A few days ago, Yahoo! announced that they would be shuttering the venerable GeoCities this year. “So what?” you might well ask – GeoCities is after all an ageing service from a bygone era, and apart from some nostalgia and perhaps some data that some people might have had parked there for a while, most people won’t really notice it’s passing.
But nevertheless, it’s important, and people who get carried away with putting a dollar value on the current favourite websites of the day (e.g. Facebook) should take careful note. GeoCities was huge, really a sensation at the time, before many of the people raving over Facebook now were online, or perhaps even born (scary). It was easily as big culturally as Facebook at the time, which is why Yahoo bought it for almost $3 billion. I bet they regret that, because what happened was exactly what will continue to happen in this sort of space – things changed. New technology comes along, new techniques, new fashions, and the old sites are abandoned like burning ships incredibly quickly, until as happened this week (perhaps a little overdue in fact), the charred, lonely hulk sinks beneath the waves.
The issue is that these sites are not really ‘sticky’ on an individual basis. There’s really very little investment needed to use them, so getting up and moving somewhere else really isn’t much of an issue. Sure, with social networks the main ‘index of stickyness’ is your friends list, so people tend to stick where their friends are, but really, I don’t see this being a major barrier in practice, because by nature most of the stuff on there is non-critical and for fun, and these things are often follow generational ‘clusters’ – the students in the 90s were all on GeoCities, now they’re all on Facebook. Where will the next set be? I wouldn’t for a second assume they’d stay in the same place; they’ll want sites for their own generation, not the last one.
The eventual destiny of GeoCities should be a significant warning to anyone thinking of paying top-dollar for web companies that have no business model beyond casual eyeballs, and rely on fashion to drive that attention. Fashion changes, and you really don’t want to be stuck with $3bn worth of brown corduroy flares (assuming that they’re not fashionable right now – I can’t keep up! 
)
April 29th, 2009 at 7:27 pm
Perhaps they made a good deal of money with it though, every website had banners at the top if I remember correctly. Even if they didn’t earn the 3 billion back, it might have helped them to enough popularity to at least gain it back indirectly.
Perhaps it’s not really true though, as Google’s 2008 AdWords turnover was 21.8 billion of which 4.2 billion profit. I don’t know if the whole Internet made that much money with advertising back in the 90s.
April 29th, 2009 at 7:46 pm
I very much doubt they made the money back, certainly compared to the return they would have got with alternative investments (opportunity costs). As you say, ad revenue wasn’t anything like the scale it is now.
And although ad revenue looks high now, it’s probably not proportionately; because although there are more people browsing these sites, the sites themselves cost more to run (massively more storage and bandwidth required than the 90s), and the competition is far more intense. How many years of strong profits would it take to pay back the price of Facebook if someone bought it now? (even if it went for less than the crazy $15bn) – they’re turning over $200m or something right now and making zero profit. Of course Mark Zuckerberg thinks that growth is more important than profit, but will his company really last long enough to make that ‘strategy’ pay off? GeoCities suggests not.
I previously thought they would be able to hype it for long enough that some poor sucker like Yahoo! will buy it at its crazy inflated price before it nosedives, but with the economy the way it is now I’m not sure so many people will be willing to indulge companies like this, that look great on paper (2 zillion users!!) but which just burn money rather than make it. But, they’re still “hot” so as long as they can keep bullshitting on the profit line they probably will find a buyer and Zuckerberg can retire.
April 29th, 2009 at 10:53 pm
There is a big difference between Geocities and Facebook, and it’s the lock-in. It’s easy to leave Geocities, you just copy your pages and leave. But it’s not so easy to leave Facebook, since your friends are still there. Unless a bigger competitor appears, it will be costly to leave Facebook and start again in another network.
April 30th, 2009 at 9:18 am
You like this particular soap box don’t'cha? In a few years time, perhaps you’ll be able to bellow at the top of your voice “I TOLD YOU SO!”, and be able to cite all the times you saw this coming. :0)
Perhaps by then everyone will have mobile phones running open source software and servers, hosting their own content using a unified standard that allows the kind of social networking those properitary sites that hoard all your data currently do.
… or not.
April 30th, 2009 at 9:20 am
@Hernan: I don’t agree. I already know people who have stopped using Facebook and now just use Twitter, and have kept their friends, because it’s just not difficult to sign up to these sites. Also, on Facebook you have no real ‘content’ that’s locked in – just status updates that become quickly irrelevant with time, and photos which you can easily upload somewhere else. So what hold exactly does Facebook have over you in practice? Very little.
Honestly, the idea that Facebook is somehow different to other internet fads is a total myth. Most of the people that think this grew up with Facebook, so since they’re of it’s generation they think that it will last forever – the typical hubris of youth
History simply does not agree – ideas and fashions expire, the next generation (of internet users, rather than people – cycle every 5-10 years) will use something else. When Facebook eventually sells up to a bigger player, it’ll start in earnest – it’s what always happens.
@Paul: I just detest the hype train around things like this. I hated it around time of the dot-com bubble too, I dispaired at the amounts of money that were flying around with little real sense attached. After 2001, I just can’t believe people still fall for this anymore.
April 30th, 2009 at 5:28 pm
@Hernan:
I also disagree. I’m 20 years old, and I can tell you all my friends moved from MSN Messenger to Facebook. MSN used to be a boom around here. For a short time it was fotolog, and now everything it’s facebook. And I’m already wondering what site will be next.
And eons ago it was ICQ. Nowadays I found the ICQ on wikipedia and got shocked it’s still running.
What I notice is that professional/business services tend to last longer (i.e. Skype, linkedIn) and are more stable.
Steve already posted a blog entry regarding that some time ago.
But when it comes to pure (non-productive?) sites attracting young people, it is as volatile as a dangling C pointer