The Spin on Digital City Layoffs

By: Steve Outing Digital City, the online city guide unit of America Online, laid off about 80 employees last week in a significant restructuring move. Some observers are suggesting that this development -- coming several weeks after Microsoft announced similar cutbacks in staff for its Sidewalk local online entertainment guide Web sites -- means that companies operating in this space are finding that it's more difficult than they imagined to create profitable businesses with online city guides, because of the tremendous costs of developing original local content.

To that kind of talk, I would suggest that it's premature to draw such conclusions. In the case of Digital City, part of the reason behind the layoffs rests with an America Online restructuring announced in early February, in which Digital City was folded back into America Online. It had been in a separate business unit, AOL Studios, which returns to AOL corporate. (Informed speculation is that it was returned to the corporate roost because attempts to raise money last year fell short when investors were less than enthusiastic about the company's prospects.)

AOL spokesperson Ann Brackbill says that the layoffs were the result of redundancies between the AOL Studios/Digital City operation and AOL; Digital City now will be able to leverage AOL's corporate resources. The layoffs were the result of several weeks of reviewing the operation and identifying duplication and cost savings. Digital City users will notice no cutbacks in content of the service, she says.

Brackbill insists that the layoffs will have no impact on the content staff of Digital City, which currently operates online guides in 32 U.S. cities. The terminated employees worked in finance, ad sales and marketing positions, primarily. Those responsibilities will be absorbed by AOL. Digital City will continue to employ just over 200 people throughout the chain.

"We remain totally committed to local content," Brackbill says. "Things are good." Indeed, she boasts that Digital City sold more than $10 million in advertising in the last 90 days and generated more than 1 million page views in the last week. (Of course, that still pales in comparison to the traffic at the major Web search engines, and some of the busiest news Web sites.)

Cutbacks at the individual Digital City units varied, Brackbill says. Sites in Washington, D.C., Los Angeles and New York lost no employees, while the Digital City in Minneapolis-St. Paul lost 8 of 15 staffers in this round of layoffs. The LA and D.C. Digital City units are now profitable, she says.

Digital City also has gone to a regional hub model for some of its units, where support personnel in one city serve the Digital City units in the surrounding regions -- which is again designed to make the overall operation more cost-efficient.

The individual Digital City units continue to operate mostly on the America Online proprietary service, and not on the Web. Digital City 2.0, which has begun to be rolled out, will support the local sites on AOL and on the Web. New York Digital City, which just launched, is on the Web, and Washington, D.C., is scheduled to add Web support this summer. Brackbill says that the larger cities will roll out first to the Web through the year.

The layoffs and restructuring apparently will have no impact on the Digital City units operated separately by the Tribune Co. Those units, which operate in Tribune markets like Chicago and Fort Lauderdale, Florida, tend to have larger staffs and are run independently. Tribune is a minority owner of Digital City/AOL.

What should we make of all this? One conclusion is that the online city guide business is not going to be an overnight success. (Like the online newspaper business -- no surprise there.) Sidewalk has exhibited similar behavior with its restructuring and layoffs. Part of the reason is the process of learning about the business and learning how to centralize parts of the individual site operations. Both Digital City and Sidewalk have taken great pains to emphasize that employees they've laid off have not been local content producers. Also, Digital City's business plan relies heavily on local media partners for much content.

Newspapers with Web sites that are competitive to Digital City shouldn't feel too heartened by this round of layoffs. Local Digital City units should be formidable potential competitors once they get on the Web.

More para-sites

In a recent column I reported on "para-sites" like and, which hope to attract Web users who mistype the URL of newspaper sites. Jack Lail, manager of online publishing at the Knoxville (Tennessee) News-Sentinel, reports that his site has some para-sites involving ".to" domains -- and (The News-Sentinel operates and "At least most people wouldn't automatically think to type a URL with a '.to,'" Lail says, "but they do show up in some search engines/Web indexes." What a tangled Web we are weaving.

Looking to hire?

The news of last week that New Century Network has laid off nearly one-third of its staff -- mostly those in editorial/content positions -- puts a group of talented newspaper-savvy new media professionals on the job market. If you have openings, I'd like to take this opportunity to remind you of the availability of these individuals. The main phone number of New York-based NCN is 212-373-9350.


Got a tip? Let me know about it

If you have a newsworthy item about the newspaper new media business, please send me a note.

This column is written by Steve Outing for Editor & Publisher Interactive. Tips, letters and feedback can be sent to Steve at

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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

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


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