deals with Web sites looking to add home page publishing. Then, users can access Homestead's publishing tools, which consist of drag-and-drop "elements," or features that can be added to a personal home page.

Homestead makes money from its partnerships with Web sites and from companies that want to include their services as elements. The company also recently landed $35 million in financing.

"Our goal is to create this distribution channel," said Justin Kitch, Homestead's chief executive. "We're not a customer acquisition model. We're enabling other companies to acquire customers through us."

Meanwhile, TheGlobe.com, which also allows users to create home pages, has taken a strategic turnaround of its own. A year ago, the company tried to boost its traffic by becoming a Web portal on top of a home page publishing site. TheGlobe, fresh from its record-setting initial public offering, added content links, news headlines and search features to its interface.

But that effort didn't fly, company executives acknowledge. Now the company is returning to its home page publishing roots. Instead of being only a destination for Web publishers, TheGlobe has begun licensing its tools to other Web sites, such as teen portal Alloy.com and search engine Direct Hit. TheGlobe hopes the deals will drive more traffic to its site and increase its advertising revenues.

"A year and a half ago, TheGlobe was trying to be a portal, and a mediocre portal at best," said Stephan Paternot, the company's co-founder. "We basically decided to move away from that. What we can win at is if we're known as a community site.

"The real money-generator here is in the long run, by signing up six or seven major sites," he added.

Whether these new models will result in long-standing viability remains to be seen. But community sites' ability to generate the interest and valuation of a GeoCities may be a thing of the past.

What remains, analysts say, is for these few holdouts to turn themselves into more viable businesses. And that will take some creativity.

"These companies have been marginalized," said Forrester's Charron. "Initially they created all this excitement because of their reach and traffic numbers. But advertisers and investors and Web sites are realizing that reach and traffic is not everything."