April 22, 2009 by Vinny Lingham
The world surely has changed since the heydays of the late 90�s. It�s been a little over 10 years since Yahoo acquired Geocities for nearly $5bn. Yahoo announced today that it would be shutting down it�s Geocities service - it seems that free websites are on their way out? Clearly, I have a lot vested in this industry (especially since Yola (previously SynthaSite) recently raised $20m in funding for a free websites business model) - so I thought that I should at least try to provide an insider�s view of this sector and how it�s changed (and is still changing).
Yahoo has finally proved that the old advertising model on free websites will not stand the test of time. Yahoo placed advertising on all the Geocities websites - and clearly, this model failed. At Yola we purposefully do not place any ads on our users� website - it makes no sense to us, for many reasons, including the fact that our users do not want it in the first place. We offer an advertising-free free website service - plain and simple. The quick observation is that if Yahoo, which is an advertising juggernaut, cannot monetize it�s free website service with advertising - how do we even stand a chance? We�re not even trying to.
That business model is so Web 1.0! Bandwidth costs were high, storage, computing & technology costs were high and you needed large data centers and many engineers to keep the lights on. Geocities built their business model upon an age old premise, that sites are expensive to host and therefore you needed to run advertising on each page in order to monetize pageviews and generate sufficient revenue to cover costs. Enter Web 2.0 - bandwidth is dirt cheap, and so is computing power (which is available on demand via the cloud, almost like a utility). The economics have changed and advertising on our users websites is no longer the only way to generate revenues. Yahoo build a revenue base for Geocities around advertising, and as advertisers got smarter and understood the value of that inventory - when rates dropped, they did not have alternative income streams to fall back on. In addition Yahoo also sported a desktop based application which was heavyweight and did not work on multiple platforms (unlike Yola - which is entirely browser based). The costs of maintaining this piece of technology (written in Java) for the desktop exceeded the revenues - basically, the business model did not scale and also was not well leveraged. This resulted in a broken business model.
The demands among Web users have changed as well. Web users, and particularly small businesses, don�t just want an online presence (which was Geocities key value proposition), they want a professional-looking site that they can quickly and affordably build and the tools to help themselves and/or their businesses succeed (online marketing, commerce capabilities, etc.) - and that�s what we�re about. Meanwhile Geocities, while once revolutionary in the space, has failed to meet users� changing needs and as a result, has been shut down.
We believe the model of the future is to create a platform that anyone can use to create their own personal or business website - and then we are able to sell add-on services (domains, templates, etc.) that allow the users to further customize their websites. Hosting & bandwidth is and should always be free to the end user. I look at the Internet as a really big LAN (Local Area Network). Why would you pay to transfer files across a LAN? Also, people can currently get free web pages in a limited sense through various providers, but a page with ads is like a social network site or similar - and not a true, professional web presence. People are sophisticated enough to want real websites, and that is what we offer them. And, when you provide a valuable service, your customers becomes loyal advocates, and you succeed if you have a profitable business model.
My most recent blog post was about freemium business models and how startups should consider moving away from advertising based business models, and focus on charging their customers for add on services (premium services). In order to build a long term sustainable business, you need to understand what value you�re creating as a company, and who would be willing to pay for it and build your revenue streams around that. Advertisers are just not willing to support websites that do not deliver ROI anymore - the game is changing.
April 23, 2009 1:37 PM PDT
Now closing: GeoCities, a relic of Web's early days
by Stephen Shankland
Yahoo is closing its GeoCities personal home page service, and with it will go an era of self-expression on the Web that's largely been replaced by social networks and blogs.
GeoCities rose to power during an era when publishing on the Internet meant setting up your own Web site. GeoCities simplified the process by helping people sidestep the complications of registering a domain and learning how to program HTML, the language that describes Web pages.
Yahoo is closing it GeoCities site this year.
Yahoo bought GeoCities for more than $2.9 billion in dot-com-priced stock in 1999, when GeoCities had more than 1.1 million users. However, while the idea of having a personal presence on the Internet has caught on, GeoCities turned out to be a backwater, not the mainstream.
"We will be closing GeoCities later this year," Yahoo said in a note on the site. "We'll provide more details about closing GeoCities and how to save your site data this summer."
Goodbye Geocities, hello Facebook.
Today, the way people choose to express themselves on the Internet is shifting away from isolated Web pages. Instead they use social-networking sites such as Facebook, with built-in features for creating a profile, staying in touch with contacts, and maintaining at least a little privacy; WordPress, where it's easy to post updates to a blog; or Flickr, where the photographically inclined can meet, share, and comment.
What these services and others including Twitter, YouTube, MySpace, and Blogger possess is a mechanism to notify interested parties of new activity, helping to keep social links pulsing with new information in a way that just can't be replicated by depending on a person to swing by a personal Web site.
That's not to say personal home pages are extinct. Google Sites is still around, and Yola, formerly SynthaSite, bought out search ads related to GeoCities searches on Thursday. But for most folks, it's easier to rely on more sophisticated pre-built services than to roll their own sites.
It's no surprise GeoCities is on the chopping block. Yahoo has its hands full trying to integrate its successful properties with the socially active parts of the Internet. The company hardly has resources to spare on last decade's trend.
Part of GeoCities' closure is related to Yahoo's circumstances. The company already was under financial pressure before the recession arrived in full force, but now things are even tighter, and new Chief Executive Carol Bartz is focusing on the company's core, successful properties--laying off about 675 employees in areas that don't pass muster.
GeoCities' vanishing sites?
Still unclear is what exactly will become of GeoCities pages. New sign-ups are already no longer permitted, but what about existing sites?
Here's how Yahoo put it: "You can continue to enjoy your Web site and GeoCities services until later this year. You don't need to change a thing right now--we just wanted you to let you know about the closure as soon as possible. We'll provide more details about closing GeoCities and how to save your site data this summer, and we will update the help center with more details at that time."
That leaves open the possibility that Yahoo will make it possible to move a site to another service, as it did when shutting down Yahoo Photos, but in the current climate, it's probably best not to expect such a graceful transition option. Yahoo wouldn't comment on its plans.
Another option is to upgrade to a separate paid Yahoo service: "You don't need to change your service today, but we encourage anyone interested in a full-featured Web hosting plan to consider upgrading to our award-winning Yahoo Web Hosting service."
But given how many GeoCities users weren't technical experts, it seems likely that a lot of amateur Web sites soon will vanish without a trace, a casualty of business priorities.