The Local Information Market: Poised and Ready

By: Steve Outing

The emergence of an online city guide industry -- with major players like Digital City, CitySearch, Microsoft Sidewalk and USWest Dive-In -- is of course a popular topic in the trade and business press. But much of the recent coverage takes a negative slant, with journalists covering the industry openly skeptical about its chances to succeed financially.

But an analyst who spent the last eight months writing a 500-page research report for Find/SVP on the topic of local online information services (what I sometimes refer to as "online city guides") does not share this pessimistic view. While today's market cannot support the players in business today, the direction of the Internet marketplace combined with eventual consolidation in the local information services industry will create a viable market for such services within a few short years, says report author Peter Krasilovsky.

Krasilovsky's report, "Redefining Local Information" ($2,295), paints an optimistic picture for services like Digital City, CitySearch and Sidewalk. The report, which relies on data from Find/SVP's 1997 American Internet User Survey, predicts that the emergence of a "critical mass" of local users will emerge quickly in the next couple years. In the U.S., seven metro areas have more than 1 million Internet users, and another 46 communities have more than 100,000 users. Further, about half of current local Internet users already access local services; and nearly half of Internet users said they would regularly (daily or weekly) access a "virtual city" Web site for their community, according to the report.

Publishers' concerns

As the industry's future plays out, Krasilovsky expects to see a couple of key national players, who will be competing in major metro markets against each other and against local media online city guides. Obviously, newspaper companies figure large in this scenario, but he says there are inherent dangers for newspapers. "It's their game to lose," he says.

While publishers are no doubt concerned about the emergence of local information services in their towns as part of coordinated national roll-outs by large companies, there remains an attitude among many publishers that a non-local brand cannot mosey into town and gun down the local newspaper with its entrenched brand and local consumer loyalty. But Krasilovsky points out that the "virtual city companies" (those like Digital City that provide local online users with a "one-stop" site for all locally relevant information) have an advantage over local newspapers who set up their own city guides, even though the national city guides may staff their local operations modestly.

"The advantage ... is a simple one: coordinated roll-out plans. Sidewalk, CitySearch, Digital City, Yahoo!, Dive-In all tend to coordinate their plans between markets, and learn important lessons from each new launch," the author writes in the report. "Most media conglomerates, on the other hand, tend to be more survivalistic than synergistic, and they have adopted a hands-off approach to their local markets."

Despite this criticism of the newspaper industry in general, Krasilovsky does note that Cox, Tribune Co. and Knight-Ridder seem to be the exceptions, with coordinated plans to get on the Internet with quality local information services in their markets. Hearst and Times Mirror also are taking lesser, pioneering steps in this direction.

Of particular concern to local newspaper publishers should be the model that the national city guide companies employ of combining national and local advertising and content. "Much of the ad revenue (for the national services) is likely to come from national advertisers who will localize their marketing efforts via the local online services," Krasilovsky writes. "These national advertisers will presumably be eager to pay a premium for the privilege of targeting potential customers with local, regional or national ad packages." Like it or not, Mr. and Ms. Publisher, the national online city guides have an advantage with their national sales initiatives.

Further, these non-newspaper companies are getting adept at using filtering and sorting technology to create cheaper and sometimes better means of providing generic information that does not require editorial enhancement. Databases for directory listings, driving instructions, weather, traffic conditions, real estate, movie theater listings, TV listings, community events and sports all lend themselves to automation -- and thus lower cost.

Choose wisely

Publishers need to compete with this trend, and that will be difficult for an independent newspaper in a market where it faces one of the national city guide companies. The answer often is using a technology "integrator," like Zip2, Vicinity or LocalEyes -- companies that provide private label services that match the national city guides. But Krasilovsky cautions publishers to make this choice carefully. "Whatever integrator a local site ultimately chooses -- if any -- the alliance is likely to be a conclusive one," he writes. "Switching partners 12 to 24 months down the line is conceded by the integrators to be 'almost impossible.'"

Krasilovsky believes that the national city site companies can succeed in building newspaper-threatening local brands. A publisher cannot rest on the strength of the local newspaper brand in the Internet environment. What Digital City and Sidewalk are trying to do, for instance, is not so different than how MTV or ESPN successfully built their brands from scratch on cable TV, he says.

In fact, the author believes that the national brand is what makes the city guides so threatening to local media. "CitySearch San Francisco is less important than CitySearch the national brand," he says.

Krasilovsky says that Digital City seems to have articulated the strategy most likely to succeed, because of its combination of local and extra-local content (that is, national content made local through automation, such as with weather reports or sports scores). They hit on the right model "almost by accident," since the strategy was designed in large part to save money, he says.

Contact: Peter Krasilovsky, pkras@aol.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