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Internet Communities


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INTERNET COMMUNITIES

Forget surfers. A new class of Netizen is settling right in

After her marriage broke up, Bonnie Sakadales ventured onto the Internet for advice on raising her son and daughter alone. Last June, the University of Maryland administrative assistant landed at Parent Soup, a World Wide Web site plastered with parenting information and online "bulletin boards" where visitors swap solace and tips. Within days, Sakadales struck up an online conversation with Al Cole, an Oswego, N.Y., security guard, who was struggling with custody issues. After two weeks of long phone calls, Al drove to Damascus, Md., to meet Bonnie--and they fell in love. Last Valentine's Day, they were married, and Bonnie is still singing the praises of Parent Soup: "It gave me a world to be in besides work and the kids. I can't imagine what my life would be like without it."

Neither can millions of other Web surfers who are approaching the Internet in an altogether new way. Instead of flitting from site to site dabbling in the gobs of information and latest news flashes, this new class of Netizen is settling in, staying put, making a home away from home. Oh, they're after the

info, too, but they seek far more than that. They want a sense of community--the cyberspace equivalent of the bar at TV's Cheers, where everybody knows your E-mail address.

To these Netizens, content is no longer king. They're not necessarily plunking themselves down on barstools at uptown Web sites laden with splashy content like Time Warner Inc.'s Pathfinder or the oh-so-hip online lofts of HotWired Inc.--both hemorrhaging big bucks in search of visitors who will stick around. Nearly every walk of life can chat it up, from Tripod for twentysomethings to Utne Online for New Age intellectuals to GolfWeb for Tiger Woods wannabes. Says Tom Rielly, CEO of the online gay community PlanetOut: "It's not the content. It's the people, stupid. Content may be why people visit a site. But community is why people stay."

"NEXT WAVE." Call it the colonizing of cyberspace. Forget surfing: Today, people of like minds and interests are establishing Internet communities faster than any construction company in the brick-and-mortar world. According to a new BUSINESS WEEK/Harris Poll, 57% of those hopping on to the Net today go to the same sites repeatedly instead of wandering like nomads from one to the next. And of the 89% of Netizens who use E-mail, nearly one-third consider themselves part of an online community. "We're at the beginning of an explosion," says Andrew Busey, chairman and chief technology officer of ichat Inc., an Internet startup in Austin, Tex., that makes software for online chats. "Community and communications is the next big wave on the Internet."

What's behind this new geography of the Web? Experts say the biggest factor is the changing demographics of its users. There are now some 40 million people on the Web, up from 1 million in December, 1994. As that number grows, the online population begins to look more like the mass population. The BUSINESS WEEK/Harris Poll, for example, found the Web is no longer a stomping ground just for the young: 67% are now 30 years and older, including 19% over the age of 50 (page 84). And, today, women account for a bigger portion of the Net population than ever before--41%, up from 21% a year and a half ago.

As Mr. and Ms. Mainstream venture into cyberspace, they often find it a dizzying place, what with hundreds of thousands of Web sites to choose from. So, just as in the physical world, Net newbies are gravitating to Web sites where they can find friends and feel comfortable. "To most people, the Internet feels like jumping out into the ocean," says Douglas Rushkoff, author of Cyberia, a book on cyberculture. "Online communities provide the lifeguards."

Early signs show they may also provide the profits. Netrepreneurs are finding they can turn the intrinsic cultural appeal of communities into a real business proposition. The numbers tell the tale. According to a study by the University of Minnesota, if a site doesn't capture Web surfers' interest within eight seconds, they're gone--off to another one with a click of the computer mouse. Even if they stay, the average visit is only seven minutes. That leaves precious little time for Web publishers, advertisers, and merchants to promote or sell anything.

Not so inside Net neighborhoods. Simply adding a way for Web surfers to chat, for example, consistently boosts traffic on any Web site by as much as 50%. It also calms those itchy index fingers: Chat visitors hang around a half-hour, three times the average--a big lure to advertisers. And a little communication can go a long way toward wooing those wallets. A new study by Yankelovich Partners Inc., a marketing research firm, found 63% of people online say they won't buy anything over the Web until there's more human interaction involved.

Garden Escape Inc. found that out fast. CEO Clifford A. Sharples launched the Web site in March, 1996, primarily as an online nursery with everything from 294 different kinds of roses to heirloom cherry tomatoes. But Sharples was soon inundated with E-mail and questions. Three months ago, he did something about it, adding chat and forums on regional gardening issues, such as one for the Pacific Northwest. The result: Visitors spend twice as much time on the site now--20 minutes. And sales? They're growing at 40% a month, boosted by orders from chat participants, who spend an average $100 an order, vs. $60 from others. "We thought of ourselves as more of a store," says Sharples. "We underestimated how important community would be."

So just what is a Web community? For now, most of these online gatherings are still in their formative stage. Like Rome, they are not being built in a day but are evolving as people gather and establish, week by week, their interests and their needs. That makes their natures as eclectic and varied as the neighborhoods in Brooklyn and Bombay.

There are some constants, though. All communities are built around a common interest or passion, whether it's playing piano or being a parent. But the ideal community site does more than just focus on like interests. It encourages lots of communication and interaction, whether through chat rooms, bulletin boards, or discussion forums, which can stretch out over a period of months. "In the chat rooms, people essentially become the content," says Sony Online Vice-President Matt Rothman.

But most important of all, the creators of these communities don't try to play the role of benevolent dictator. Sure, they provide a framework and guidance along the way, but then they step back and let the members shape the community. On 3DO Co.'s Meridian 59 site, for example, the Redwood City (Calif.)-based company put together a medieval world of sorcery and swordplay, then opened the doors. Very quickly, a group of people formed bent on killing other players, and just as quickly, a group sprang up to protect the innocent. Now when "killers" are spotted, members of "protector" groups stalk and do them in. "The successful communities stand back and let nature take its course," says Chip Morningstar, co-founder and chief scientist at Electric Communities, a Cupertino (Calif.) builder of virtual communities.

For many inhabitants of online communities, that course is a direct path from their work lives. According to the BUSINESS WEEK/Harris Poll, 42% of those involved in an online community say it is related to their profession, while 35% say their community is a social group, and 18% say it revolves around a hobby.

FARM BELT. One of the more successful work-related sites is Agriculture Online (@griculture, in geek-speak). Launched two years ago by Meredith Corp., this site offers the latest farm news, Global Positioning Satellite data, commodity prices, and bulletin boards galore. Visit the Electronic Coffee Shop and jump into a discussion on how to control soybean cyst nematodes or offer up a down-on-the-farm joke. "Interactivity is the linchpin of this whole thing," says @griculture Online editor John Walter. "But the chemistry of good discussion groups is mysterious."

Baffling or no, it's working. The site has mushroomed from 83,000 "hits," the number of times a site is accessed, in August, 1995, to 5 million hits last month. And now it's on track for profitability by yearend through a combination of advertising revenues and $10 monthly subscriptions for its Blue Ribbon premium services, which include up-to-the-minute weather reports.

While such communities are new to the Web, they spring from the very roots of the Internet. In the early 1970s, the Internet emerged as a tight-knit community of Defense Dept. scientists exchanging research data. Soon, as universities and private research labs hooked in, more and more participants began forming subcommunities. In 1979, so-called Usenet groups, which allowed computer users to post messages in bulletin-board fashion, developed and blossomed into thousands of "newsgroups" focusing on everything from Apple Computer Inc.'s Macintosh software to The X-Files TV show.

Online communities have a rich tradition outside the Net, too. The WELL, for instance, started in 1985 in Sausalito, Calif., as one of the first community-oriented "bulletin-board systems," so-called BBSes--private computers reached via the telephone system rather than the Net. In late 1995, the WELL made itself accessible via the fast-growing Web. Others, such as New York's East Coast Hangout (ECHO), still operate thriving BBS communities.

America Online, however, was probably the first to get it right for the masses. In the early 1990s, AOL popularized chat, which allowed people to exchange messages live. Today, AOL boasts some 14,000 chat rooms accounting for about one-third of its members' time online. Recently, AOL introduced another innovation--"buddy lists," which alert members when friends are online so they can exchange instant messages. "Community is the Velcro that keeps people there," says AOL Studios President Theodore Leonsis.

Now the Web is laying out the www.elcome mat for communities. When the Web surfaced in late 1993, most sites focused on their newfound ability to publish graphics-rich documents. But in 1996, software makers began developing Web-based programs for discussion forums and chat. These programs are in hot demand now, creating a booming business for startups such as ichat and eShare. And some sites, such as LiveWorld Productions Inc.'s Talk City, are devoted exclusively to chatting (page 74).

Today the push is to turn the age-old appeal of communities into cash--especially on the profit-starved Web. Just last month, for example, the popular political site PoliticsNow closed amid rumors that it is losing money in the low seven figures. CMP Media Inc., unhappy with how little revenue its NetGuide Live site was generating, cut most of its staff. Time-Warner's Pathfinder is losing at least $5 million a year.

And American Cybercast, which is producing The Spot and The Pyramid cybersoaps, filed for Chapter 11 bankruptcy protection in January. The problem: These early Web efforts have not taken full advantage of interactivity.

It's early, but there are tantalizing signs that cybertowns could fulfill the early promise of profits on the Web. For one, these sites are alluring to advertisers, who will gladly pay to reach an audience that stays put long enough to absorb their ad messages. Moreover, communities have common interests and more defined demographics, say a group of gardeners or antique-car buffs, that make it easy for advertisers to target buyers. "You're reaching more qualified eyeballs," says Seth Goldstein, president of SiteSpecific Inc., a New York interactive advertising agency.

That's already translating into higher ad rates for some Net neighborhoods. Women's Wire, for example, is a Web community for career-oriented women that commands ad fees of $50 per 1,000 "impressions," or ad viewings. That's up from $20 last summer and considerably more than the average $30 for mainstream Web sites. Firefly Network Inc. does better yet. The Boston software maker runs a site to showcase its filtering software, which can track the likes and dislikes of members--say, what movies they enjoy--and then recommend similar films. The site has attracted 2 million registered users, who spend an average 32 minutes each visit. Firefly's ad rates: $70 to $100 per 1,000 impressions.

Now, some cyberhoods are getting even more mileage out of advertisers. Just as consumer-products giants hawked laundry detergent by sponsoring the old TV soap operas, many merchants today see a big plus in being linked to an online community. Sponsorships are particularly suited for community sites since they are less intrusive than banner ads and "they integrate the sponsor into the neighborhood," says David Bohnett, CEO of GeoCities, a Santa Monica (Calif.)-based startup (page 70). Bohnett ought to know. GeoCities helps Web users set up their own home pages and then arranges them in preferred communities--Napa Valley for oenophiles and Silicon Valley for gearheads. The site now has 500,000 Web pages, drawing some $500,000 a month in advertising and sponsorships. VISA USA Inc., for example, sponsors a restaurant review area called Restaurant Row, while Microsoft Corp. sponsors the Programmers' Pavilion.

SAFETY TIPS. Parent Soup is taking sponsorships a step further. It is working with advertisers to set up "bridge sites"--complete companion Web sites closely linked to Parent Soup (box). Take the one Parent Soup has with ParentsClub.com, a site for the kids' cough syrup Triaminic. This site has scads of parenting info, including child safety tips, and because it offers more than just info on Triaminic, "people feel we're more credible," says Barry Cohen, senior brand manager for the cough medicine. The result: "Traffic to our site has been enormous," Cohen says. For Parent Soup, such sponsorships work so well that 80% of advertisers come back.

The biggest cash coup of all for Net neighborhoods may be the ability to charge admission. Subscription fees have long been out of reach for most Web sites. Microsoft's highbrow online magazine Slate, for example, has delayed charging for a subscription indefinitely, and even Playboy can't seem to command monthly fees. Yet online communities are making a go of it. The WELL, for instance, charges 11,000 members $10 a month for access to 260 ongoing conferences. 3DO's Meridian 59 collects $9.95 a month from its members. And WebGenesis Inc.'s The Globe chat site, which lets people yak about TV, music, and other topics, is bringing in $75,000 a month from its annual $25 subscriptions, a third of total revenues.

Of course, there's no telling whether any of these communities--or the hundreds of others in various stages of construction--will succeed in the long run. It's unlikely there will be any Netscape Communications-style quick killings. "There aren't going to be any overnight successes," says Forrester Research Inc. analyst Emily Nagle Green.

Indeed, considerable challenges lie ahead. Internet communities could reshape the way buyers and sellers conduct electronic commerce. Consumers will naturally gravitate to communities offering a wide choice of information or product suppliers--not those run by one merchant. Auto buyers, for example, won't flock to a General Motors site if all it offers is GM cars. That means consumers will wield much more power over vendors than ever before, says John Hagel, co-author of the new book Net Gain: Expanding Markets Through Virtual Communities. Consumers, for example, could play vendors off one another to get the lowest prices. But merchants and advertisers may also balk at being lumped together and choose not to do business with those communities.

That also puts Web communities at the mercy of what advertisers think is marketable. One community already is changing its stripes because of a paucity of advertising. Howard Rheingold, author of The Virtual Community, envisioned a new advertising-based community for people interested in the collision of computers and culture. But now, after not garnering enough ad support, his Electric Minds site is shifting to building communities for others, such as IBM, though it will maintain its own site. "This is very early," says Rheingold.

LACK OF CONTROL? Virtual villages may also find themselves unprepared for the forces they will unleash. Chat rooms, for instance, are often appallingly juvenile, even hostile places, where you're as likely to be insulted as you are to be enlightened. In that environment, advertisers can be subject to ridicule. "Advertisers worry about the lack of control," admits Bayard Winthrop, vice-president of business development for chat site WebChat Broadcasting System.

And there's a flip side to community loyalty: Members demand a say in the community's direction that may not always jibe with the intentions of the site's owners. But publishers and merchants who want to be associated with a Net neighborhood may have to live with it, say online community veterans. "Any community you try to control will quickly dissolve," says Maria Wilhelm, president of The WELL.

Will all this pay off in the long run? Will people really feel part of a community built around, say, pantyhose--as Sara Lee Corp. is trying to do for its L'Eggs products? For some longtime community builders, steeped in the pointedly noncommercial roots of the Net, the answer is no. People need an emotional attachment to feel part of a community, and a narrow product focus won't do the trick. Says Rheingold: "Any company that thinks they can go out and create a community in 30 days to sell a lot of pantyhose is going to be disappointed." Indeed, he says, no matter what the type of neighborhood, it takes time--probably years--to form a lasting community.

Some communities are already finding it tough on the cyber frontier. Last October, for instance, iVillage acquired parenting site ParentsPlace.com, which still operates as a separate site. Moms Online recently tapped New York-based online department store CyberShop to take over its online store. "We just don't have the cash resources," says Moms Online Business Manager Rob de Baun. Why is this consolidation happening so early in the game? Says Hagel: "Many of the early efforts have had overly optimistic business plans."

For all the challenges to creating true communities online, it's clear that once people get a taste of them, they don't want to leave. Take Ellen Remily, a mother of two young children in rural Shelton, Conn. She found such a friendly community on AOL's Moms Online that she's now a volunteer chat host. "There is always someone who understands where you are coming from," she says. "This is my cyber neighborhood."

If builders of online communities can't figure out how to make a buck out of that kind of loyalty, maybe they should ask the experts: their members. For instance, when members of Tripod, a community for twentysomethings, started requesting space for personal home pages, CEO Bo Peabody asked them if it would be O.K. to place ads on their pages to defray the cost (page 66). To his surprise, 96% said yes. Now, Peabody expects 1997 ad sales to top $3.5 million, or 70% of overall revenues.

A few more examples of that kind of economic democracy, and Netizens may feel as if they've found Home Sweet Internet.By Robert D. Hof in San Francisco, with Seanna Browder in Seattle, Peter Elstrom in Chicago, and bureau reportsReturn to top


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