Yahoo to shut down Geocities

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…

Comments

  1. Get Netted says:

    I had 2 geocities account one with the local Yahoo site and one with Yahoo.com so both of mine will be gone

  2. Yes the trend of internet business will always changing from time to time. And internet has been made those changes faster and more extreme.

    Webmastershouse

  3. ADAC says:

    For the last few years the only people who would use Geocities were very new webmasters that would put almost no effort into promoting their sites.

    Who is going to want to pay to put their ad on a site that no one visits?

  4. Giochi says:

    I’m kind of glad they are dropping it. GeoCities used to be a really great place to have a home brew website. I met many friends there. Once GeoCities sold to Yahoo, it went by the wayside. Yahoo can’t manage anything without it being destroyed. I was so hoping that Microsoft would have bought Yahoo outright.

  5. mobilekaren says:

    I’m pretty surprised at Yahoo for doing this as it was a revenue stream for them with the ads on the websites.

  6. Genduk says:

    So sad to hear that :(

  7. I can remember the tripod / geocities days when I used to make sites with bright green backgrounds and red text and it was amazing to have a scrolling marquee. Those were the days!

  8. popo says:

    hi there, I found your blog on google and read a few of your other posts. I just added you to my Google News Reader. Keep up the good work. Look forward to reading more from you in the future.

  9. Giochi says:

    I agree with this decision as Geocites as a free service tend to lower the quality of Yahoo overall.

  10. This post is very helpful for people like me who has less knowledge with topics alike. I do hope there would be a followup on this. Thanks for sharing your knowledge.

  11. Ali BARIN says:

    Bad event so i’m unhappy. :/

  12. I think it is a good decision to shut down geocities. I think it’s time came and went and well, no sense keeping it around.

  13. Interesting post, I didn’t know Geocities was being shut down. I remember when it was one of the leading free website providers, along with Angelfire. You are right, the entire business model was very Web 1.0 and they did not evolve to meet the changing needs of the internet user.
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  14. I have never created website on Geocities so I’m not sad I think wordpress.com do best

  15. I never like using geocities, too.
    And nice site here!

  16. candra cute says:

    Really enjoy reading your posts they always seem to make so much sense. You absolutely right in this day and age the consumer wants a real website that they can control and monetize themselves. Really look forward to seeing your premium templates. Easy, clean & simple…always works! I believe the market is ready, willing & able to pay when they are able to see the value.
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    http://howtodothings.07x.net

  17. I think that there was a solid revenue stream for them with the ads on the websites. But there must be something under all this.

  18. ehow says:

    it is quite amazing how these 5 billion dollars disappeared in smoke so fast. On the other hand goecities had completely disappear (as well) from the recent web2.0 landscape.
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    http://howtodothings.07x.net

  19. JPOS says:

    Well I moved my Geocities site to a new location. http://ithascome.bravehost.com It was/is my first and only site. I did not want to let all that work go down the tubes. My site is not all that fancy but it tells the story. I think those old fashion sites need to stay around… it reminds us of the Internet roots.
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    http://www.voles.info/2009_07_01_archive.html

  20. jacyle says:

    I’m surprised it took this long. Also, SYNTHASITE is a bad bet. The net is moving towards SOCIAL NETWORKED user content. We’re past the user content phase. It’s all about virally spreading that content. Synthasite’s model is stationary.
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  21. Maybe they realize that the should be making money than giving free service like.

  22. I didn’t even know that Geocities still existed. I remember it being around many years ago, way back when Yahoo dominated the Search Engine Wars. Not even sure why they held on to it for so long…

  23. Vinny, you have very smartly and effectively brought out the reasons leading to the closing down of Geocites – infact you have touched the right nerve and diagonised the disease ailing Geocities. I’ve checked Yola and I must say that its really great. I’m definitely going to start my next niche site at Yola, you’ll have really great features available at the most decent prices, whats more helpful then getting free hosting. I’ve also noted that you’ll have removed all factors that plagued geocities. I think I’m amazed is to think that why did Yahoo close Geocities when they could have shifted to your model.

  24. Tomas says:

    It very sad story. i have a lot of website on that.

  25. Hmm, its crazy how much has changed on the internet in such a short time. Makes you wonder where we will be in another 10 years.

  26. wely says:

    I think it should be closed many years ago. It is just a failed service. I think no one is going to create free pages because it is so easy to build full sites or to use other social media sites. I can see many other services by yahoo which are going to be popular(Like Buzz and answers).