Boomtown: Where Madison Avenue meets Info Road

by Cary Tennis

Why would a Fortune 500 company help an indie music collective build an Internet utopia?

They wouldn't, unless there was money to be made.

Intel, the Silicon Valley chip maker with 32,000 employees and a net annual income of more than $2.2 billion, proudly displays its banner on the Internet Underground Music Archives because IUMA is the Internet equivalent of a hot new TV show.

"We are looked at as the NBC, CBS, and ABC of the Internet," says Ahin Savara, executive vice president for sales and merchandising at IUMA. "Because of that, Volvo, Coca Cola, and other potential corporate advertisers recognize us."

Such odd couplings promise to become increasingly common as large companies, aware of the potential for exponential growth in the number of customers they can reach, seek to get their corporate messages across via the Internet.

However, nobody is sure exactly what model of advertising on the Net will and should work. Two main models are emerging: the sponsorship model and the pilot model. In the sponsorship model somebody like Hot Wired or IUMA has a cool idea, puts a site together, and offers companies banner space in return for monetary support for the site.

As in public television, the sponsor waits humbly offstage while the network discreetly acknowledges its generosity, creating an image of a good corporate citizen eager to quietly further the cultural agenda of god people everywhere. Of course, everyone knows it's just advertising.

The other emerging model is the television-pilot model, wherein a Web production company, or "content provider," develops a site it thinks will be popular, gets it up and running, and when it has drawn a good crowd, sells advertising space on it.

"It's like the early days of the soap opera," says Henri Poole, president of vivid studios, a digital design firm in San Francisco. vivid is working with talent agencies who match production companies with corporations eager for a profile on the Internet. Auto manufacturers are high on the list. "We're calling them Ford operas or Saturn sites," says Poole.

The development is not without contention.

"People are developing Web sites with the idea that they'll sustain them on advertising and sponsorship revenue on a monthly basis, and that is absolutely the wrong model," says Savara.

His sentiment reflects an idealism deeply rooted in the Internet subculture. IUMA did not start out to make money, but its popularity has brought the prospect of big profits.

When asked to describe the opportunities on the Internet, advertising executive Erica Baccus of San Francisco's FCB Technology Group, whose clients include Adobe and Tandem, replies with one word: "Big." Those opportunities will have their effect on even the most idealistic Internet utopians. "We're tired of everyone being volunteer," says Tony Stonefield, IUMA's music-publishing liaison. "We're all in negotiations as to what our stock ownership will be."

In other words, contradictions abound as we zoom ahead into the unknown. While indie zealots consciously pooh-pooh commercial Web models, Poole insists that pragmatic capitalist engagement is the road to freedom. "I personally think that advertising on the Net is going to going to save the Net," he says. He reasons that if you don't have free sites with paid advertising, you'll have advertising-free sites that you have to pay to enter. So the question is, does the sponsor pay or does the consumer?

"It should be an open service, period," Poole says.

Of course, with sponsorship comes eventual influence over content, as all publications professionals realize.

"Most of these sponsors have had very open hands and said, 'Do what you want; we want to be involved,'" Stonefield says.

But when content providers set out to tailor sites to prospective sponsors, some control over content is probably inevitable. Moreover, the sheer numbers of potential viewers and profits guarantee that battles for territory and economic control will quickly ensue, leading to a seemingly inevitable consolidation of power. And judging from the numbers, the kind of power we are talking about is staggering.

According to sources at Wired, while the magazine has a circulation of 145,000, the HotWired Web site has 200,000 registered users. According to Andrew Fry, president of Free Range Media in Seattle, the number of servers has jumped from 50 in 1993 to 20,000 just two years later. The current estimate of 20 million Internet users is said to be growing at 10 to 20 percent a month.

And, most important for advertisers, a recent poll indicated that, according to Poole, the 7.5 percent of US households that have online services watch 25 percent less television than the overall national average.

"Traditionally we were reaching [that eight percent] through TV," says Henry Eakland, digital production director at FCB Technology Group. "Now they're not watching TV."

"Two percent of the US advertising budget might be available for media buys on-line," says Poole. "So advertisers are being asked by their clients to place media buys on-line. But there's not a lot of places [to do that]."

That scarcity accounts both for the sharp corporate interest in sites, such as IUMA, that have demonstrated their audience base and for the scramble of content providers to create more sites. How advertisers on these sites will be charged is not yet clear.

"It's no longer a traditional agency model of getting 15 percent of media buys. because you're not buying media," Eakland says. "Nielsen and Arbitron are both trying to figure out how to rate Web site advertising so there can be a model for buying space. My understanding is they haven't quite reached a consensus."

All this corporate interest in having a Net presence is, as Eakland notes, having an unexpected effect on the corporations themselves. "We're finding that the simple decision to do or revamp Web sites requires an entire rethinking in the company. Departments that have never talked [with each other] have to get involved. All of a sudden project managers in Europe and Asia are talking to public relations people in the U.S. And companies are just getting a look at this new one-on-one relationship with customers, as well. It's a whole new paradigm shift."

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