City dot-coms still waiting to strike it rich

[Correction: An earlier version of this article stated that Associated Cities was formed in June 2005. In fact, it was formed in 2003. Additionally, Patrick Carleton, president of Associated Cities, informs OJR that the group now has 87 member sites with 6 million unique visitors, not 82 member sites with 5 million unique visitors, as originally reported. The story has been changed to reflect that information as well.]

A decade ago, a scattered band of savvy wheeler-dealers had the foresight to snap up thousands of dot-com Web addresses composed of the names of cities, counties and other geographic regions. They have been waiting ever since for that presumably prescient virtual land grab to make them rich.

It has been a long, sometimes seemingly hopeless wait. But last year, so-called geodomain entrepreneurs finally could point to some concrete developments that suggest their investments might pay off one day. In fact, the prospects for the future began to look bright enough that the major players in the city-site niche decided they needed a trade association of their own, and they formed one — Associated Cities — to help promote the sites among consumers and advertisers.

In the early days, it wasn’t clear whether private operators would be allowed to stay in the geodomain game. Municipal governments from Myrtle Beach to Barcelona filed suits asserting that since they owned the trademark to their name they were entitled to the corresponding URL. That argument was repeatedly rejected by the courts and finally fizzled out several years ago. But while the legal threat to city sites dissolved, a swarm of competitors — ranging from the media giants’ city guides and travel portals, like Citysearch and Expedia, to trendy, local blogs and online community forums (see OJR’s story “Grassroots Journalism”) — had arisen, making city dot-coms begin to look irrelevant.

Various types of city sites

A few city domains, most notably Cleveland.com, Miami.com and Boston.com, are owned and run by their respective city’s major daily newspaper and do workhorse duty as the paper’s website. But most geodomains are held by an assortment of entrepreneurs who may know little or nothing about the town whose namesake website they run. The value of the domains for them lies in the sites’ utility as advertising vehicles — and the prospect that they could be resold some day for a hefty markup over the purchase price.

The pioneers in the field by the early 1990s had swept up all the “pure” geodomains, such as LosAngeles.com. Latecomers paid from tens to hundreds of thousand of dollars for pure domain names, while laying first claim to endless variations of secondary names like Los-Angeles-California.com and derivatives such as MyLosAngeles.com.

Over the years, the major players have accumulated hundreds of geodomain names. A majority of the most important city dot-coms today are in just three hands.

Boulevards New Media owns 90 significant city domains, including pure URLs for 12 of the 20 largest U.S. cities, and hundreds of lesser ones. The company is headed by Dan Pulcrano, the publisher of Metro, an alternative weekly paper in San Jose, where Boulevards is also based. The company’s look-alike websites include a cluster in the San Francisco Bay Area, led by SanFrancisco.com and SanJose.com, and others scattered around the world from Dallas.com and Houston.com, to Managua.com and Belfast.com, and beyond.

A company in Hilton Head, S.C., called Information Centers, Inc., owned by Skip Hoagland, controls around 600 URLs, starting with a cluster in the Southeast including Atlanta.com, HiltonHead.com and MyrtleBeach.com. Hoagland’s geodomain empire extends from there to cities and countries around the world, from Honolulu.com to Cuba.com. Hoagland has said he was a tourist magazine publisher just trying to protect his online flanks when he purchased his first city dot-com in 1995, a step that led him into his current full-time vocation as a geodomain entrepreneur. He told an AP reporter that he remains constantly on the prowl for underutilized city and country URLs.

One of Hoagland’s recent prize purchases was Portland.com, which was gathering dust in the hands of the company that publishes a newspaper in Portland, Maine. Hoagland, who had said he’s never paid more than $200,000 for a domain name, acquired it for an undisclosed sum in 2004. Using his standard city dot-com template, he has turned it into a platform for paid listings of hotels, restaurants and other services for visitors to Portland, Ore.

The third power in geodomains is an enterprise called Castello Cities Internet Network Inc., headed by a pair of brothers, David and Michael Castello. They own more than a 1,000 city, country and other geographic URLs, including city dot-coms for such major tourist destinations as Palm Springs, Acapulco and Nashville.

There are a few independent city sites — such as Richmond.com, the one and only city dot-com owned by John Whitlock, of the Richmond-based technology consultancy Whitlock Portals — that have full time staffs of as many as half a dozen reporters, editors and programmers, aided by strings of paid freelance contributors. But most city sites, operated by aggregators that have many more websites than people on staff, are designed to run with little human intervention.

Running on autopilot

Indeed, the chief virtue of city dot-coms is that they can practically run themselves. As Hoagland exalted in an interview posted on the Associated Cities website, “We eliminate most everything that starts with the letter ‘p’ except for profit. These include paper, publishing, printing, property, paper-delivery trucks, paper machines, property tax, people and property for communication towers.” As a result, his city dot-coms are a better deal for advertisers, Hoagland asserted. “We can reach many more people instantly at much less cost” than local media competitors, he said.

Perhaps their most important competitive advantage is the fact that city dot-coms benefit from what entrepreneurs in the field call “intuitive branding.” In short, they don’t need to go through a costly song and dance to imprint their Web address in the minds of consumers interested in the city they cover. The sites also come with built-in traffic. According to Associated Cities, between 60 and 80 percent of visitors reach city dot-coms by typing the name directly into their browser. To profit from that traffic, all the operator needs to do is sell ads and feed them into appropriate slots on the city dot-com’s Web pages.

The end result at many city dot-coms is a tacky jumble of paid listings for restaurants, hotels and other local businesses, perhaps with the local temperature appearing in the corner and headlines from local papers somewhere else on the site.

But geodomain entrepreneurs insist the unimpressive looks are deceiving. “Though our front page is obnoxious with tons of local ads, we refuse to change it because it is a triple positive,” said Michael Castello, in an interview with Associated Cities, in which he and his brother boasted that their city sites are running circles around other local competitors. “Advertisers love to be there, visitors love to click on the special PalmSprings.com rates and we love the money we make from that page,” Michael Castello said.

To anyone who inclined to sniff at city dot-coms, the main players have a message. Hold the snickers. Several developments in the past year suggest that a new era for the sector may be at hand.

To begin with, the publishers of rival newspapers, the Las Vegas Sun and Las Vegas Review-Journal, fought it out in a legal dispute that was resolved last spring over control of the LasVegas.com website. The terms of the settlement weren’t disclosed. But the initial offer by the ultimately victorious Greenspun Media Group, publisher of the Sun and owner of Vegas.com, was a whopping $12 million. Perhaps no other city dot-com is as inherently lucrative as LasVegas.com, which reportedly generates $8 million in revenue a year. But besides the hefty sum on the table, the fact that two “old media” entities were fighting over a city dot-com lent much-appreciated credence to the fading notion that good geodomains are worth big money.

The events in Las Vegas sent a jolt of energy through the world of city.coms. Since then, an assortment of other independent Web publishers with city dot-com sites have joined, bringing the total number of city domains under the association’s umbrella to 87 with a reported combined monthly traffic of 6 million unique visitors delivering 50 million ad impressions a month.

Landmark analyst’s report

Another development last year that gladdened the hearts of geodomain entrepreneurs was the November release of a research report on independent city sites by an interactive marketing research firm, Borrell Associates. Many of the sites surveyed reported that ad sales doubled or tripled in 2005 from the year before. “From Atlanta to Yuma and from the suburbs of Syracuse to the tiny Gulf town of Port Aransas, Texas, small, independently run local sites have begun to pick up significant steam,” the report asserted. Fueled by “feverish growth in online advertising,” they have emerged as a “new threat” to “old media.”

The city dot-coms have abandoned the model of traditional media sites, which have expensive staffs of reporters and editors cranking out local content, the report said. The city sites “couldn’t care less about local news headlines, obituaries and Doppler weather reports. They shun the drudgery of repackaging local news and information, and instead focus almost exclusively on fun and interesting things to do around town,” the report went on to say. In the process, they are “elbowing in on territory that traditional local media properties have been trying to stake out for the past decade.”

But the authors of the Borrell Associates report were careful not to overstate the case for a resurgence of city sites. The city dot-coms continue to draw only a fraction of the visitor traffic that flows to local media sites, the report pointed out. Revenue, even if it doubled or tripled last year, still lags far behind revenue at local “old media” websites. Annual revenue at many city sites has “moved into the six-figure range,” the report stated. “For a few of the larger competitors, it’s well above $1 million.” Yet revenue at every city site surveyed “amounted to less than 1 percent of the local online advertising expenditure in their respective markets. In contrast, local TV and radio Web sites typically capture market shares of 2 percent to 4 percent, while individual newspaper Web sites get about 18 percent.”

Few of the city sites appear to have ambitious plans to claim more market share, Borrell’s analysts found. “The City.com sites have also done little to develop the latest applications and services for their users,” the Borrell report noted. Few have e-mails, RSS feeds, animation, mapping or other fancy graphics, or sophisticated ad insertion and tracking. The content can be a joke — as it was one day last fall when Borrell’s researcher dropped by WashingtonDC.com for a visit and found that the lead news story of the day was a press release about Armenian railroads. “Almost none of the sites is exploring community input from such networking technologies as forums, blogs, and wikis.”

None of those caveats has stopped geodomain entrepreneurs from trumpeting the Borrell Associates report as vindication of the viability of their business model. An Associated Cities news dispatch about the report gushed that this is “the first time the [geodomain] space has been validated by an outside source.” The gist of the report, as the association saw it, is that “consumers and rivals to these entrepreneurial ventures can no longer take an apathetic stance on the viability of these sites as valuable service providers.”

David Castello found even deeper significance in publication of the report. In a comment to Associated Cities, he pronounced, “Many in print, radio and cable will look back someday and say it was the first time they took notice of us.”

Advantages for advertisers

The Castellos, who post no contact information on any of their websites and couldn’t be reached for comment by way of emails to the webmaster, probably don’t expect aesthetes or intellectuals to be impressed with their admittedly “obnoxious”-looking city sites. But city dot-coms are unsurpassed in their ability to cost-effectively steer business to advertisers, geodomain entrepreneurs assert. “Our network presents a compelling unfair advantage for advertisers and partners,” the Associated Cities website boasts.

In their interview with Associated Cities, the Castello brothers described how ads for PalmSprings.com practically sell themselves on the strength of success stories that business people are hearing from others. “When it comes to Internet marketing, there is no competition in Palm Springs for PalmSprings.com,” said David Castello. “That’s because we’ve concentrated on generating revenue for our clients since day one,” unlike other local sites which expend a lot of costly but needless effort on what he calls “smoke and mirrors.”

Julie Varnau, online editor for The Desert Sun, the daily newspaper in Palm Springs, counts her site, which averages about 225,000 unique visitors a month, as a competitor of PalmSpring.com’s. “We are competitors for advertising dollars,” she said. “They are obviously getting ad dollars that we’d love to have on our site.”

Of course, helping visitors spend their money in town isn’t the primary goal of The Desert Sun’s website. Nonetheless, the paper isn’t about to cede that role to PalmSprings.com. To serve that big market in the desert resort city, The Desert Sun’s website added a visitors guide in 2004, Varnau noted. It has far more extensive lists of a wider array of services than PalmSprings.com has. And it has a big advantage in being able to draw from a deep pool of continually refreshed content produced by the newspaper staff. Thus, the Sun’s online visitor guide maintains a calendar spotlighting a dozen or more events a day versus a paltry list of several random events a month at PalmSprings.com. The Sun’s site also has a weekly schedule of shows at galleries, complemented by the paper’s extensive database of restaurant, movie and theater reviews.

Without a doubt, the paper’s website would be far more useful to out-of-town visitors — but only if they were able to find it. It would help if tourists happened to know the name of the city newspaper; otherwise, they would have to get there with the help of a search engine, which is where one of the biggest natural advantages of geodomains kicks in. Pages on PalmSprings.com inevitably rank higher in search engine results for local attractions because everything about the site, down to the domain name, screams “Palm Springs,” Varnau says. “We have to meter our use of Palm Springs a little more because we also cover other cities in the Coachella Valley who don’t appreciate it if we mention Palm Springs all the time.”

Maybe content matters after all

In Associated Cities’ recent interviews with all three of the top geodomain aggregators, Boulevards New Media’s Dan Pulcrano is the only one who said unique editorial content may actually matter.

As long-time publisher of alternative weekly newspapers in the San Francisco Bay Area, he told Associated Cities that he personally has a strong appreciation for local content. “Our roots are in independent journalism, so an editorial approach is important to us. We hire professional journalists to write the majority of the information,” he said.

In fact, when he and his editorial team first started launching city sites in 1994, they envisioned that the sites would be filled with many more editorial features than they ended up carrying. Pulcrano told Associated Cities that he anticipated publishing stories that “emphasized arts and entertainment and alternative culture with edge and attitude.” But it became apparent soon enough that what visitors wanted was “a well-priced hotel room rather than the coolest back-alley jazz club,” Pulcrano said. So the sites shifted their focus to tourist services several years ago. But now, the tide may be turning back. “We are slowly reintroducing locally-targeted content, but we’re writing it to be embraced by a general audience,” he said.

For now, the only source of local news on Boulevards’ sites is headlines delivered by Topix.net, which aren’t always on target. But, in October, the company took what could turn out to be a first step toward adding ambitious new features to the company’s city sites. Boulevards New Media paid an undisclosed sum to acquire SFStation.com, a popular guide to entertainment, food and culture in San Francisco. The site, which draws about half a million unique visitors a month, will continue to be run by the existing team as a wholly-owned subsidiary of Boulevards.

Kyu Kyung, one of SFStation’s founders, who will stay on as president, said Boulevards was the most compatible of a number of suitors who have expressed an interest in SFStation.com over the past year. Kyung said he was drawn to Boulevards by the “similar company cultures and their willingness to support our vision.”

In fact, the company cultures are quite different in at least key one respect: staffing. At Boulevards, a staff of about 16 people manages thousands of domain names and runs more than 100 active city dot-coms around the world. At SFStation.com, five full-time employees and more than 50 regular, paid freelance contributors produce the single website.

Pulcrano did not respond to requests for comment about his plans for the future of the Boulevards city sites. But in an interview with OJR, Kyung suggested that at least some of the city dot-coms will be experimenting with one of the most notable features of SFStation.com. “Dan Pulcrano acquired us not only for our reach in San Francisco but for our proprietary technology,” he explained. That technology allows registered users to post their own listings in business directories and event calendars on the Web site and to modify them in real time. The SFStation.com team is going to help relaunch some of the Boulevards sites with similar features, Kyung said.

Imagine that. A city dot-com with a human touch.