Lessons from Geocities’ death

Yahoo paid billions for it, then killed it. What went wrong?

Lessons from Geocities’ deathAs Facebook, Twitter and MySpace duke it out for Internet supremacy, another once-mighty Web giant is quietly shutting down: on Oct. 26, Yahoo’s GeoCities, a free Web hosting service, will be no more. Hailed as the Facebook of its time, GeoCities was once the third most visited site on the Web. Today, it’s all but forgotten, and only a handful of diehards will mourn the company’s passing. Yet its fascinating trajectory provides a valuable lesson for social media sites built on GeoCities’ foundations: it’s not enough to build a critical mass of users, insiders say—if you can’t make money from them, you will die.

Founded in 1994 by David Bohnett, GeoCities allowed users to create personal websites, for free. “We had templates, so people could do it in a matter of minutes,” Bohnett says. By making self-publishing on the Web more efficient, GeoCities “established the viability of user-generated content,” paving the way for Facebook and others. Pages were clumped into communities of interest: Hollywood stood for entertainment, for example, and Wall Street for finance. It was a model Bohnett believed would appeal to advertisers, and it was an immediate hit with Internet users. “I’d get an email every time someone signed up,” Bohnett recalls. With each one, his email client would make a pinging noise. “We were getting up to 10 sign-ups a second. It got to be so many, I had to turn it off.”

In 1998, at the height of the dot-com bubble, GeoCities went public, becoming a billion-dollar company in a matter of hours. The following year, Yahoo paid an incredible US$4.6 billion in stock for it; news of the sale made the Wall Street Journal’s front page. “I thought Yahoo was a good home for GeoCities,” Bohnett says. “They had the resources to take advantage of the brand.” Indeed, with roughly 3.5 million Web pages hosted there in the late 1990s, GeoCities was a traffic magnet. But despite the crowds who flocked to it, monetizing the site was another question.

GeoCities faced a challenge that today’s social networking sites still grapple with: just because people like the site doesn’t mean they’ll respond to ads posted there. “A large proportion of the top 10 sites worldwide are devoted to online community and self-expression,” says Mary Lou Fulton, former vice-president of editorial at GeoCities. “But the revenue isn’t there in the same numbers, not even close.” (Twitter is the latest example of a “compelling consumer application with no business model,” she says; like GeoCities in its early days, the company has been focused instead on building a critical mass of users.)

Even so, according to Fulton, GeoCities had something else of value: a staff committed to “continual innovation.” GeoCities, she notes, “was not a place that was standing still.” Despite all that activity, insiders claim that soon after the takeover, things started to sour: one former employee chalks it up to “ ‘not invented here’ syndrome.” As GeoCities was folded into the larger company, staff was cut back. “There was a loss of the institutional memory of what made GeoCities successful,” says Fulton, who left after the transition.

With technology changing so rapidly, competitors were popping up everywhere. Thanks to broadband Internet, photos could be uploaded on other sites quickly, whereas on GeoCities it had taken hours. Online video and music quality were also improving, and blogging made regular updates de rigueur. Sites like Facebook and MySpace popularized the notion of “friends,” which made linking up easier than ever. More and more, the new social media sites helped people harness technologies of the day, while GeoCities started to look like a dinosaur. Despite Yahoo’s “sincere attempt” to integrate the company, Bohnett says, it was starting to lose momentum compared to other sites. Right after the acquisition “would have been the time to invest heavily, in anticipation of inevitable competition,” he says. “That just didn’t happen.”

In April, just days after Yahoo said it would lay off five per cent of its workforce, the company announced GeoCities would be shut down, making it one of almost 20 Yahoo services to get the axe since late 2008. (A spokesperson said in an email that GeoCities’ closure was part of an “ongoing effort to build products and services that deliver the best possible experiences for consumers and results for advertisers,” noting that Yahoo is scaling back some services, while investing in others.)

Today, there are an estimated 38 million GeoCities accounts worldwide, with pages devoted to every topic imaginable: blue whales, long-forgotten family vacations, Madonna. By today’s standards, they look stiff and clunky; yet according to Fulton, they’re a reminder of an important lesson. “It’s never too soon to start thinking of an economic model,” she says. “The one social media company that’s actually making money is LinkedIn,” which targets a specific audience: professionals. Without a business model, she adds, “only two things can happen: you go broke, or you get bought. And in this economy, I don’t think the strategy of building-to-get-bought is as viable as it used to be.”

On Oct. 26, any files that aren’t saved elsewhere will be gone forever. GeoCities will become a ghost town.