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Do Communities Pay?

Online communities can help establish relationships with potential customers, but it remains to be seen whether they can consistently generate revenue.

By Mathew Schwartz
April 10, 2000 12:00 PM ET

Computerworld - t's May 1995: You're using browser-based chat, available only at online community Theglobe.com, to chat with a friend in Australia. You submit a message to the public chat board, then hit reload about 20 seconds later to see if she's responded. Of all the posts made in that time, you see one near the top with a purple cartoon icon. It's her reply. You come back often. You become part of a valuable asset - an audience Theglobe.com and the few other dedicated community sites can sell to their advertisers.
Flash forward to the present: Instant messaging has made chatting by posting to a Web page obsolete. But that's not all that has changed. "Communities were defined by their technology and tool sets. An online community was a destination site where a user could find often-proprietary interactive technologies such as chat, forums and home-page building," says Christopher Auxier, who was director of new product development at New York-based Theglobe.com, until he left recently for a start-up he declined to name. Today, the technology is commoditized, ubiquitous and as mature as phones, whose sizes and designs change, but whose basic functions remain the same.
Community Money
As their technology became more widespread and their livelihood more tenuous, most stand-alone communities vanished. Tripod Inc. and Geocities, the two most successful, were bought in 1998 and 1999, respectively, by Lycos Inc. and Yahoo Inc.
Yet the potential of community may still enrich sites selling other things, by attracting and keeping an audience.
Communities alone don't always equal their weight in revenue. A September Forrester Research Inc. study of 20 sites showed that their community areas accounted for 22% of traffic but only 7% of revenue.
Communities can make money, but they're difficult to monetize. "That's been the great quest of online community sites, and frankly, I don't think you can point to any site that's nailed it," says Oliver Sharp, chief technology officer at the youth-oriented community site iTurf.com, which was profitable in 1998 but not in 1999.
But there can be indirect benefits that are hard to ignore. For instance, iTurf.com attracts more teen-agers than any other online community. It's also the exclusive online presence of catalog retailer Delia's Inc., which sells teen-oriented fashions. Put them together, and you help account for $1 million in revenue per week during last year's fourth quarter, 85% to 90% of which was derived from product sales.
Communities also improve the customer relationship. "When was the last time you talked to 5,000 of your customers?" asks Vanessa DiMauro, vice president, community at specialty foods



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