IQ News: CitySearch Livin’ La Vida Local

Buyout of Sidewalk raises new questions about content
Perhaps it surprised few members of the digerati when software giant Microsoft announced last week that it was selling off the arts and entertainment guides portion of its beleaguered franchise of local Web sites in major markets. The company to which it sold the assets, archrival Ticketmaster Online-CitySearch, had been kicking virtual butt up and down the Sidewalk with its ticketing and e-commerce capabilities and, by most accounts, the nearly 3-year-old Sidewalk was hemorrhaging cash, big time.
What TMCS didn’t have was Sidewalk’s killer distribution through Microsoft Network, which it will now get in exchange for losing a meager 9 percent stake of the company to Microsoft. TMCS also lacked satellite offices in key cities, and in a space where Sidewalk failed to successfully spin money out of its content offerings–its business model had originally centered on plain vanilla advertising–TMCS had succeeded. So the marriage of convenience between former foes seemed sensible for both parties involved and they lived happily every after.
At least that’s what the spin doctors want everyone to believe.
In truth, while the deal is a good one for Pasadena, Calif.-based TMCS, which beefs up its reach from 33 cities to 77 cities worldwide, Microsoft’s divestment of the local entertainment listings portion of Sidewalk signals another retreat for Microsoft from the aggressive online content strategy it formulated only a few years ago.
The company’s retention of the buyers’ guides and yellow pages sections–the potentially lucrative (or theoretically revenue-generating) parts of Sidewalk–gave off that now familiar swoosh of Microsoft swinging through the exit door of the content biz, in favor of the current “It” Web business model, e-commerce. “We looked at this limitless opportunity and decided that we really wanted to focus more and more on commerce,” said Matt Kursh, business unit manager at MSN, during last Monday’s teleconference announcing the sale of Sidewalk to TMCS. “That meant making some difficult decisions.”
If Microsoft’s track record on Web content is any indicator, however, the decision to give up on the Sidewalk brand may not have been so difficult after all. While there is little doubt that most Web properties have struggled to find the magic beans that would transform their online content offerings into cash cows, Microsoft has seemed especially inadequate at creating Web content compelling enough for consumers or advertisers, recently opting instead to stomp down the safe, well-lit and well-beaten e-commerce path. Most of its online properties focusing on such popular topics as travel and finance have effectively shifted away from original content toward commerce-driven models. (The exception is the joint news venture with NBC, MSNBC, which draws on a proven online content model.)
“Everybody, Microsoft included, has struggled to figure out the business model that works on the Web,” says Lisa Allen, senior analyst at Cambridge, Mass.-based Forrester Research. “Increasingly, we’ve seen that it’s not ad-supported content, which is, in part, why Sidewalk shifted its product focus a number of months ago and why Microsoft got out of the local city guide business altogether.”
When Sidewalk made its debut in 1997, it was widely expected that the property would trounce local newspapers, stealing much of their lucrative classified advertising revenue and millions of eyeballs. But that roar turned out to be a mere whimper. Why? Does this prove that consumers really just prefer picking up their local version of the Village Voice to check out what’s happening and that advertisers therefore stayed with them in print?
Maybe it’s a bit of both. On the Web, at least, “Content is most definitely not king,” says Allen. “The only content that people have been able to charge for and make money on the Web has been high-end business and financial information or porn.” Allen does think, however, that newspapers have become complacent because the local content market hasn’t thrived. But the complacency, she says, shouldn’t continue.
“I think the deal with Microsoft dropping out of the local content space and TMCS moving into former Sidewalk markets will once again strike fear in the hearts of many a newspaper publisher,” she predicts. “Everybody thought Microsoft would spell the end of local newspapers’ online efforts. When that didn’t happen, a sense of complacency and relief surfaced in local publishing circles. But now the party’s over and it’s time to get serious again.”
If the local online market is more settled because of the Sidewalk/TMCS merger, other questions remain. Given that advertising alone may not be able to adequately support free content, mousepad pundits were asking last week, what does that mean for the future of MSN’s high-profile, Michael Kingsley-edited Web property Slate? The current affairs and culture publication doesn’t lend itself easily to an e-commerce revenue stream, as do other properties that Microsoft has been able to re-fashion into transactional sites.
“The bottom-line problem for a Sidewalk or a Slate is that content, unfortunately, is not a valued commodity,” opines Allen. “Content, per se, is really a commodity used to bring people into and along the buying cycle, to get them to actually buy something online.”
Nonetheless, Scott Moore, publisher of Slate, says that reports of Slate’s impending death are greatly exaggerated. “It seems to me that [there has been] some speculation that the deal with Sidewalk and Ticketmaster might foretell future moves by Microsoft but that’s just unfounded speculation,” he insists.
Moore contends that equating Microsoft’s divestment of Sidewalk with a divestment in content on the whole is simply bad math. “We’re going great guns over here,” he says.
To be sure, Slate has seen something of a revival since the e-‘zine announced in January that it was scrapping its subscription model in favor of being entirely ad-supported. Since the changeover, Moore claims that traffic to Slate has more than quadrupled, from 220,000 monthly visits in January to nearly a million hits thus far this month.
Additionally, Slate has added 11 new advertisers since February, including Brooks Brothers and First USA, with total billings of more than $2 million.
But Allen believes that despite Moore’s claim that Slate is gaining momentum, Microsoft will inevitably make the decision of “jettisoning anything weighing down future stock options.” She predicts that one day the cry, “magazine overboard,” will ring through the halls of the Slate offices. (True, Microsoft’s future success will not rely on the profits of a teensy-weensy e-‘zine.)
Moore thinks that skeptics need only look at the property’s growing traffic to witness Slate’s success. A link from the main site last week led to a Slate feature on the perils of flying at night, written in response to the Kennedy tragedy, and garnered an impressive 200,000 visitors in a single day. “So in one day, a single piece on our site drove almost as much traffic as we got in the entire month of January,” says Moore. “That kind of puts it in perspective. We’re really on a roll now.”
The question is whether a company that has steered away from most of its media aspirations will want to support a few scattershot content properties over the long haul.
From where Moore sits, however, the future for Slate in Redmond still looks bright. When asked whether Slate had received any assurances from Microsoft or whether he needed any that it would be business as usual at Slate, he replied, “I mean, that’s kind of a funny thing. It’s not like we sent an e-mail around saying, ‘Are we still OK?’ But every indication is that we’re going forward just as we’ve been going forward.” Moore adds, “Given the successes that we’ve had, I have no reason to think otherwise. I think analysts are paid to give opinions and that’s fine. But speculation is speculation.”