A New Weapon for Newspapers in the Online City Guide Skirmishes

By: Steve Outing

Newspapers just got another weapon with which to battle with the online city guide companies lining up to do business in their communities. Earlier this week a Silicon Valley start-up, Zip2, announced itself to the world. And like KOZ inc., which I wrote about recently, Zip2 is aligning itself with newspaper publishers, providing a technology solution for newspapers to match what the city guide companies are offering in terms of technical sophistication on the World Wide Web.

Zip2's first partners are U.S. media companies Knight-Ridder Inc. and Landmark Communications. The company had been keeping a low profile, lining up media partners before revealing its intentions to the world on Monday.

What Zip2 is doing is not unlike what numerous other companies are attempting -- that is, building a technology platform to take advantage of the potentially huge market for local advertising on the Internet. According to director of product marketing Kimbal Musk, Zip2 is building a series of Internet publishing applications which are meant to be utilized by publishers. First out of the chute is a Yellow Pages application, similar to some of the other online Yellow Pages being developed by companies like Big Book and Pacific Bell (with its AtHand service). Coming next is an application for local real estate advertising and directory services, followed by automobiles, movie listings and event guides.

Newspaper is in the lead

While Zip2 does have a national Web site that anyone on the Internet can use for electronic business directory and Yellow Pages services, that site is secondary to Zip2's media partnerships, Musk says. Most consumers will interact with Zip2's applications through sites co-branded with newspapers and other partners. Knight-Ridder plans to incorporate Zip2 applications in all 26 of its newspaper online services. First up will be Mercury Center (San Jose Mercury News), Philadelphia Online (Philadelphia Daily News and Inquirer), HeraldLink (Miami Herald), charlotte.com (Charlotte Observer), Pioneer Planet (St. Paul Pioneer Press), and News@Sentinel (Fort Wayne News-Sentinel). Landmark will use Zip2 at its six newspaper Web sites.

Knight-Ridder's site will launch Zip2 services this month, with the introduction of co-branded interactive Yellow Pages and real estate listings at the six papers mentioned above. Consumers will be able to search for a home via a geographic map, Java-based map, or by distance from a specific location. The system will support consumers making a restaurant reservation online or checking the availability of a movie at a local video store, Musk says. The system also offers maps locating any home or business, and has a feature that gives directions between two addresses.

(One of the more interesting features is that a full MLS (Realtors' Multiple Listing Service) database is integrated into each local system (negotiated at the local level with the Realtors' Board). This is good news in that local Realtors continue to gravitate toward cooperating with newspapers rather than setting up their own online services. Still, this trend might make some newspaper classifieds managers uneasy about the future of housing for sale listings given that full MLS listings are now easily searchable online.)

The Zip2 co-branding leans in newspapers' favor, with a typical site carrying the newspaper branding and a secondary "Powered by Zip2" banner on the page. For the first release, the Zip2 Yellow Pages will carry a standardized interface with a newspaper's logo included at the top. But Musk says release 2 of the application will give publishers control over the design of Zip2 pages.

Newspaper ad sales strategy

Where Zip2 is different from the other online directory services is that it relies on its publisher partners primarily to sell advertising in their local markets. Zip2 is a technology enabler, says Musk, and it makes most sense for local publishers to handle advertising relationships with local merchants -- and for Zip2 to focus almost entirely on developing and pushing the technology.

The business model is primarily based on revenue sharing plus a payment per application. The local publisher keeps the majority of local ad revenue, and also receives a small share of national advertising sold by Zip2 for placement in all the partner sites. (Musk declines to offer specific revenue split numbers.)

Musk says that for newspaper partners that don't have the staff resources to effectively sell online advertising for the Zip2 services, it can help a publisher retain a third-party sales force. The company also trains a paper's sales representatives.

What's being sold, principally, are enhanced listings for local businesses in the directory services. Every business in North America is listed for free in the database that Zip2 uses, so publishers will be selling various flavors of enhanced listings and special services.

This Is Not CitySearch

Zip2's services seem very similar to that of CitySearch, one of the numerous online city guides launching in various U.S. cities. Musk says the difference is that CitySearch is a destination site for Web consumers, whereas Zip2 is creating applications; the partner newspaper has the "destination site" while Zip2 provides the technology solution for a paper to maintain its position as the community's dominant destination for consumers seeking local information.

Predictably, Musk suggests that publishers are foolish to partner with the likes of CitySearch (or Digital City or Microsoft's "CityScape"). "The franchise is too valuable to give up that kind of control" over content to another company, he says.

Zip2 does appear to be a promising newspaper industry weapon for beating back the competition from the likes of CitySearch, CityScape, Digital City and a host of online city guide ventures being cooked up by telephone and cable companies. I've long said that newspaper companies will have trouble competing in the online city guide market with technology powerhouses like Microsoft. Newspapers are not technology companies, and most don't have the resources or skills to compete at the same level as a technology-focused company. The appearance of companies like Zip2 and KOZ is an encouraging sign, for they offer the technological tools to put up a good fight and better leverage what should be a content advantage for newspaper companies.

Contact: Kimbal Musk, kmusk@zip2.com


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