FOCUS: INTERNET - Pulling threads out of the Web/Agencies investing in Web development are discovering a rich source of income beyond the scope of PR and marketing

The longevity of most Web-based marketing and design businesses

says a lot. It’s a tough way to make a living.

Stand back from the hyperbole of the Internet, and take a sober look at

the fees being earned and, after the select few leaders, the typical

income drops away rapidly.

This is an immature market, where the investment demands still heavily

outweigh the rewards on offer to most business. It is as well to

remember also, that the Internet ’public’ in the UK at least, is still

only seven per cent of the adult population (many at work), and around

two per cent of households.

The good news, however, is that for those players with a foot in the

door, Web development is proving a highly profitable development

sector.

According to Hill and Knowlton’s Tony Burgess-Webb chair of the agency’s

Web development division, relatively modest fee income figures mask some

extremely healthy profit margins.

PR Week’s survey of how much UK PR agencies are earning from Web

development shows that at present, the serious fee income is flowing

mainly to a few international agencies who have been pouring money and

resources into Web development businesses for several years. However,

there are a number of dedicated Web spin-offs entering the market.

Despite the obvious synergy of new media with existing PR skills, there

are many genuine reasons for separating a Web development outfit from PR

activity.

’It’s a question of mindset really,’ says Jan Stannard, joint managing

director of Marbles, which has a small, separate Web development

spin-off.

’Electronic media does not just concern the marketing side of business,

but also business processes, sales channels, and business functions such

as communications. Some firms getting involved in the Web are only

giving the Web a marketing label - if you look comprehensively at what

the Internet can do for companies, it’s well beyond the scope of public

relations and marketing.’

Charles Cohen, managing director of Band and Brown’s independent

spin-off company Thought Interactive claims massive growth for the

purely Web-focused business.

After six months’ of independence, he claims turnover is heading for

pounds 500,000. Band and Brown started up the venture around two years

ago.

Big name clients include BT (also a corporate account for Band and Brown

Communications) and the Liberal Democrats general election site.

Despite the success of The Weber Group’s US Web development spin-off

Thunder House, UK Web fee income was rather modest last year - at around

pounds 60,000. But all this is set to change with plans to open a

Thunder House office in the UK next month, offering Web development,

maintenance and on-line media buying.

Meteoric growth is a feature of some of the new breed of design-oriented

Web development agencies, for instance Sunbather, a media and

entertainment-led agency which has grown to a turnover of almost pounds

1.5 million in two years. William Julian, partner and creative director,

reckons its turnover will more than double in the next two years.

Having the range of hi-tech skills in the in-house team of five is a

major factor in achieving high quality results. One popular offering is

’Incorporate’ the company’s own system of handing back control to

clients, allowing them to drag-and-drop documents from their own word

processors into their Web sites.

Shandwick emerges as the most active player on the UK PR scene. Last

year Web development accounted for pounds 967,120 in fees - four per

cent of its overall UK fee income. Shandwick has long been involved with

the Internet, but its current star, Shandwick Interactive has only been

in existence since last September. It was born out of established

trading companies such as Shandwick Design, and has its developmental

roots in Shandwick’s US-based Spiderworx Web design brand.

Indeed, it began working for major client Shell (www.shell.co.uk) in

March 1996, six months before Shandwick Interactive was conceived.

The Web development agency can also draw on the resources of the rest of

Shandwick International, to bring in expertise on identifying key

audiences and developing suitable messages for them.

’We take a strategic focus, we’re not a back-end delivery outfit,’ says

Shandwick Interactive managing director Simone Barratt.

Shandwick Interactive employs 13 staff in London, and 60 worldwide.

Working together as a global ’virtual’ team gives them a cross-cultural

team which can exchange views on designs, concepts, tone and

grammar.

Nearest rival Hill and Knowlton Net Communications reported UK fees of

pounds 612,000 for 1996. H&K Net Com managing director Chris Solheim

points to the importance of the skills mix, with a high technical

content, among its16 full-time staff in London. ’We’re one of the

largest specialist communications departments in any European PR

agency,’ says Solheim.

Critically important is having IT specialists who can talk the same

language as the client’s IT staff, since this is an important factor in

winning the client’s confidence. However, IT specialists are not always

specialists in communications media, and having experienced

communications staff in this area distinguishes H&K from many purely

design or technology-oriented agencies.

Solheim has also invested in a staff member who is devoted to improving

on-line publicity for sites, including search engines and links from

other Web hot spots.

One of Hill and Knowlton Net Communications’ biggest Internet sites is

the Shell-Ferrari Formula 1 site (www.shell-ferrari.com). Many more

developments are taking place in clients’ Intra or Extra-nets (private

sites either entirely within one company, or shared between a restricted

group of companies).

Solheim’s personal prediction is that 1997 will be the year when these

private sites become the most substantial area of business.

’Extranets are likely to become an extremely important part of corporate

communications and business-to-business for an increasing number of

companies,’ he says.

’It is still mostly Internet business but sooner or later companies will

see the Intranet as a cost-effective way of putting out all the stuff

they need to,’ agrees Dick Lumsden, managing director of Charles Barker

Publishing.

Lumsden left Paragon, which pioneered Shandwick’s Web business, to set

up Charles Barker Publishing single-handed. Annual turnover since the

start of 1996 is heading for pounds 1 million, pounds 189,625 of which

was generated by Web development.

A number of agencies hint at the risk that companies will pay big

up-front costs for Web site design from the emerging design specialists,

but then recoil in horror at paying for regular updates. The fees

charged by leading transatlantic Web design agencies, vary widely and

are often misunderstood, since hi-tech gimmickry can weigh heavily in

the cost of individual projects.

William Julian, partner and creative director of Web design specialist

Sunbather says the range of prices they have charged for Web sites

varies widely, from pounds 12,000 up to between pounds 200,000 and

pounds 250,000.

Hi-tech features which seriously notch up the cost include links to

databases, and use of so-called Intelligent Agents.

Lower level programming-based features such as Shockwave games and CGI

scripts are also expensive.

Despite the widespread belief that a compelling Web site has to be

loaded with hi-tech features, the issue of content continues to be the

serious long-term issue.

’What we’re doing is designed to answer the question: ’Why would anyone

go to your Web site twice?’,’ explains Nick Hayes, managing director of

Noiseworks.

’We don’t develop anybody’s Web site from scratch, we specialise in

WebZines ...

there is definitely a clear role for public relations companies in the

marketing relationship with their clients.’

Recent successes for Noiseworks include Hewlett-Packard, Lotus, Creative

Labs, and Packard-Bell.

With this sudden and easily-won success, Hayes believes he has struck

the right chord at the right moment for this area of business to prove

an explosive growth area for Noiseworks.

However, comforting as it may seem for public relations agencies to rely

on the content issue for Web sites, this is an open secret shared by

others outside the world of public relations.

’Anybody who’s not doing content is not going to be in business long,’

points out Sunbather’s Julian.

CASE STUDY: SHELLING OUT FOR A DESIGN CLASSIC

Shell International did have a Web site prior to taking on Shandwick

Interactive, but this went straight into the bin, leaving a clean sheet

for the new team.

A key strategy underlining the development was a desire to reflect

political moves within Shell to become more transparent and open. This

includes Shell’s desire to be seen as leading the environmental debate,

and Shandwick proposed that the Web site could be the first demonstrable

tool that reflected this new approach.

Elements that show a willingness to be open include a number of

quasi-news groups, debating issues where Shell has been in the news.

Visitors can say anything, apparently, although the number who actually

contribute is small. The site also provides links to the sites of

pressure gourps,such as Greenpeace. Recently it was shortlisted for one

of the Web design awards actually worth having - the British Interactive

Media Association’s Corporate Web site award.

For example, there are just three messages in the Human Rights/Shell in

Nigeria thread, although all three are strongly-worded and lengthy

condemnations of Shell’s record in the country. General business

principles, which featured strongly in the news coverage of Shell’s AGM

last month, attracted just one sceptical questioner immediately

afterwards.

The total numbers accessing the site exceed 6,000 visitors daily. The

site generates business responses via e-mail as well. From an initial

350 pages, the Internet site has developed to over 800 pages, and is

expected to continue growing both in size and in the number of

interactive features.

Shandwick Interactive is also developing an internal Intranet site for

Shell.

There is also an active on-line and off-line marketing campaign to

promote the Shell Web site. The initial launch was promoted through a

press campaign in 40 countries, and has continued actively since then.

In addition to defining an Internet strategy, Shandwick has evaluated

competitors’ use of the Internet and carried out a survey of NGO and

environmental organisations’ use of the Internet. The company also

tested the site design in 15 countries, running in-house training for

Shell operating companies to identify best practice in Web creation, and

subsequently creating ’best practice’ guidelines.

The daily updates and maintenance of the site are driven by tight

deadlines.

For example, the annual chairman’s speech at the AGM in May was

reproduced on the site exactly half an hour after it was delivered to

shareholders.

’It’s a bit like a marriage. After the big build-up, you have to make

sure it works the next day, and the next day ...’ concludes Shandwick

Interactive’s managing director Simone Barratt.

CASE STUDY: A FINGER ON THE PULSE FOR GPS

One of the PR industry’s biggest Internet enthusiasts is Scott Clark,

managing director of Complete Pharma Relations, which specialises in

multinational and international programmes for pharmaceutical

companies.

Quick to spot the potential of the Internet for delivering high quality,

and sometimes complex messages, to key audiences, Complete Pharma

invested in its own Web server, and has been delivering editorially-led

information targeted particularly at GPs for around two years.

Complete Pharma’s income from Web site design and management is about

six per cent of its fee billings, and heading for between 10 per cent

and 12 per cent. Last year Web development generated fees of pounds

103,552.

Despite the Internet being what seems an obvious medium for the delivery

of international campaign messages, pharmaceutical companies have found

the universal accessibility of the Internet to be a mixed blessing.

Drugs have to be approved for use in treating specific diseases by

different bodies in different parts of the world. This has led to

problems in providing information about treatments where they are

’indicated’ differently in different countries or regions.

Legislation that prevents such mishaps occurring in traditional printed

media does not apply to the Internet. The issue was covered in some

depth in the February issue of Medical Marketing and Media, and the US

Federal Drugs Administration wrote a warning letter to companies about

its view of the problem, which could lead to new legislation.

Clark’s view is that the alarm has been rung too soon. ’Let’s wait and

see if there really is a problem before they start regulating: we should

get into a discussion about it.’

CPR’s approach is that the openness of the Internet is good for putting

out general information about diseases, such as the Ephanet site,

sponsored by the European Association for Asthma. However,

product-specific information is restricted to medical audiences with a

password protection system.

’You have to ask: ’is this the best medium to reach an audience?’,’ says

Clark.

Some experience points to GPs being an unusual Internet audience, in

that it tends to be older practitioners who have access to the Internet,

at home. Younger GPs are more career-minded or distracted by families,

and are less likely to have Internet access. General practices as a rule

do not have Internet access at work.

Experience seems to show that the Internet is working well as a means of

reaching GPs. They appreciate the exclusiveness of the password

protected zones, and have visited CPR sites in tens of thousands. For

instance, CPR had a recent target to point a medical audience towards

specific new research findings, and exceeded its target ten-fold.