Raise your sights

New media can be a very confusing area if you don’t understand it. Phil Dwyer starts off by examining the potential market of the Internet and Jane Lewis gets the clients’ point of view. Phil Dwyer is editor of New Media Age

Over the past couple of years, new media predictions have fallen into one of two opposing camps. It is either a case of: this is a revolution which is going to change the world (tomorrow probably, but by next week at the outside); or this is just another passing fad (like citizen’s band radio, the yo-yo and the European Union) which we will all have forgotten about by the summer. Experience has shown us that the truth will be somewhere between those two extremes.

First, some facts: the World Wide Web is (by some measures at least) the fastest growing medium this planet has ever seen. The number of people around the world now regularly using the Web is put by most analysts at 60 to 80 million –a figure which is expected to grow by at least 25 per cent this year.

Europe is among the fastest growing markets in the world – largely because it is starting from a smaller base. National Opinion Poll estimates there are around a million on-line households in the UK at the moment and expects that figure to grow by another half a million this year.

And, despite a lot of media coverage on problems with the security of on-line transactions, those people are buying things. Figures on European on-line purchases are difficult to come by, but US research group Jupiter estimates that on-line shopping revenues in the US last year were around 1.6bn. The company is forecasting that this figure will more than double this year, to 3.6bn.

Another factor in the maturity of this new medium is the advertising market. This is far less developed in Europe than in the US (where, in 1997, it looks as if the total market got close to a billion dollars for the first time). In the UK last year it was much more modest: 4m is the most commonly quoted figure for total Web advertising revenues in the UK. Some brave souls are suggesting this will more than double next year to around 10m.

Finally, what about the other “hidden” figures behind the statistics – the growth in the number of websites themselves, and the cost of building and maintaining them?

The absolute number of websites in existence is a fairly meaningless number. It is bound to include a great deal of the digital detritus which is the Internet’s cholesterol – personal and amateur sites. A more meaningful measure is the number of, say, Fortune 500 companies which have sites in the US, and that is over 75 per cent. In the UK, “Web-connectedness” is not quite so common, but a recent survey suggested over 50 per cent of the UK’s top companies now have their own website.

Nobody knows for certain how much is spent annually building these sites. Though a recent survey by New Media Finance newsletter suggested the Web design industry may have been worth a total of 100m in the UK last year. ©

There is still a wide variation in how much Web design agencies, in particular, are charging to put together a full-featured site. For the top few agencies in the survey, a new contract is likely to be worth around 250 000 a time, but below these few elite are a number of second-tier players that achieve an average contract value of much less – around 50 000. There are still too many operators in the market willing to undercut the competition by taking on jobs at around cost, just in order to get turnover, but that’s a policy which is holding back the industry as a whole.

In the US, the average contract value is much higher. It is not uncommon for companies to spend several million dollars on a new site. But there the market is more mature, and the major agencies better established and more confident.

The UK desperately needs consolidation, and it is inevitable. Most of the digital design sweat-shops will fail – indeed, the biggest players believe there may be room in the UK for no more than a handful of Web design houses.

One of the biggest debates of last year – one which is yet to be resolved – is what kind of role these Web agencies should have. Most believe they are the new media equivalent of the advertising agency. They claim agencies don’t (and can’t) understand the unique dynamics and characteristics of new media.

Those agencies with an interest in developing a new media arm, on the other hand, argue they are the custodians of the brand, and are much better placed to integrate on-line into the brand’s overall media strategy.

Nobody knows which position is valid, and only time will reveal the answer. The evidence of previous media revolutions might lead us to believe that traditional agencies will find themselves wrong-footed by new media, and will fail. Hardly any of the dominant agencies of the print era are around today. A new breed took over when television came along.

However, as the statistics show, new media is still a very long way from making a dent in TV agencies’ TV advertising revenues. They still have a few years to grow expertise and plan their strategy before being swept aside by the young Turks of the new media world.

So what does all this add up to? Realistically, what it adds up to is a year of rapid growth in a new medium which will still be insignificant when compared with other major media by the end of it. It adds up to a great deal of experimentation, and dancing in the dark.

If you were to ask me why anyone should bother with the Web at all, I would supply a two word answer: digital TV. The Web is a testing bed for the kinds of interactive products and services which digital TV will make available to a much wider public. Anyone who doesn’t have their eye on that particular ball is in for a rapid and rather rude awakening.

Jane Lewis gets the client view on finding the perfect new media consultancy

One of the hardest things for clients commissioning new media is finding the right consultancy. With so many people out there claiming to be specialists, ranging from advertising agencies and technology companies to design groups and a growing number of agencies set up specifically to offer new media skills, it can be a daunting task indeed. The market is competitive, free-pitching is rife, fees vary enormously and smaller companies are being swallowed up by the bigger players.

The sector has grown so fast it is hard to predict exactly what is in store. Its immaturity means it is precarious, and there have already been casualties, with Webmedia the latest agency to find itself in trouble. There are plenty of horror stories, of consultancies claiming to be specialists when they don’t know their Java from their HTML.

But demand continues to grow, with clients looking for new media solutions which are appropriate for their businesses. And UK groups are starting to earn a reputation for providing a service which is both strategic and creative.

“The market is in chaos,” says Peter Matthews, managing director of Nucleus, which has spent six years developing its new media company. “There is huge potential but it’s important to get the balance of skills right.” Matthews also believes the biggest threat to UK groups is an invasion from the States. “In the US the market is two years ahead. Europe is way behind. The big US groups are ready to come over here,” he says. Alliances are already being formed and Nucleus itself has offices in the US.

Not only have clients faced a battle to find the right suppliers of new media skills, they have also faced a sharp learning curve about what new media can do for their business and how it should be applied. “Clients are becoming much more knowledgeable about the whole area and they are more demanding,. That’s good, because they understand that it’s about communication, and they’re not as likely to get excited about

gizmos,” says Karen Mahony of Mahony Associates. “Clients have gone through the process of having websites and now want something that integrates more with other media.”

The challenge, according to Simon Scott, a director at AMX Digital, is to convince clients about the potential of new media: “It’s the purest form of communication… it’s like the manager of a supermarket hearing customer’s conversation as they drive off in their cars.”

As the sector matures, more companies are developing new media strategies but, warns © ICA director of new media Sholto Ramsay, most still don’t take new media seriously enough. At the very least, he suggests, they should be creating in-house new media teams rather than bolting it on to marketing, IT or publicity departments. “New media agencies have to persuade clients to have new media departments. They have to give it more importance. Otherwise it’s just window dressing.”

What clients want

Finding the right consultancy is proving the biggest hurdle for clients that are looking for strategic skills as well as technical back-up. Encouragingly, for design-led groups, clients often want genuine design skills and benefit from consultancies’ understanding of brands and strategic requirements. But clients also have to be able to trust the agency they use – consultancies which claim to have new media skills but can’t deliver the goods are not only damaging themselves, they are discrediting the sector as a whole.

Clients also want a balance of skills to get the equation right. Sophie Walpole, editor of Channel 4’s website, recalls: “It was a long and very painful process and took two years to find the right consultancy. When we were looking, the industry was very different. People were pitching because they wanted the money but didn’t understand what Channel 4 wanted.” Eventually, Channel 4 selected Online Magic, with which it still works.

When searching for a new media consultancy to create the Post Office’s corporate website, head of publications John Schofield was faced with a daunting task. “It was fraught because so many design consultancies think, ‘we’ve got to do it because there’s money to be made’,” he says. “We wanted someone with a high technical knowledge and an ability to maintain the site for a reasonable price. At the pitch stage we went to large and small design consultancies which have built up parallel electronic skills as we felt confident in their design ability.”

His task was made more difficult as an earlier website had been aborted because it was “unimaginative, and the maintenance was a disaster”. It was later discovered the former agency had out-sourced the skills rather than confessing it didn’t have an in-house team. Consultancy BCG won the job for the latest site, and the Post Office is now building up an in-house new media team.

Adrian Sauter, director of Diageo’s knowledge centre, states: “We have a roster of agencies we like for new media which we’ve built up over time because we’ve been running an Intranet for a while. There are four or five groups we feel comfortable with and would recommend to any internal department. They know how we work, know our design standards, are fast and flexible and know where to go inside the company to get images. We don’t rely on agencies to keep us up to date with new technology, we do that internally; we use them to implement our projects.”

Sauter finds it useful that different agencies have different skills and chooses them because of their knowledge of their skills set. “The rules are the same for new media as for anything else,” he says. “You have to be close to what you’re doing and you need hands-on involvement from the client side. I get nervous if consultancies take the project off my hands and deliver it on the day.”

Heather Norman, manager of relationship marketing at Reuters, was more impressed with UK new media design specialists than those on the Continent. “I was very disappointed with the standard outside the UK. I found a big change when I came here – there’s much more innovation and style.” For the current Reuters project she chose Edwards Churcher, a fairly new agency with a design background. “I wanted more than just an ability to design something that looked good. I was also looking for functionality and a level of interaction. There aren’t many people who can combine knowledge of the Web with strong design skills. They have understood the whole purpose of the project and there has been a very nice synergy between our companies.”

Request, a transaction services company, chose Okupi to develop a 3D interface for its call centre to simplify the flow of information. “There aren’t a lot of website consultancies which are confident with 3D. Okupi is very serious – it has researched the field and focuses on 3D. It has strong project management skills, understands our business and has quickly understood how 3D could be beneficial to our users. We initially appointed a different agency but discovered it was not what we were looking for,” says Thierry Leray, Request’s marketing director.

Okupi is also working with Lloyd’s, which wanted to introduce a virtual environment for users of its website. “We were looking for virtual reality modelling language (VRML) expertise, creativity, and for the firm to be on top of technological developments as they unfold, in order that Lloyd’s would be genuinely getting the latest state of the art user interfaces for the site,” says spokesman Erick Lamothe.

Room for improvement

There is no room for design egos within a new media team, which could include writers, producers, programmers, editors, software developers and animators as well as designers. Clients need steering through projects, want to feel confident about the service they are getting and work in harmony with the team.

Adrian Sauter points out: “In new media it’s harder to get a conceptual picture. The client might have a picture of what it wants to see and it could come back totally different. You might have lots of contact meetings, but until you see a demo, it’s hard to picture something tangible.

“In terms of improving things, I would look for rapid prototyping tools so that we could almost knock something up and include it in the brief,” says Sauter, adding that he gets nervous if he sees an imbalance on a team. “I want a project manager running the show alongside a programmer and designer as they bring a balance.”

Leray looks for strong project management too: “It was difficult for me to judge when Request was looking for an agency because they all had talented people. But talent is not enough for good performance. Project management, forward thinking and business understanding really make a difference.”

Thomas Golsong, business adviser at BP’s global design team, adds attitude to that list. He is impressed by “real enthusiasm”, and says: “To enter the Internet arena, you have to have IT skills as well as design skills as well as communication skills.”

Norman claims some agencies “fall down by just delivering the minimum, by not being able to see the whole picture and what our objectives are, or going beneath the surface and making suggestions about content”.

Schofield is critical of consultancies which claim to have in-house teams when it’s really only a couple of employees. “One major consultancy just had a couple of blokes in an office. I’d rather have seen an editor, writer, programmers and designers working as a team.” He also believes consultancies haven’t kept ahead of the game: “It’s taken them a while to take on board how big electronic publishing is going to be.”

According to Walpole, there should be “more action and less hype”. She also believes new media consultancies aren’t good at “listening to what we actually want”.

Fees

Fees can vary enormously, from suspiciously cut-throat to ludicrously inflated. Because of the nature of the sector, it can be difficult for clients to know what the going rates are – but UK groups generally aren’t making as much as groups in the US.

Although some clients always grumble about fees, Heather Norman isn’t one: “I’m happy with the fee levels from the agency I’m working with at the moment – but you can get ripped off in this area.”

Leray is happy with the fees he is paying too, but he adds: “It’s a new field so it’s difficult to have a clear benchmark about how much it should cost. I expect a breakdown so I know what I’m paying for and I wouldn’t expect to pay for a pitch. It’s all part of the game.”

Schofield says the Post Office always pays for pitches – “it’s immoral not to”- and believes he is getting value for money. But he was shocked by the variation in quotes to maintain a site; they ranged from 600 per month to 8500 per month for essentially the same service.

Walpole thinks fees are “inflated”, but adds that the competitive nature of the sector should even out fees this year.

Trends

Of the 1000-plus groups in the UK offering Web design services of one sort or another, consolidation is inevitable as the industry matures. “A lot of the tiny companies are starting to vanish and it’s getting more professional,” says Mahony. The surprising collapse of Webmedia’s production side this month is being blamed on a lack of big contracts, and preference of clients to use small, niche agencies.

New media budgets are starting to come through, but there is still boardroom reluctance to sign the cheques. However, more in-house new media teams are likely to emerge, along with a rise in demand for more strategic skills from external consultancies.

Digital TV will have an impact on the sector, making the Internet far more accessible and, some predict, may lead to the demise of multimedia such as CD-ROMs.

According to Leray, “3D media is definitely the future because it provides new dimensions. The good thing about it is navigation depths.”

Matthews believes the design industry has fallen behind in new media. “We’re on the cusp of a major revolution and the design industry should have been leading it, but it’s particularly ill-informed.” He believes that means UK groups may fall prey to US agencies, which are ahead of the game.

Ramsay is frustrated by those companies which have failed to appreciate the benefits of new media. “It’s fundamental that companies understand it because it can revolutionise the way they work. If they’re not taking that approach they’ve got a problem.”

Case study – First Direct

First Direct brought new media company Nucleus in to develop its PC banking concept. The service has proved so popular that the bank has a waiting list of people wanting to go on-line, and it’s still in its trial period – the national launch is due in the spring.

‘Nucleus helped to educate us, and worked with us to look at the brand and how we could apply it to new media,’ says Ewan Hutton, First Direct’s business development manager for electronic services. Nucleus helped develop the look and feel and design interfaces for the service, and worked closely with computer group ICL, which developed a sophisticated software.

‘This is a very fast-moving area. There are already virtual banks in the States,’ says Nucleus managing director Peter Matthews, whose brief was to create something ‘very clean, clear and fast’. Nucleus acted as a catalyst ‘to spark off ideas’ and the final product was further developed by First Direct’s regular consultancy, The Attik, with some input from The Point.

Hutton was keen to bring in First Direct’s regular consultancies: ‘We always like to use consultancies we’ve worked with before so that there’s a degree of self sufficiency.’ He was pleasantly surprised that the project ran so smoothly given the different elements of the project team. ‘Mixing different people and different agencies together can be difficult, but everyone handled it very well and took on the roles we wanted them to have.’

There are cost benefits to banking through the Internet: a recent survey showed it costs an average 0.5p per transaction compared to 64p through a branch and 25-28p through ATMs. People are also prepared to pay to use the service. Matthews predicts: ‘This sort of technology will change the face of certain sectors, like insurance and banking, because the cost base is affected. It’s quick, convenient and saves money.’

‘First Direct is a great client,’ says The Attik creative director Simon Needham, ‘because it always pushes the technology side and is really in to being creative. It wants to try and push us, whereas normally it’s the other way round.’

Case study – ICA

‘A horrendous number of IT projects fail,’ claims Sholto Ramsay, director of new media at the Institute of Contemporary Art. ‘Clients so often don’t know what they’re asking for.’ Ramsay believes too many companies fail to take new media seriously, and that those investing in it should ensure they have the in-house resources to run projects properly. Which is why the ICA has Ramsay as director of new media.

When the ICA started talking to Sun Microsoft about opening a new media centre, it seemed obvious to Ramsay to bring in AMX Digital to work on digital design. ‘We were already talking to AMX about having a much wider relationship, extending digital technology throughout the institute. We felt confident with AMX because we knew its work and what is interesting about it is its combination of design skills with other sets of skills in terms of project management, programming and business understanding.’

Ramsay was looking for the right balance of skills. IT professionals, he claims, ‘are tech heads who just like playing with computers and don’t seem to give a damn about whether it’s appropriate,’ while design-biased groups can get hung up about the colour of text.

The new media centre has enabled the ICA to communicate more effectively with its existing and potential audience and with artists. ‘It was like not having a telephone, and now we can address people all over Britain,’ says Ramsay.

Maxine Gregson, head of design at AMX, says the challenge was creating a site which, ‘gave a feeling of the ICA in an artistic rather than an obvious way. We used images from the ICA itself blended with a grid structure.’ She adds: ‘The ICA is a really good client because it had lots of good ideas, it’s got a brilliant amount of content and loads of ideas for the future of the site.’

Ramsay is keen to ensure the site is properly maintained, and acts almost like a ‘switchboard’ within the institute – another area he feels is often neglected by many companies dipping their toe into the Web.

The key things for a project to succeed, claims Ramsay, are knowing what you want from the project, knowing how to manage relationships with the people you’re commissioning, and trusting them to do it properly. ‘It’s difficult to know how to go about commissioning work or managing relationships when what is being delivered is unclear to you.’

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