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Where can you find a city with a population of more than a million, with neighbourhoods based on interest rather than geography and where it's completely free to set up home - in return for being advertised to?

The answer is Geocities, the US-based online "virtual community" which has grown to more than a million members over the last few years.

Geocities (www.geocities. com) attracts 'homesteaders' by offering 2Mb of free web server space for people to set up their own home pages, with various software tools that allow them to build the pages.

A first-time web user could be up and running with their own home page in 20 minutes, claims Geocities founder David Bohnett. There is also live chat and online shopping and even its own local currency, called Geopoints, which members can earn and spend in various ways.

It is a model which Bohnett believes exploits the medium of the internet perfectly. Why spend millions of dollars generating content for a big media web site when there are millions of people with things to say to each other, searching for a means to say them. In other words, why not let your audience be your content?

"Our editorial strategy is based solely on our members creating the content and the experience themselves. It's certainly not a novel idea to give away free web space. Most ISPs do it. But we have created a context, an environment where people feel comfortable. We give people the opportunity to express their passions and interests," says Bohnett.

It's a model which not only exploits the many-to-many communication potential of the internet but also one which appears to work commercially. Turnover last year was $6m and is expected to rise to $18m in 1998. There are more than seven million unique visits a month. PC Meter has placed Geocities among the top 10 most visited sites on the web.

"Because of our scale we are able not only to attract advertising, but also to offer people services and merchandise at competitive rates," says Bohnett. Around 20 per cent of Geocities' revenue is from electronic commerce.

It's easy to dismiss such virtual communities, and things like the well-populated chat rooms on AOL, as a peculiarly American phenomenon. Nearly half the homesteaders and the traffic to Geocities, however, are not from the US. There is already a Geocities Japan and it now has its eyes on Europe.

"At some point we'll launch a UK-specific version of Geocities, probably around mid-1998," says Bohnett. "Our aim is to build a worldwide community of interests with geographic sub-sets." If he does decide to start reverse-colonising the old country he won't find the field clear, however. Fortune City, a UK-based virtual community based on a similar model to Geocities, is already doing quite nicely for itself over here.

Fortune City (www.fortune city. com) has 100,000 users with home pages, most of them in the UK, with traffic running at 135,000 unique visits and 500,000 page impressions a day. This makes it one of the UK's biggest web sites. There are 20 to 30 advertisers a week and these have included Disney, Microsoft, Intel, Sony and Time Warner. There is online shopping provided by the likes of CD-Now and ticket agency Way Ahead.

The attraction for anyone advertising in such an environment is the great loyalty that such places generate in their users and visitors, says Richard Jones, one of the founders of Fortune City. "We get a lot of repeat visits, and basically people have a lot of fun. There's a Fortune City Mafia and a Fortune City Communist Party, for instance." One of his favourite members' sites is one where the Teletubbies meet Erich von Daniken's visitors from outer space.

The skills that Geocities and Fortune City themselves brings to the table, apart from the technical ones, relate not so much to content generation as to community building. Much work goes into organising games, competitions, live events and other activities, highlighting interesting sites and promoting members' pages to draw traffic to them. "We put a lot of effort into promoting the people doing interesting things, and in encouraging their leaders," says Jones.

Bohnett adds: "It's surprising how much ownership the members feel. They know they're getting something free, but they also know that advertising pays for that. Our pledge in return is to bring in advertisers who add value to the experience."

The result is that members are prepared to put in a lot of free work themselves in order to sustain the forum they value. Fortune City has a mayor and officials elected by the members, and even has a virtual jail.

Any pornographic or illegal material that is found is immediately deleted and the offender's name and email address placed on a special web page for anyone to see.

Jones says he's now in the process of setting up Fortune Cities in other European countries. It launched in Sweden in September and Germany, Spain, Norway and Denmark are all also on the list. "That's what makes us different from Geocities - we follow a localised model so people can use their own languages," he says.