The Fortune 500 executive in charge of his company's Web site/intranet/e-commerce operation steps into the conference room and closes the door. At the other end of the table sits the representative from the "interactive services" firm -- which in a former life described itself as a Web design studio.
The executive's wish list includes a complete overhaul of the company's existing "brochureware" site, a new intranet for his firm and a secure e-commerce server. When he finishes, he looks at the rep, expecting him to bid on a part of the project and make referrals to software engineering firms for the rest of it. The representative simply looks up, smirks and says, "That'll be $1.2 million. Would you like some fries with that?"
OK, so maybe shopping for a Web design firm (sorry, "interactive services firm") isn't this bad yet. But the market seems to be leaning closer to fast food these days than to Spago. This year two mega-firms, Atlanta-based iXL and USWeb in Santa Clara, Calif., have risen to the top of this market by buying out scores of smaller firms. Mark Jacobstein, formerly the CEO of the New York design shop Small World Interactive and now VP of marketing at iXL, describes his USWeb rivals as having "the reputation of being the McDonalds of the Web." (Jacobstein is apparently unaware that his current firm, which bought Small World, has the reputation of being the Burger King.)
And corporate America is eating it up. While media companies like Disney et al. are building portals, and while citizens of Geocities happily keep building home pages circa 1995, the third segment of Web sites -- those of the corporate heavy lifters -- are being redefined from glossy Web sites into "networked solutions."
Thus the metamorphosis from "Web design" to "interactive services," and thus the shakeout in Silicon Alley and across the industry over the past few months. The days of two guys starting a design firm out of their home office are apparently over; although it didn't do much for Godzilla, in the Internet industry today size apparently does matter. But is bigger really better? And is there any room left for great design?
Size is essential to USWeb and iXL -- who, like a certain lizard, have been busy digesting large chunks of the New York scene. iXL gobbled up Micro Interactive on June 1, adding it to a branch created when the company bought Small World in February. USWeb has followed suit, building its own slapdash network of offices to follow the new rules of the Internet industry: Get as big as you can as fast as you can, get tight with Wall Street and then let the IPO sort things out.
But there are a number of problems with this strategy that their investors would rather you forget. Besides the possibility of a cookie-cutter look to the Web site of every semisuccessful corporation, iXL and its peers face the problem of melding together a menagerie of small companies with varying cultures and technical expertise, separated by geographical distance, into one big, happy, 600-member family.
"The reality is that they're slapping people together to go for an IPO," claims Jeff Dachis, CEO of Razorfish Solutions. "They're saying to themselves, 'Let's roll up people, let's bottom feed and put together a revenue stream and the finance community will welcome us.'"
"iXL is running around and picking up whatever 20-person company it can find, but they'll find it's hard to build a brand," added Craig Kanarick, Razorfish's chairman and "chief scientist."
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Dachis and Kanarick think their company has found a way to avoid going head to head with the Godzillas. Razorfish is already known as a leading bleeding-edge interface-design firm -- a reputation it has reinforced with the purchase of like-minded companies in San Francisco and London. But it's also hedging its bets with an original-content strategy through its fledgling Razorfish Studios division -- which plans to sell CDs, T-shirts and other "ideas."
Razorfish has something no other Web design/interactive service firm possesses -- and something Razorfish shouldn't have in the first place: a visual brand. Designers aren't expected to drag their own styles across projects, but rather to enhance the visual identities and brands of their clients.
But Razorfish Solutions has aggressively and insidiously imprinted its style on everything it touches, from its redesign of Time Warner's Netly News site (using a pea-green color and a font style for the logo that echoes Razorfish's own home page) to its full-page ads in recent issues of the Industry Standard that resemble rave posters even as they promote its strategic services.
Dachis and Kanarick have devised the same plan as every content company that has come before: build a brand and then leverage it into anything that will sell. "T-shirts, games, detergent," said Kanarick. "We'll work on a network of toasters if it pays," said Dachis.
The pair think they've found a way out of the eat-or-be-eaten strategy by sticking to their guns and using Razorfish Solutions to expand expertise at clients' expense, which Razorfish Studios can capitalize on later.
"We're already doing it for clients, so why don't we do it for ourselves?" asked Kanarick, and to some extent, Razorfish Studios has. It released its first CD in April, "Polydemic," by the Brooklyn rapper Ticklah. A book featuring the work of photographer Danny Clinch, who's currently featured on Razorfish's in-house "Blue Dot" project, will be released this fall. And the true sign of would-be cool: Razorfish T-shirts and other logo-wear are forthcoming, said Kanarick.
But neither Kanarick nor Dachis made any mention of profits from the Studios division. Of course, since they're not putting much money into the content, they can afford to be underwhelmed at first. "A lot of other
companies put up a ton of money for their content. IVillage has burned through $50 million. The reason we're optimistic is because we haven't burned through that kind of money. Our expectations are low enough that we're excited when we sell 100 records. We're only in eight stores in New York."
Jason Chervokas, industry observer and co-editor of news site @NY, thinks the Studios might just be a sideshow, or maybe the latest manifestation of Razorfish's fascination with media moguldom. "Personally, I'm skeptical," he said. "We've yet to find the business model for Internet content. For a company that's 40 percent owned by an ad agency holding company [the Omnicom Group, which also owns a large stake in Razorfish's rival, Agency.com], I don't know what kind of patience their investors have for something completely outside the core business."
"Most of the companies that wound up being Internet service companies started out with the dream of doing content for themselves," Chervokas says. "And this being New York, everyone also has the secret dream of being media moguls. The people at the top still harbor personal feelings for media."
But even if their strategy is right -- especially if it's right -- Dachis and Kanarick could see their Godzilla competition come back to haunt them. With iXL's 600-person staff (which dwarfs Razorfish's 150), the company need never pass up a client, Jacobstein argues. And as his company handles more and more of its clients' needs -- including writing copy, editing video and creating other types of content -- iXL may one day find itself in the same content-generating business as Razorfish, whether it wants to or not. With Agency.com, iXL, USWeb all munching on this market, what good will a logo T-shirt do Razorfish then?