Geocities: Mr. Bohnett's Cyberhood

First, the Net community maker offered home pages. Now it's bringing in online shops--and preparing to go public

It's a beautiful day in the neighborhood. Just ask "Grandma." She lives 11 miles from her nearest neighbor--and three miles from her mailbox--on Little Stony Mountain in West Virginia. But these days, she's spending lots of time in Heartland, her Geo-Cities cyberhood. Her address: "I'm a Geo junkie," says Grandma, a disabled grandmother who prefers anonymity. "It's my main contact with people."

With more than 1.5 million cybernauts homesteading in 40 different GeoCities neighborhoods, such testimonials are endless. That's exactly what David Bohnett, a 42-year-old former marketing executive at software company Legent Corp., was banking on when he set out in 1994 to create a giant Internet community. Bohnett (pronounced BO-net) bet that if he gave away Web space and home-page publishing tools and created neighborhoods built around common interests or hobbies, Netizens would pour in. Sure enough, TV and movie buffs flocked to create addresses in the Hollywood neighborhood, nerds migrated to Silicon Valley, and small investors converged on Wall Street.

It's a land-office business. GeoCities is signing up new members at a rate of six per minute. In February, was the seventh most visited Web site, according to Web-traffic monitor RelevantKnowledge. It was the second-fastest-growing Web site last year, after, an electronic greeting-card publisher. The result: GeoCities racked up $6 million in revenues last year, 80% from advertisers keen to target specific neighborhoods.

Now, Bohnett thinks he can quadruple revenues, to about $25 million this year, partly by adding online stores to the neighborhoods. This month, a new program called GeoShops will let Netizens open electronic storefronts for $24.95 a month. For an extra $40, plus 5% of sales, they can plug into GeoCities' order- and transaction-processing system, including credit-card verification and sales-tax calculation. Bohnett figures more than 100,000 entrepreneurs will hang their shingles during the first year.

This is no ordinary electronic mall, an approach that has flopped on the Net. Instead, online merchants can pick neighborhoods where people of like minds hang out and chat. A maker of hand-tied flies for trout seekers, for example, could opt for Yosemite, an area for outdoor sports fans. "It's like Avon ladies online, where ordinary people become a sales force," says analyst Kate Delhagen of Forrester Research Inc.

Corner cyberstores is just GeoCities' latest foray into E-commerce. In recent months, the Santa Monica (Calif.) startup signed deals with online retailers such as bookseller, record shop CDnow Inc., and credit card company First USA Visa: They get a prominent and exclusive placement on its site--and GeoCities gets a cut of their revenues, an arrangement that could bring millions to GeoCities.

The startup has already proven it can draw the advertising dollars--some $4.8 million last year. By letting companies zero in on specific neighborhoods, GeoCities appeals to 40 to 50 advertisers at any given time, including Ford, Microsoft, M&M's, and Cathay Pacific. "What intrigued us about GeoCities was the ability to target the auto enthusiast neighborhoods," says Jon Bucci, interactive communications manager for Toyota Motor Sales USA Inc., a Motor City advertiser.

But it's fees from shopkeepers and revenue-sharing from the giant online retailers that will propel GeoCities into a public offering and profitability this year, Bohnett says. In 1998, he figures GeoCities will report between $20 million and $25 million in revenues, 70% of that from advertising, including the promotional fees and commissions paid by its exclusive commerce partners. The rest will be monthly rent and commissions from GeoShops.

In preparing for its IPO, GeoCities is building a professional management team. It hired an ad chief from Disney Online, Michael G. Barrett, and a CFO, Stephen L. Hansen, from Universal Studios. Next up is a CEO to replace Bohnett, who will remain as chairman. Says Bohnett: "My background is software, but what we really need is a savvy media or publishing executive." He expects to name a new chief in a few months.

IMITATORS. Success means competition, and GeoCities already has a batch of imitators, including such sites as The Globe, Angelfire, and FortuneCity. In February, its biggest rival for free Web space, Tripod Inc., was snapped up by search-engine company Lycos Inc. for $58 million in stock. Success also has meant buyout offers--GeoCities says it had two last fall but won't name the companies. Instead, in January the company raised $25 million from Softbank Holdings Inc. and $5 million from search engine Yahoo! Inc.--for a combined stake of 32%.

If GeoCities can stave off the competition and keep growing, will it lose its hometown appeal? Already some are griping. Last fall, the company decided members had to accept ad banners or pop-up advertising on their sites. That drove some homesteaders away.

But most GeoCities' residents are happy with their free Web homes--even Steve Schalchlin, who's decamping soon for his own site. Two years ago the singer-songwriter in North Hollywood, Calif., set up a page in the Broadway neighborhood to keep a diary so his brothers in Texas could follow his fight against AIDS. The resulting publicity led to an Off-Broadway production of a musical he'd written, The Last Session. Now Schalchlin wants his own domain name. "But I'll always keep the GeoCities link," he says. It's that kind of loyalty that Bohnett will need to grow GeoCities into a major metropolis.