Building the Gay Web

Not long ago, gay-oriented content sites like PlanetOut and Gay.com?both of which offer an array of news, financial tips, entertainment coverage and service information?existed only as the wild dreams of entrepreneurial visionaries. Few thought that in 2000 financial analysts and techno-pundits would be debating which company would launch the Internet's first "gay IPO."

According to PlanetOut's CEO Megan Smith, gay content on the Web is still in the "Model T days." If that's so, however, Smith can rightly be called the gay Web's Henry Ford. Her San Francisco-based company?founded five years ago?is a multimedia, interactive community site aimed at connecting gays and lesbians while providing them with amusement and information. PlanetOut is the first gay-focused dot-com in history to get venture capital funding. It used April's Millennium March on Washington to showcase its interactive capabilities, webcasting the "Equality Rocks" concert from DC's RFK Stadium. The webcast allowed people who couldn't make the march and rally to participate.

Smith sees her company filling a void. Six years ago, the Gay Games in New York packed Yankee Stadium to capacity?yet the event received scant same-day coverage from the mainstream press. "So in '98 we went to Amsterdam and webcast [the Gay Games]," she says, pointing out that "no one can censor" the Internet. PlanetOut's customer, she says, has been "very underserved."

PlanetOut, in which America Online holds a 12 percent stake, has pursued a strategy similar to AOL's, merging with other media concerns?specifically with Liberation Publications, Inc., which owns Out, HIV+ and The Advocate, the country's largest gay and lesbian newsmagazine.

Currently, PlanetOut has more than 550,000 registered members, and adds about 10,000 new ones per week. Other PlanetOut factoids: 38 percent of its members are women?which defies demographic studies that place the number of lesbians far lower than that of gay men. Five percent register as "straight." That straight people are registering with PlanetOut reflects the power of the broader brand name that Smith believes she has created?one that can draw straight friends and allies to her site.

Gay.com was launched in 1996 and has offices in London, Paris, Buenos Aires and San Francisco as well as in New York. Mark Elderkin, the site's president and founder, says that his company deliberately chose a business strategy that differed from PlanetOut's. Elderkin and his colleagues decided not to chase venture capital funding early on, as PlanetOut did, and as Web start-ups have typically done. Gay.com has built a global community site largely on the strength of its personals and chat rooms, and without spending any money on advertising during the first 18 months of its existence. Instead, it's partnered with Hero magazine (which serves the monogamous and relationship-oriented gay man), the Washington Blade, the Bay Area Reporter, the lesbian magazine Girlfriends and other gay-themed publications.

Perhaps the site's biggest coup has been a strategic alliance with The New York Times that allows Gay.com to syndicate Times articles. The agreement gives Gay.com access to daily news and feature stories, along with food and wine critiques from Times online properties like nytoday.com, boston.com and winetoday.com. Gay.com has also been able to increase its membership rolls by building an affiliate network of more than 2500 sites. Gay.com has been registering members since February, at a rate of 100,000 per month. Elderkin predicts they'll reach a million registered users by the end of this year.

Coming out of the closet is tough, even for a website. It takes time to change a culture?even the culture of an industry as relatively open-minded as the New Media industry. But PlanetOut and Gay.com are doing their part, forging new links in the business community for gays, while promoting acceptance for gays in a more general way. It's almost impossible to come out of the closet without the help and encouragement of friends, family (when possible) and coworkers. A support system is needed, and both companies are working toward strengthening that support system. Chat rooms and bulletin boards are bringing greater numbers of young gays and lesbians out of the closet than ever before. A gay teenager thinking of coming out in the Bible Belt now has access, through the Web, to the coming-out experiences and shared histories of thousands of others.

Gay.com's chat rooms are hugely popular, and are available in languages other than English. On an average afternoon you'll find upward of 7000 people chatting on the site. Some users are looking for friendship, some for advice, others for sex (or love). The Net's bridging the huge cultural chasm that exists between gay urban centers and small towns, and PlanetOut and Gay.com are part of that work.

What's heartening is that the blue suits at places like Goldman Sachs and Salomon Smith Barney aren't skittish about investing in gay dot-com properties. Last January, Salomon Smith Barney invited PlanetOut to be one of six private companies to attend its annual conference?an honor for any startup. "In terms of positioning, the bankers can see that this is a really promising market... They're very excited about what we're doing and the way PlanetOut's putting it together," Smith says.

Over the past year, Gay.com and PlanetOut have received $23 million and $16.4 million in venture capital funding, respectively. So the stakes are high, and the competition to further subdivide what is already a niche marketplace is certain to accelerate. Two years ago, the Gay Financial Network (gfn.com) was launched; in April, the G&L Internet Bank scored $40 million in funding. Unlike many other banks, it allows domestic partners to maintain joint checking accounts, loans and CDs. Two months ago, the Gay Health Network launched.

Poking around on either PlanetOut or Gay.com provides a look at the current, rather schizophrenic, state of gay rights and the dichotomous positions that gays and lesbians find themselves in these days. On the one hand, they're largely visible in the pop culture and able to partake in the trappings of happiness?they're as welcome to be consumers as the members of any other demographic, and soon they'll be able to pursue quasi-marriages in Vermont. On the other hand, they continue to be victims of random, even violent, discrimination. So it was nice to find, in Gay.com's "Home & Family" section, no fewer than 88 posted messages concerning the extremely difficult process of coming out as gay to your children. Clearly, in its own quiet way, Gay.com is injecting some common sense?and some humanity?into the loud debate between national gay figures and leaders of the religious right. (On the other hand, what was more helpful to me personally was PlanetOut's "Love Letters" section, where I could have my questions about men, dating and relationships answered by a psychotherapist.)

So, are there enough gay dollars to go around? The answer seems to be an indisputable "yes." Smith claims that gay men and women represent $450 billion in consumer buying power. Some companies will focus more narrowly on health care, some on financial information, while others?like Gay.com?will continue to build online communities mainly with chat rooms, personals and bulletin boards, and by syndicating content through partnerships. PlanetOut will finalize its offline pursuits and might bolster the circulation of Out and The Advocate, too. Both companies are hiring experienced new staff, with Gay.com landing respected columnist and editor Michelangelo Signorile as its editor-at-large. Smith and Elderkin are mum about future IPO possibilities, and instead are setting their sights on becoming category leaders in the gay online space.

"The investment community is pretty high on what we're doing; analysts think there's a great opportunity," Elderkin says.

Smith is more coy, but sounds just as confident. "Our focus is to build a great company that lasts for a long time," she says. "Lycos went public before Yahoo!, so I don't think it's necessarily a requirement to be first to be great. When and if it makes sense to take PlanetOut public, we'll do that certainly."