Market Column



On the list of things not to do in 1997, put this at the top: Start a new Internet content business that depends on advertising for survival.

While few people seriously believed last year that the Internet was ready to be an advertising-sponsored medium, the story of American Cybercast Inc. is a painful reminder that much of what happens on the Internet is little more than a gigantic experiment.

The Jan. 15 announcement by American Cybercast that it was filing for Chapter 11 bankruptcy protection was a dark day for L.A.’s new media industry. For the preceeding year and a half, the company had been held up as a model which some still believe is the ultimate future for the Internet as a medium.

But its failure also was seen as evidence that it is all but impossible to survive on the Web by relying on advertising as a sole source of revenue. At least so far.

“It’s natural, when the person percieved as a leader goes down, for everybody else to sort of go into a tailspin,” says Thomas Lakeman, senior vice president of production with Culver City-based Internet content developer Digital Planet Inc. “(American Cybercast) did damage to more than just themselves.”

American Cybercast, as readers of this space will recall, is a spin-off of Marina del Rey advertising agency Fattal & Collins that was created following the phenomenal success of its first creation an episodic Web site called “The Spot.”

The site was a revolutionary idea, which has since been copied by hundreds of other companies. The premise was simple: The way to attract viewers to a Web site was to make it more like television. By telling a story, and creating new episodes on a daily or weekly basis, you could keep viewers coming back for more. And by attracting a large number of regular viewers, you could sell space on the site to advertisers.

“The Spot” looked like something Aaron Spelling’s nerdy grandson would have created, an interactive story about a group of good-looking young college kids living in a beach house in Santa Monica. It attracted such big-name sponsors as Apple Computer Inc., K-Swiss Inc. and American Honda Motor Co.

Within a year, the site was paying for itself through advertising or at least so American Cybercast officials claimed. Last May, they launched a science fiction series called “Eon-4,” and followed that up with another drama called “The Pyramid” and a comedy site called “Quick Fix Theater.”

At its height, American Cybercast had 60 employees. Last week, there were 13 left, and production on both “Eon-4” and “Quick Fix Theater” had ceased, according to former company spokeswoman Kay Dangaard who herself has been laid off.

The company’s failure has been attributed to an unrealistic business plan. The cost of producing all those episodes grew way out of range of the advertising revenues coming in. But that doesn’t provide much comfort for the other producers of episodic Web entertainment.

It’s estimated that there are as many as 4,000 episodic serials on the Web, although most search engines only turn up between 100 and 200. Many of them are produced here in L.A. And their creators are the first to admit that they’re worried.

“The show has satisfied all our goals in terms of content, but it still isn’t a successful business model,” says Scott Zakarin, whose Culver City-based LightSpeed Media Inc. produces a Web series called “GrapeJam.”

It was Zakarin who created “The Spot” for Fattal & Collins while working for the agency as a contractor. His LightSpeed Media designs Web sites for corporate clients, which brings in the money to pay for production of “GrapeJam.” But Zakarin admits that the site has no traditional advertisers, and he isn’t sure how long he can keep it going without more support.

“GrapeJam” attracts an average of 30,000 hits a day, translating to about 3,000 individual viewers, which makes it one of the more popular sites on the Web. But 3,000 people is only a miniscule fraction of the number of people who watch even a bad TV show. And, as Zakarin points out, it is expensive to produce a high-quality Web site that will attract even that meager audience.

“I think the best bet is to make sure your core business isn’t depending on advertising so you can be experimental,” says Zakarin. In fact, he sees the main purpose of the “GrapeJam” site now as a marketing tool for LightSpeed, because it shows potential clients what the company can do.

Digital Planet, which produces a Web serial called “Madeleine’s Mind,” has also downgraded its hopes for the series.

Originally intending to make it an advertising-supported show, Digital Planet has ceased production of “Madeleine’s Mind” indefinitely and now sees it mainly as a marketing device for the company, says Lakeman. It is also a research and development tool, because working on it teaches new skills to the company’s employees.

Despite the problems, most Web site developers still believe that episodic Web sites, and the advertising-support model, will eventually work. Software is on the horizon that will make production faster and cheaper, and expected improvements in the speed of data transmission will make Web sites more and more like television, only interactive.

“I think the idea of entertainment narrative on the Web is too good, and it’s too close to what people want, to fail,” says Lakeman. “It’s going to come back in some form.”

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