Newspapers, city guides and other local Web sites are experimenting with myriad revenue models and a variety of specialized content in their search for profitability.
Local Web sites are either going it alone or sticking with sister companies, as in the case of newspaper chains. The result is a local online market that is fragmented into city-by-city battles for ad dollars and region-by-region content needs.
A typical example is San Jose Mercury News' Mercury Center, one of the earliest online newspaper sites that embarked on America Online in 1993. The Center earns money from classifieds, banners, Web hosting, Internet access, electronic commerce and the sale of archived articles. Mercury Center has tried the subscription model, but abandoned it in May. Currently, the online venture is also looking into sponsorships and expanding e-commerce into a "unique" store, said Doug Edwards, Mercury Center online brand group manager.
EXPERIMENTING IN NEW AREAS
On the content side, Mercury Center maintains more than half a dozen targeted sites including Good Morning Silicon Valley with a national tech and financial audience; Just Go Bay Area for locals looking for entertainment, music and cultural events; and Digital High designed and written by local teens for their peers.
Mercury Center also recently cut a deal, which is still being developed, with San Francisco CBS affiliate KPIX-TV to do cross-marketing, advertising, sales and promotions.
"We have to experiment a lot in these areas because I don't think just any one way [alone] will work," Mr. Edwards said.
Knight-Ridder's Mercury Center is typical of newspapers and local-content sites trying to find their own way in an increasingly wired society and an increasingly competitive market. However, few, if any sites are making a profit yet.
DEATH OF NCN CREATES NATIONAL VOID
Newspapers within chains often work well together, but the March death of New Century Network created a void for online ad sales among national publishers. NCN tried to link local advertising to a nationwide network involving nine major newspaper chains. However, internal fragmentation eventually wore all the partners out.
"The demise of NCN was lamented, but at the same time it strikes me that they hadn't really penetrated the local markets or the psyche of the market," said John Sturm, president of the Newspaper Association of America.
REAL MEDIA, DOUBLECLICK STEP IN
"NCN was really focused on national [online] advertising," said Randy Bennett, VP-electronic media at the NAA. "It certainly helped raise the visibility of online advertising, but it was really more focused on building brands at the national level and distributing them down to the local level."
In its wake, ad network Real Media has picked up more ad sales and service business for newspapers across the country.
A newer nationwide attempt is coming from DoubleClick, with a new service called DoubleClick Local announced earlier this month.
With its service, DoubleClick will represent the more than 70 sites in its network to regional and local advertisers that want to geographically target an audience. DoubleClick will charge $25 to $50 per thousand impressions.
"It's the same place we were with national advertisers a year or so ago," said Kevin O'Connor, DoubleClick CEO. "It's not so much a competitive issue as a developing-the-market issue. There are no shortage of prospects; it's getting them to come online."
CITY GUIDES BLUR THE LINE
But for other local sites, competition is never far from their thinking and often is credited as a driving force in development.
Much has been made of the competitive entry of Microsoft Corp.'s Sidewalk along with other city guides including City Search, Real Cities and Digital City. But even in competition the lines are blurred: America Online and Tribune Co. own Digital City; Knight-Ridder New Media owns Real Cities; and City Search has funding from newspaper companies including the Washington Post Co. and Times Mirror Co., and sets up its sites with partners including The Dallas Morning News, Los Angeles Times, The (Baltimore) Sun and San Diego Union-Tribune.
GEOGRAPHIC RESTRAINTS REMOVED
Both established newspapers and newer sites, such as Microsoft's Sidewalk, have valuable assets, albeit very different ones.
Newspapers have the depth of local content and the advantage of advertising sales relationships with local advertisers.
However, the new online entrants tend to have a much better understanding of technology and, usually, deeper pockets.
"Newspapers in general tend not to have the technology, [and technology] is less compelling to advertisers," said Marc Johnson, analyst at Jupiter Communications, "but on the user side, the technology gives a better value when you can do things like search easily and keep your own calendar."
Sometimes those opposite advantages result in working together--for instance, alternative weekly The Village Voice syndicates listings and content to Sidewalk and Yahoo!NY.
"We develop partnerships and, as we find good arrangements, we look at scaling them up to the whole Knight-Ridder network," Mercury Center's Mr. Edwards said. "Newspapers have traditionally operated very much as autonomous units because of geographic separation, but in the online world those geographic restraints are removed."
JOE'S PIZZA WANTS LOCAL ADS
But Evan Neufeld, another Jupiter analyst, says that lack of geographic specificity may be just the problem.
"Having a discussion about local advertising on the Internet is in some ways ridiculous because the Internet renders geographic obstacles obsolete.
"For national advertisers, it's great because they've always struggled with how to reach a local audience. But if I'm Joe's Pizza, I only want to reach the people where I live," he said. "It's a tough market, but it is the newspapers' market to lose," Mr. Neufeld said.
Copyright July 1998, Crain Communications Inc.