Internet firms in your face

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They spend millions on ads in old media

Miami Herald JOHN DORSCHNER [email protected]

Three years ago, your typical Internet start-up was two nerds with a computer, and their idea of marketing was to tell their friends and post a message on an electronic bulletin board. And now…

Now … it’s OurBeginning.com, an Orlando Web site in business less than a year. Its primary audience has been women interested in wedding invitations. This afternoon, it’s going to the Super Bowl.

It’s spending $4 million — five times last year’s revenue — for a controversial ad campaign that ABC demanded it redo. The company is milking the revision by offering a “director’s cut” on its Web site.

Now … it’s Yupi.com, the Miami Beach Spanish-language portal. For the first nine months of 1999, it spent $7.8 million on marketing — 46 times its revenue for the period. It plans to spend another $40 million to get itself known.

The Internet boom may be the best thing that’s ever happened to advertising and public relations firms. According to the latest figures of Competitive Media Reporting, “dot-coms” spent $1.4 billion in traditional advertising media for the first three quarters of 1999 — that’s almost three times as much as a year earlier.

It’s gotten to the point that some pros are wondering whether viewers are experiencing dot-com overload. “There’s just too much out there now,” says Edward Boches of the Mullen advertising agency, which created the early commercials for Monster.com. “I don’t see how people can remember them. It’s like being introduced to 40 persons at a party.”

That hasn’t stopped the dot-coms from forging ahead.

“Our business has just exploded in the last year,” says Elaine Silverstein, co-founder of Miami’s Beber Silverstein ad agency. She says that the Internet has gone from zero to 17 percent of its business. Among its clients: EquityStation and WeType4U.com, both of Boca Raton.

“No question within the last 18 months that the Internet revolution has had an enormously positive impact,” says Dan Tarman, a managing director in the Miami office of public relations giant Burson-Marsteller. For the last six months, a third of the office’s business has been dot-coms, he said. Among its local clients: Yupi, Patagon.com and ByeByeNow.com.

The focal point for dot-com buzz is the most ballyhooed event of the television year, the Super Bowl. Last year, only two dot-coms appeared, Monster.com and HotJobs.com, which plopped half of its annual revenue into a single 30-second commercial.

This year, 17 dot-coms will take 20 percent of the spots at prices averaging $2.2 million, though some late entrants had to fork over $3 million to get the last of the 30-second spots.

The dot-com onslaught is everywhere. According to Competitive Media, dot-com advertising in national newspapers — Wall Street Journal, New York Times — was up 256 percent from the previous year. In local newspapers, it’s up 296 percent, in magazines 190 percent.

The biggest push has been in radio, where dot-com spot commercials are up 464 percent for the first three quarters of 1999 as compared to the previous year. Dot-coms are now the fifth biggest advertising category in radio — so strong that some analysts are recommending investing in radio stocks — such as Infinity — as an indirect Internet play.

The trend shows no signs of abating. A special report by Advertising Age predicts that dot-com advertising this year may come close to doubling. Unless, the trade magazine says, “the market goes bust.”

Why is so much money being thrown around by companies with so little revenue?

In the past several years, more than a million Web sites have cropped up. The two nerds in the garage may spend only a couple of hundred dollars to get their Net page running so that theoretically anyone in the world can see it, but who is going to pick its page out of all the clutter?

“We need to create a household name throughout the United States,” says Kristen Routh, marketing vice president of a Miami Beach start-up, MyCity.com. That’s why MyCity hired CW/Rampage, a Beach marketing-advertising company, before it has even launched the first of the 50,000-plus sites it hopes to create.

It can afford to do so because there are plenty of Internet angels and venture capitalists, excited by the soaring stock prices of other Internet companies, willing to bet on virtual ideas.

“These companies are flush with cash, and they’re looking to make a big impression in a hurry,” says Celeste DeArmas of CW/Rampage.

OURBEGINNING.COM

The hot example of the moment is OurBeginning.com. It started as a site aimed at brides-to-be. Lately, it’s expanded into a virtual store offering a variety of stationery, though its home page still leads off with a photo of a smiling bride with the headline Wedding Bliss.

Why did such a site decide to go to the Super Bowl, where the audience is 60 percent male?

“Well, why do you think?” asks Laura Bennett, whose Bennett & Co. is the agency for the ads. She pauses for dramatic effect before providing the answer, “Wall Street watches the Super Bowl.”

Indeed, influencing future investors before a stock goes public is a major motive of many dot-com campaigns, but the underlying idea of the Super Bowl is to get known — and quickly — before competitors grab the spotlight.

“Dot-coms move like lightning,” Bennett says. “It’s scary. I’ve never had a client move like this.”

The Orlando company is spending $2.5 million, plus production costs, for four 30-second pregame spots and one spot in the third quarter.PAY IN ADVANCE

Since ABC, like many other media companies, does not trust these small, new dot-coms to pay their bills, the network demanded a huge payment from OurBeginning in advance.

Bennett is using her 30-second Super Bowl fame for all it’s worth. “We’re leveraging the heck out of it….

“The first thing we did was we went to the Web site and asked our customers to vote whether they wanted warm and fuzzy, edgy and creative, or funny. Thousands and thousands voted. They wanted funny.”

They arranged with Disney people to create and produce the five 30-second commercials.

Bennett said that ABC was upset by one of the spots. “They thought it was too violent. It involved cakes and brides … and some other things.”

MEDIA BUZZ

OurBeginning redid the commercial, but starting this afternoon fans can see the unexpurgated original — “the director’s cut” — on the Web site.

Regardless of its viewership this afternoon, Bennett says the commercial has already paid for itself in publicity, all of which was generated by journalists wondering why a wedding-invitation site would be advertising at a sporting event.

“Business Week had a whole crew here,” she said. “CNN did 30 minutes. USA Today mentioned us four or five times. Two AP reporters came. And now The Miami Herald! This was never about the commercial. It was about getting on the radar screen.”

In fact, for unknown dot-coms, nothing compares with the Super Bowl — the only television event where journalists pay attention to advertising.

Last year, the buzz was about HotJobs.com, a little known site that joined the fray at least partly to offset the influence of another job-placement site, Monster.com.

Thanks to its 30-second spot, HotJobs’ revenue grew fivefold. Its monthly traffic soared from 450,000 to 2.3 million — and stayed up there, even months after the game. The company went public — with a market capitalization of about $1 billion.

“It worked great for us, and of course, we’re going back,” says Chief Executive Richard Johnson, who made himself available to journalists throughout the United States to talk about the three 15-second spots HotJobs is creating for this afternoon’s game, involving the voice of a actor Samuel L. Jackson as a cursor hand.

DROPPING OUT

The power of the Super Bowl is such that even dropping out of the commercial lineup gets publicity. That’s what happened with Angeltips.com, which originally signed up for the game last summer, then dropped out in December.

Chief Executive Steve Fu says he was worried by a number of factors. First, he didn’t want to get lost among a bunch of dot-com commercials. “We always strive to be unique.”

Then the company — which provides an online marketplace to bring start-up entrepreneurs and angel investors together — worked out a new concept with strategic partners. There wasn’t time to redo its Web site, and he worried that the Super Bowl publicity would crash the site, as happened once to Victoria’s Secret.

“So ABC gave us credit for commercials we can do later — and we’ve gotten quite a bit of publicity about our move,” says Fu.

Some surveys show Fu may have been wise to drop out. Active Research did a holiday poll of online shoppers that showed 22 percent were unable to name a specific Web site when asked what Net commercial had been the most memorable.

Beyond.com attracted media attention when it featured a naked worker in a commercial to promote its software, but after dismal holiday sales, the company laid off workers and said it would change its emphasis from retail to business-to-business applications.

TOO HASTY

“The problem is there’s all this venture capital out there to be spent,” says Boches of Mullen advertising, “but most of these dot-coms advertising at the Super Bowl the public has never heard of. They’re all so hasty to get to market that they haven’t really thought through what they should do.

“They all have that similar edgy kind of advertising that looks and feels the same. It reflects the people creating the commercials rather than the customers.”

In South Florida, the most visible marketing campaign is Yupi.com’s. It has shown television commercials during prime time and Dolphins games. It has vehicles painted with the Yupi logo going around town. It has billboards. It has radio commercials on WTMI, the classical music station.

Yupi’s vice president of marketing, Jackie O’Brien, says the company can explain nothing about its advertising — or anything else — because it began a government-mandated “quiet period” after filing documents a week and a half ago to prepare for a public offering of its stock.

STOCK OFFERS

Yupi’s marketing is fueled by a $67 million round of venture capital announced in November, but many dot-coms with little money are also seeking agencies to promote them.

Many entrepreneurs come only with a dream and perhaps an offer of stock, and that means established agencies are cautious about taking them on.

“They come in asking for RFPs [requests for proposals],” says Cori Zywotow Rice of SAMCOR Communications, whose client list includes Xcelerate, a Fort Lauderdale e-business company. “And before we spend the time on that, we need to find out: Do they have the funding for a cohesive professional program?”

Silverstein says her agency is “highly selective. We don’t want all these guys with a dream and no money saying, `We’ll give you 20 percent of the company.'”

However, she adds, if she thinks a company has merit, “We’ll take some cash, some equity.” That’s the case with EquityStation.com, a service for investors.

WISE DECISIONS

Tarman at Burson-Marsteller says the international public relations firm doesn’t talk about fees, but “like so many other large firms, we are certainly wise enough to look at nontraditional ways of doing business that were probably unheard of a few years ago.”

In fact, with many dot-coms, Burson-Marsteller is going beyond “the traditional PR to use a myriad of tools. Designing a corporate identity, deciding what you want your brands to represent, help them write a business plan. Obviously not the financial components, but crafting the key message, which is important to investors and other audiences. And we help develop the road show and the key messages there.”

Some dot-coms, however, are reluctant to put themselves completely in a PR firm’s hands. John Bonaccorso of ScoreCardUSA.com, which gave a presentation at the recent Florida Venture Capital Conference, says “we made the mistake before” of allowing a PR agency create a capital-seeking presentation.

“They tend to make the same script for everybody,” Bonaccorso said, “so that it makes for interchangeable companies. We decided, `To heck with them, we’re going to pitch it our way.'”

BACKLASH

In fact, a backlash may be setting in about all the money being spent on marketing.

Jeff White, a vice president with Silicon Valley Bank, observed during a Florida visit, “A lot of venture capitalists are starting to think that a $30 million round of funding that has $25 million go into marketing is not the way to go.”

The new buzz word, White says, is “viral marketing,” meaning buttons that link one Web site to another and create an old-fashioned concept called “word of mouth.”