Information Processing: THE INTERNET
WHERE THE CYBERACTION IS: YOUR HOMETOWN
City guides are a hot market enticing myriad big players
Planning a Saturday night to remember is a mouse click away. Imagine--hopping onto the Internet to find out about all the local happenings: movies, concerts, restaurants, sporting events, even the dates of Little League games. Want tickets to Alanis Morrissette or the Detroit Red Wings? Just click on the performing center, call up the floor plan, and choose your seats. And no more scrabbling about for a nearby restaurant. Tap on a map and view the possibilities, complete with menus and reviews, then zap in your reservation.
Welcome to yourtown.com--Web sites that have a handle on everything local from the theatrical sublime to the address of the nearest dry cleaners. Today, there are dozens of these guides, from Internet startups such as CitySearch and Yahoo! to a host of Baby Bells each trying to turn their online "yellow pages" into cybertowns. They are about to get plenty of company.
The digital land rush is under way. On Apr. 3, software giant Microsoft Corp. launched Sidewalk, a local arts and entertainment guide. This first appears in Microsoft's backyard, Seattle, but it will be followed by a dozen other cities, including New York and Minneapolis, by yearend. The veterans are also stepping up the pace. Digital City, a joint venture of America Online Inc. and Tribune Co., will outline plans later this month to move its 13 cities now on AOL onto the Web. CitySearch plans to expand from seven cities to 20 this year.
"BLOODY BATTLE." And don't forget television broadcasters. Time Warner Inc. is signing up local TV stations to become affiliates of its CityWeb service announced in January. The affiliates will contribute local programming, as well as airtime, that Time Warner can resell to advertisers. In exchange, they get access to CityWeb's national content, such as CNN Interactive. NBC, meanwhile, is urging its affiliates to wait for a similar service it plans to start this summer. "Everyone and their brother is launching a local-content site," says analyst Bill Bass of Forrester Research Inc. "We're going to see a bloody battle with more losers than winners."
Why all the fuss over local doings? Today we spend 80% of our time--and money--within 10 to 15 miles of home. Companies with ambitious Web plans want to tap into the $60 billion to $80 billion a year spent on local TV, newspaper, and classified advertising. Even if the online sites grab just 1% of local newspaper ad revenues, that would translate into $345 million--more than all online advertising in 1996, says Internet analyst Paul W. Noglows of Hambrecht & Quist Inc. And that doesn't count transactions. As more Web surfers buy tickets or products on the local Web sites, cybertowns hope to take a cut of the transaction revenues.
For now, traditional community players, such as newspapers and TV stations, are pitted against the Internet interlopers. Market researcher Forrester figures that advertisers will shift $1.5 billion in local spending from newspapers and other conventional media to online ads by the year 2001--with the heaviest hit suffered by classified ads. "It's the newspapers' market to lose," says analyst Mark Mooradian at Jupiter Research Inc. in New York.
And maybe too easily. The local market has long been served by newspapers, city magazines, and TV and radio stations. But the Internet has a big advantage over traditional media: unlimited space. Web sites can hold hundreds of thousands of listings, including photos and reviews, that would make a daily newspaper as thick as a phone book. What's more, Web listings can be easily searched and cross-referenced.
SHADOW OF A GIANT. Add in the deep pockets of some of the Internet players and phone companies, and it's no wonder local newspapers and TV stations are worried. Take Microsoft. Analysts who have seen previews of Sidewalk give it high marks for its easy-to-navigate design and for its savvy use of Microsoft technology, such as the company's street-mapping software. This has already helped Microsoft sign up national advertisers, including Barnes & Noble Inc. and United Airlines Inc., that will tailor their ads to particular regions.
But Microsoft's biggest advantage is its sheer size and staying power. The software giant says it will spend hundreds of millions of dollars over the next few years on its expanding Internet media empire. At Sidewalk, that translates into enough staffing--15 to 25 people in each Sidewalk city, including big-name editorial talent--to scour the local arts scene and write it up.
Sidewalk has yet another plus: It will benefit from links and cross-promotions with other Microsoft Internet properties, such as MSNBC, the TV and online news joint venture with NBC. It's also considering creating local versions of its Expedia online travel service and CarPoint auto-buying guide that could be offered with Sidewalk.
Most of all, with Microsoft's $9 billion cash pile, Sidewalk can afford to lose money for a few years until there is a critical mass of people--and advertisers. "This is not about turning a profit in 1997," says analyst Mooradian. "This is about companies positioning themselves for a market that will come to fruition in three to five years."
For companies trying to build cyberhoods, such as Microsoft and Digital City, that means quickly establishing a local presence and brand. Meanwhile, traditional local players are scrambling to learn the ways of the Web.
It adds up to steep investments with little near-term return. Digital City CEO Paul DeBendictus says a local guide can become profitable within two years, but Digital City plows profits back into the company to launch additional sites. He predicts the company will become profitable in three years. CitySearch is in investment mode, too. It has been through three rounds of financing since its founding two years ago, raising $35 million. Conn hopes to raise more money in the public markets later this year.
Part of the CitySearch formula for success is focusing on midsize yet promising markets that rivals might overlook. On Apr. 7, for example, it is opening a site for Salt Lake City--where 57% of households have PCs and where there are not yet any competing online city guides. "There's no reason to believe this is a winner-take-all medium," says Conn.
Newspaper publishers couldn't agree more. Many are scrambling to establish an online presence. There are some 369 newspapers online today, offering varying amounts of local information, but only a smattering--including the Washington Post, Los Angeles Times, San Jose Mercury-News, and Chicago Tribune--offer comprehensive community sites. Many papers, especially smaller ones, plan to band together or team up with a larger partner to share costs. That's the idea behind New Century Network, a nationwide chain of local newspaper sites formed by Cox Communications, Knight-Ridder, and Times Mirror.
The most successful pairings, however, are likely to match up local brands with companies that have Web know-how. CitySearch has already discovered this. Its strategy is to create sites that offer a full range of community information, from volunteer opportunities to arts and entertainment listings. To do that, CitySearch sets up sites for local nonprofit groups for free. It also helps small businesses, such as dentists and restaurants, create extended ads--mini sites that hold pages of services, prices, and photos. CitySearch charges $30 to $100 a month to run the site.
Digital City is also making new friends in the neighborhood. The service has 80 local partners, including 17 newspapers. Until recently, most of the papers were properties of Tribune. But under a new affiliate program, the company has signed up the first major non-Tribune newspaper, the Minneapolis Star Tribune. "Partnering will be a big advantage for us," says Digital City's DeBendictus.
TOP BILLING. As for Microsoft, Frank Schott, Sidewalk's product unit manager, says the company will team up where it makes sense. So far, however, Microsoft has announced few partnerships, and when it has, the Sidewalk brand has taken top or sole billing. "Microsoft wants to develop the mind-set that you come to them for local information," says Adam F. Leff, vice-president of business development for AdOne Classified Network Inc. in New York, which helps newspapers put their classifieds online. That, he says, will "cut the newspaper out of the loop."
Newspapers are sensitive to that threat. "We have brands that are over 100 years old and that are very strongly recognized," says Charlene Li, director of interactive media for Community Newspaper Co., an organization that represents 120 papers in eastern Massachusetts. "We want to make sure we preserve that."
As newspapers and their rivals on the Web fight it out, one thing that will be preserved are lots of options for getting the latest on the local scene.By Amy Cortese in New YorkReturn to top