Digital City Entices Newspapers With Classifieds Solution

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By: Steve Outing

Digital City Inc. (DCI), the online city guide spin-off of America Online, has made some interesting moves to entice publishers to sign up as content partners with local Digital City units. It has purchased the online classifieds technology of ClassiFACTS, a Colorado-based newspaper industry vendor that went out of business several weeks ago, and signed a licensing deal to offer the online classifieds solution of San Francisco-based Electric Classifieds Inc. (ECI). Thus, Digital City becomes another option for publishers looking for a turnkey online classifieds solution.

Back when I reported on ClassiFACTS’ demise, it was known that ClassiFACTS had arranged to sell the online classifieds technology it had developed — called WebCLASS — but the buyer remained a mystery. The company itself was shut down, when efforts by ClassiFACTS’ management to find a buyer for the company as a whole failed and the company ran out of money. Several newspapers that were using the WebCLASS system were suddenly left scrambling for a new electronic classifieds solution.

The WebCLASS system, which was designed for and marketed specifically to the newspaper industry, was beginning to gain favor with publishers including the Atlanta Journal-Constitution and the Santa Rosa (California) Press Democrat. It offers a system for converting newspaper classifieds from various front-end systems to World Wide Web format, and the ability to convert classified display ads to searchable display ads on the Web.

Digital City acquired the technology in order to offer publishers an inexpensive way to independently publish their classifieds online, according to Digital City vice president and general manager Bob Smith, and to facilitate the aggregation of classifieds from various partner publishers on local Digital City online city guide sites.

The second part of the Digital City deal involves ECI and its Global Online Classifieds turn-key online classifieds system, which is being licensed by DCI. ECI is best known as the company behind Match.com, the most popular U.S. online matchmaking service. ECI’s system, which is one of the most advanced online classifieds solutions currently on the market, combined with the acquired ClassiFACTS technology, suddenly make Digital City a key player in the online classifieds market.

Touted as low-cost solution

Smith says that for a local publisher that partners with a local Digital City unit, the costs of utilizing DCI’s new classifieds technology will be “far less expensive” than other options. (There are currently at least half a dozen vendors offering online classifieds solutions for publishers, plus national classifieds networks that aggregate ads from many newspapers.) Depending on the terms of the partnership deal with a local Digital City, putting a paper’s classifieds online could even be essentially free, he says.

Interestingly, Smith says that he’s more than willing to simply license the technology (that it owns; not ECI’s components) to a publisher that does not want to become a content partner with Digital City, thus putting DCI into a straight vendor role. Those publishers who choose not to participate in a Digital City will of course pay more for the service, but Smith claims that it will still be much less than if they went with an online classifieds vendor or developed a sophisticated online classifieds system in-house.

Specific pricing and revenue splits have not been set, but Smith says that the publisher will retain the majority share of online classifieds revenue in a partnership with DCI. It will charge basic set-up and ongoing maintenance fees, plus take a small percentage of revenue. Classifieds sections and individual ads will be primarily branded with the publisher’s name, with DCI getting secondary billing so that it’s obvious who’s providing the technology. A classifieds publishing partner can keep its classifieds separate from other publishers’ ads on the local Digital City site, as well as have them integrated into a central database that continues to track branding of individual ads.

Smith says that the classifieds offerings to publishers are designed primarily to attract more content partners to Digital City. “It becomes a tool to do better deals,” and revenue generation for DCI is a secondary consideration.

Metro dailies beware

The effect of Digital City’s strategy is likely to be more competition for the largest metro dailies from aggregated second-tier media. At this point, DCI continues to attract mostly smaller publishers in the major U.S. metro markets it is entering — alternative newsweeklies, suburban dailies, city magazines, and some broadcasters. The largest dailies have shied away from doing business with Digital City, as well as other online city guide companies like CitySearch and Microsoft’s Sidewalk (formerly known as CityScape).

The technology that DCI has now assembled will facilitate aggregation of multiple publications’ classifieds in a central database, according to Smith, while retaining publisher branding. A local Digital City user might be viewing the ads of only Publisher X (a Digital City content partner), for example. When that user searches the entire site looking for a “Ford Explorer,” ads from other partner publications come up as well in the search results. But each ad carries the branding of the publication from which it originated.

It’s easy to see that if Digital City succeeds in gathering local, second-tier media partners who put their classifieds into the central DCI database, this aggregation poses a real threat to a metro daily’s historical dominance of the local classifieds marketplace. Also, Digital City users will have the option of placing simple liner ads into the system without charge, which can further upset the apple cart. But as Smith points out, that’s a necessary strategy online; when a free outlet for consumer liner ads is not available online, users often insert their “ads” into discussion areas or find other ways to advertise for free.

Smith says this second-tier scenario is only one of the possibilities, and he hopes to work in some markets with the dominant newspaper as a content partner — in which case it could include its own classifieds in the DCI ad database. He says he’s close to announcing a deal with a large newspaper, and claims to be making progress on convincing metros that an affiliation with the local Digital City can help build the newspaper’s online brand and not just DCI’s.

Longer term, DCI expects to acquire additional technology which can be offered to local content partners. This will include such additions to local Digital City ventures as online Yellow Pages directories; self-publishing technologies (to enable advertisers and community organizations to publish and update their own information online without DCI staff assistance); hosting services; and ISP (Internet service provider) services. Says Smith, “We can ‘buy in bulk,’ and pass the savings on to our partners,” which is what DCI has done with its new classifieds offerings.

The first newspaper to test Digital City’s classifieds solutions is the Los Angeles Daily News.

Contact: Bob Smith, bobsmith@digitalcity.com

Steve

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This column is written by Steve Outing exclusively for Editor & Publisher Interactive three days a week. News, tips, and other communications may be sent to Mr. Outing at steve@planetarynews.com

The views expressed in the above column do not necessarily represent the views of the Editor & Publisher company

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