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NEWSThe Forecast for 2001: I-Shops Optimistic but Cautious

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The high-tech honeymoon on Wall Street has turned Darwinian. Though executives at many i-shops are hopeful about prospects in 2001, they have learned from past mistakes.

"While there is an unwarranted [negative] hysteria about dot-coms, the fallout is the best thing that could happen to this industry," said John Bohan, president and CEO of L90, the Santa Monica, Calif.-based Internet ad server. "No longer can companies spend three dollars to make a dollar. They have to build real companies."

Added Matt Freeman, CEO of Tribal DDB North America in New York, "2000 was the year of hype, flashy business plans, funny VC money and buzzwords. That's not enough to sustain a business." Plus, too many Net ventures overpromised and underdelivered in 2000, leaving consumers feeling burned or cynical about online brands.

The goal for many i-firms in 2001 will be to regain consumer trust. "Companies should try to nurture relationships over time and not try to force relationships," said Freeman.

Marc Adler, chairman of MacQuarium, Atlanta, noted that while there are a lot of exciting new technologies coming this year, "you can't focus on the flavor of the week. You can't be ERP today, CRM tomorrow and wireless the next day. When you continually change direction, you have to concentrate on changing processes, people and systems. Technology is a tool."

At Circle.com, Baltimore, acting CEO Charlie Tarzian said as the Internet moves from the PC to other devices, "The monolithic Web site experience will begin to be replaced by brand moments that occur in a mobile, broadband, desktop and editorial Web site environment. People will continue to use the Web to gather information, but transactions will begin to take place elsewhere."

Tarzian also sees awareness advertising on the PC-based Web—banners and the like—growing less important this year than content-based marketing, where people can educate themselves about a product. "There's too much money being spent on awareness advertising and not enough on what the Web does best," he said. That is, "helping people who are trying to gather information."

At KPE, New York, founder and CEO Marc Patricof said e-businesses can't survive as stand-alone entities. "They won't have venture capital behind them to finance the growth of the Scients, Viants and Sapients—that's over," he said.

David Bohine, vice president of Apollo Interactive, a Culver City, Calif.-based i-shop, adds that 2001 will see an end to the "multimillion dollar digital change-in-strategy engagements" serviced by interactive agencies such as iXL, Razorfish and marchFIRST, among others.

"If you need consulting, there's no reason you wouldn't go to a traditional agency," said Patricof. He sees television absorbing "the interactive qualities people expect from the Internet." Online businesses will have to focus more on direct marketing and communication, including e-mail and instant messaging.

Most interactive agencies do know one thing: They'll think twice before taking on a pure dot-com play in 2001. "I think our mix going forward is going to be much stronger on the bricks-and-mortar side," said Brayton Johnson, president and CEO of Bethesda, Md.-based Qfactor, formerly known as WebNet Marketing.

To Jeff Einstein, director of interactive at Rapp Digital, companies will abandon a branding model to focus on return on investment. "You get more bang for the buck in guerrilla marketing and viral marketing campaigns." Similarly, Lance Trebesh, gm of the Los Angeles office for Viant, the Boston Internet strategy company, believes the client's mind-set has changed from putting "anything" on the Net to developing increased revenue channels.

Bohan said this survival period will herald the arrival of Warren Buffet-type investors who focus on the long-term model. The trick, he said, is to find the "leaders in the next three or four years that are incredibly undervalued today. That's how you get around this."