Firm's Virtual Communities Generate Real Dollars

CyberSites Inc. is showing how building a sense of community online can yield high conversion rates and one-hour plus sessions, and the New York firm has plans to add new e-commerce initiatives next year.

The company oversees about 20 Web sites and a network of more than 4,300 independent affiliated sites that bring in traffic. Its most popular online destination — a vast Web destination called AncientSites that attracts pre-Medieval history enthusiasts — has about 90,000 registered members. Newer sites dealing with everything from science fiction to pets to music account for the remainder of its roughly 150,000-strong membership base.

The firm ferrets out bulk deals on products, sells them to one of its groups of interest-specific members, and then splits, 50-50, what it nets on each sale with the affiliate that brought the buyer. CyberSites pays wholesale to affiliates providing products.

The company has managed to pull off some impressive conversion rates. For example, after carrying out online surveys among members to learn what products interest them, CyberSites recently ran a campaign to sell ancient coins. A pop-up box that asked a trivia question on AncientSites garnered a 74 percent click-through rate to a purchase menu. Of those who saw the ad, 40 percent clicked further to the advertiser's site, and a full 3 percent spent some of their modern currency for the ancient kind.

The secret is in the community — an advantage that Keith Halper, the company's chief operating officer, illustrates through real-world parallels.

“You can watch a commercial in the middle of a Mickey Mouse cartoon and you may or may not respond, but everybody who goes to Disneyland walks away with a pair of mouse ears. It's a superior environment for selling merchandise,” Halper said. “It's not a strict analogy, but we believe that we're accomplishing the same thing.”

CyberSites picked up on the power of community when the company started out in 1995 running online games. One had a historical Roman theme, and executives noticed that players were hanging out on the game's bulletin boards, pretending to be Imperial officers and giving Latin lessons. The game brought people to the site, but the community kept them there.

To facilitate that sense of community, the company doles out plenty of free media to its members. Registrants get access to e-mail accounts, instant messaging, chat, personal message boards, public message boards and the ability to create their own sub-groups of fellow members who share more specific interests, such as ancient Athens. CyberSites claims its members average a whopping 80 minutes per session on its sites.

Looking ahead to next year, the company wants to further capitalize on its conversion and session-length numbers by letting affiliates load products onto the sites and sell them into the communities on their own. Halper said the firm is looking into handling fulfillment for affiliates on an outsource basis as well.

As it is tentatively planned, the communities will essentially be transformed into open markets where members and affiliates can place both products and content. Affiliated sites that bring in traffic will continue taking a split.

“So they're making money coming and going: both on the products that they're able to sell and then also they're taking 50 percent of our cut for other products that are being sold into their audience,” Halper said.

Currently, about half of CyberSites' revenue comes from the direct marketing it does within its virtual pages. Ad sales account for roughly 40 percent, with the remainder coming from members who choose to pay special fees that guarantee them a higher listing on the index of people on the site at any given time.

Halper would not discuss the margins CyberSites gets on the products it resells, except to say percentages vary and “look like a retail store.” He indicated the firm is not profitable, but declined to discuss the company's revenue line.

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