• by Kathleen Burge , August 31, 2007

Local social networks bring the Web back home

When Raj Abhyanker knocked on hundreds of doors two years ago, asking his neighbors to elect him to the city council of Cupertino, Calif., he grew convinced that somebody needed to introduce them to one another. His forays up one street and down another gave him glimpses into cloistered lives: one neighbor was looking to sell a used bicycle; another wanted to buy one. One neighbor had just returned from Paris and another was on her way. Two neighbors who lived nearby but didn't know each other were both passionate about gardening.

"Everyone lives in isolation," Abhyanker says. Although there had been some neighborhood break-ins, he noted that "no one knew who the suspects were because nobody talks to each other."

He lost the city council race but Abhyanker, a patent lawyer and Web entrepreneur, looked to the Internet for a way to bring his neighbors together.

Disappointed at what he found, this spring he launched Fatdoor, a social network for people who live nearby. For now, Fatdoor is available to California residents within a 15-mile radius of Cupertino, but Abhyanker hopes to take the site national by the end of the year.

Fatdoor uses Microsoft Virtual Earth to map neighborhoods, letting residents position icons over photos of their houses and streets. They can create profiles, rate restaurants, post images, leave messages for other neighbors - and the more they participate, the more points they earn, building their credibility. Even before residents join, the local sites are prepopulated with information already available on the Web.

Abhyanker is venturing into relatively uncharted Internet terrain: social networking for people who live near each other. The Web is momentous for its ability to bring the faraway to your screen: You can debate the "Sopranos" finale with someone from New Zealand or watch a Sri Lankan cricket match. But the Web can also introduce you to the guy across the street.

"There's a powerful and organic connection between social networking and community," says Greg Sterling, founder of Sterling Market Intelligence and an analyst who specializes in local search. "I think it's an interesting, undeveloped area."

But Sterling and others agree the challenges are substantial. Despite the recent hype about the graying of MySpace - a study last fall found more than half the visitors to MySpace were over 35 - social networking so far still attracts mostly young people. But young people aren't the demographic Abhyanker and other local social entrepreneurs hope to attract. Their target audiences tend to be older than the millions who flock to Facebook and MySpace - statistically, the people most interested in meeting their neighbors and invested in their communities tend to be suburbanites with families.

The Challenge of Commonality

While younger users wile away hours on social networking sites, older users often have more demands on their time: jobs, children, families, commutes. Sites like Fatdoor are also competing for time and attention with burgeoning niche social networking sites like Catster, Dogster, BakeSpace (people who like to cook) and Respectance (people mourning the death of a loved one or a celebrity, from Elvis to Tammy Faye Messner.) Partly because of those time restraints and competition, Sterling believes a local social networking site must also have some practical value to succeed. "You have to solve real problems for people," he says.

More local social networking sites are also beginning to spring up. In New York City, Jared Nissim started MeetTheNeighbors.org in his East Village apartment building because he was craving more interaction with the people who lived nearby. The Front Porch Forum in Burlington, Vt., has helped neighbors sell cars, find roommates, organize block parties and get to know each other; eNeighbors.com caters to people who live in gated communities.

But despite the proliferation of these sites, no one knows what it will take for them to make money. Some researchers say that the largest social networking sites will draw more ad dollars in the next few years. A recent report by eMarketer pegs spending on such sites as $900 million this year, and forecasts an increase to $1.38 billion. Still, those figures represent less than 6 percent of the total amount expected to be spent on online advertising overall.

Niche sites (including sites sponsored by marketers) will take in far less: an estimated $70 million this year and $120 million in 2008, according to eMarketer.

Social networking sites that rely on user-generated content also face well-documented challenges. Among the most significant: advertisers fear their ads will end up on sites with offensive content. Even the largest social networking sites face this problem. In July, six marketers in the United Kingdom, including Vonage, pulled their ads from Facebook after they were displayed alongside content by the right-wing British Nationalist Party.

"Advertisers want to be where they have control," says Gordon Borrell, CEO of consultancy Borrell Associates.

Earning Profits

That sense of control is even more important to local advertisers than large brand marketers. Small shopkeepers, he says, are "scared to death" of appearing on sites where consumers might badmouth their businesses. While consumer reviews are a staple of the Web, large companies are so eager to be online that they're willing to take the risk that a disgruntled user might criticize them. "They'll weather the storm," Borrell says.

But local businesses are more reluctant to spend their limited ad dollars on sites where they might be condemned. "They don't have much to spend, so they tend to put into a medium that they trust," he says.

One of the most high-profile initiatives, BackFence.com, a hyperlocal news site that launched in 13 communities near metro Washington, D.C., Chicago and San Francisco, announced in June that it was shutting down. Mark Potts, the company's former CEO, denied the problems were financial, writing in a postmortem analysis on his blog that the company failed because of internal problems, not because staffers couldn't sell enough local ads.

But until such local community sites can actually prove they're profitable, industry observers are skeptical. "The fundamental question really for all these community sites is where is the money going to come from?" Sterling says. Local businesses, dependent on local shoppers, seem like the obvious places to mine for ads. But the process of hitting up hundreds of small business is arduous and the competition is intense.

Small businesses are already being courted by many advertisers, online and real-world; that's partly why newspaper revenues are plummeting.

"How are you going to sell ads when all these small businesses have a million people coming at them?" Sterling asks.

And then comes the problem of scale. Even if a local site blossoms - say, Fatdoor takes Cupertino by storm - the founders of the site will have to find business models that succeed in other communities as well. (Unless the company's online store, where Fatdoor track suits go for $67.99 and Fatdoor T-shirts sell for $23.79, really takes off.) Yelp.com, for instance, launched in San Francisco by two former PayPal employees, had to learn new markets each time it expanded - to New York, Boston, Chicago and a host of other cities.

"That's the challenge that a lot of these sites have faced - they can have real traction in one market and it doesn't translate into other markets," Sterling says.

"The community networking user-generated content sites are certainly interesting and will generate a lot of traffic, but I don't think the advertising will support it," Borrell says. "I just keep saying, 'Where's the money?' "