GeoCities, the Marina del Rey company that pioneered the business of building communities on the Internet, won a major endorsement of its Internet strategy Thursday when it agreed to be acquired by Yahoo in an all-stock deal valued at $3.9 billion.
The agreement, which combines two of the World Wide Web's most popular destinations, would be the largest acquisition involving a Southern California Internet start-up. It also would solidify Santa Clara, Calif.-based Yahoo's position at the head of the portal pack.
Company executives said the deal would pool two sites that together reach nearly 60% of Web surfers, expanding opportunities for electronic commerce and targeted marketing. It would also augment Yahoo's wildly popular Internet directory with GeoCities' resources for building free home pages on the Web.
"Publishing and formation of communities are big, and they're here to stay," said Yahoo President Jeff Mallett.
GeoCities has attracted more than 3.5 million "homesteaders" who have created more than 34 million pages of personalized content since its founding in November 1994. The company provides the Web space at no charge; groups the pages into themed "neighborhoods" such as sports, entertainment and business; and makes money by selling ads that appear on the homesteaders' pages.
"People are looking for two things" on the Web, said David Bohnett, GeoCities' founder and chairman. "They're looking for an opportunity to meet others of similar interests, and they're looking for a way to contribute and participate in this medium."
Still, the company, which went public in August, has yet to make a profit. GeoCities said Thursday it lost $8.4 million, or 27 cents a share, on revenue of $75 million in the quarter ended Dec. 31. Altogether, the company lost $19.8 million in 1998, compared with a loss of $8.9 million in 1997.
"There isn't any evidence that a community site by itself will make money for anybody," said Michael Murphy, editor of California Technology Stock Letter in Half Moon Bay, Calif. "You have to have a community that is willing to pay for stuff."
Yahoo and several other portal sites are betting that they can turn those communities into shoppers. Lycos last year bought Tripod and AngelFire, which both give away home pages. Excite launched its own community-building service in September, and the new Go Network--unveiled by Infoseek and Walt Disney this month--offers free home pages as well.
