DigitalTown, which runs a network of Web portals dedicated to local economic development, wants to give citizens a personal stake in their city — quite literally.
The company, which is on the 2017 Gov Tech 100 list, has already built more than 20,000 portals for localities around the world. About 8,000 of them are in the U.S. and while it gives city governments the option to license and own their own portals, it is now adding another mechanism to get locals involved if the city itself doesn't want to: digital ownership.
The idea works like this: First, DigitalTown creates one “digital stake,” roughly equivalent to a share of a company on the stock market, for each person living in a city. Then, it gives citizens of that place a window of time to claim their stake. Then it opens stakes up to local institutions such as chambers of commerce. Then it offers leftover shares to the general public, including people who live outside the city.
The share transaction system, which would enable people to buy and sell digital stakes as they wish, will run on a blockchain, according to CEO Rob Monster. But instead of relying on “miners,” or third parties who validate transactions, the DigitalTown blockchain will run on pairs of public and private keys that people will use to identify themselves. As people sell shares, they will be able to use the proceeds to shop on DigitalTown or they could convert it to cash.
“You’ll be able to see on a daily basis which cities are most valuable, which cities have gained the most value in the last day and which cities have lost the most value in the last day,” he said. “So it … creates a stock market, if you will.”
The portals, which the company began rolling out in June 2016, are meant to act as e-commerce hubs for the cities they represent. They list restaurants — menus, even — other businesses, facts about the city, event listings and more. Local businesses can use the portals as digital storefronts and sell things through the website.
It goes further. Monster said the portals can act as local competitors to Internet giants like Amazon, Expedia and Airbnb. A person can, in fact, offer short-term rentals through the site, or sell their artwork, or their skilled services.
“Look at the battles going on right now around short-term rentals,” Monster said. “All that revenue could just as soon go to the city.”
Monster hopes to undercut its larger competitors by taking a smaller cut of users’ profits. Hotel bookings are a good example, he said — where a hotel might pay a large commission to booking sites like Expedia for drawing in customers, DigitalTown would offer a lower rate and then redistribute commissions to shareholders of the portal.
These transactions generate commissions, and that’s the mechanism that creates value for the people who own shares of each portal. That is, if an artist in Boise, Idaho, sells a painting through DigitalTown to another Boise citizen, and a citizen of Salt Lake City owns a share of the Boise DigitalTown portal, then that shareholder would get a small piece of the commission.
Or, as Monster hopes, the Boise municipal government would license the portal itself and own 100 percent of the shares. That way, it would receive the entire commission.
It’s an unorthodox idea for city governments, whose revenue streams usually come from taxes or fees that pay for programs in the public interest. Judith Kleinberg, president and CEO of the Palo Alto, Calif., Chamber of Commerce and a former mayor of the city, noted that it’s increasingly common for local governments to experiment with public-private partnerships as a means of offering services more cheaply or efficiently.
“I think a public-private partnership is a good idea,” Kleinberg said. “We have a lot of those in Palo Alto, and government is going in that direction everywhere.”
However, those kinds of partnerships don’t typically involve city commissions. Rather, Kleinberg pointed to some local examples where the city provided infrastructure or support to a nonprofit that took on the responsibility of offering programs such as child care and senior services. It’s a function of government narrowing its focus to core concepts like public safety.
The default commission rates are 8 percent for retail, dining and services, and 12 percent for lodging, though Monster said cities could change those rates if they license the portals. So far, the only U.S. cities to license the portals are Miami, Boston and New York.
Monster sees multiple benefits for cities in the process. The most direct is that the cities would receive a new, non-tax revenue generation stream. Another, more nebulous, is that it would drive local economic activity. The portals, after all, are for locals — so instead of somebody shopping through Amazon, they are shopping from a merchant within their own city.
“The city becomes a stakeholder in the creation of a portal that becomes the city homepage,” he said.