The uphill struggle of multimedia business

“The one surefire Web prediction for 1998 is to expect the unexpected.” AMX Digital consultant Bob Cotton probably thought he was on sure ground when he penned this bland omen on the consultancy’s home page in a brief essay of resolutions at the turn of the year. Yet, the continuing instability of Web design groups such as AMX and Web-media Group, which axed its production house in January, is not a complete surprise. Industry pundits surveyed about the forthcoming year in multimedia bible New Media Age were full of such phrases as “a downward spiral”, “consolidation in the industry”, and “shake out” and this was before the redundancies at Webmedia had even been announced.

Concerns about design groups not being properly valued by clients and the general lack of a dynamic within the industry were being played out in forums, mailing lists, and letters pages over the previous six months. Already the largest players in the industry had been looking to the resources and client lists of ad agencies and investment companies to survive. Partnerships such as Online Magic with Agency.com, and Webmedia with Megalomedia had exposed the diffi culties that the new design groups were having in building the market.

As Paul Simon from sales house TSMSi pointed out, in the light of recent events, “those who survive the longest will be those with the longest pockets”.

Unfortunately, the pockets were empty for AMX founder Malcolm Garrett. Despite a series of high-profile clients and awards for the consultancy’s work, time had run out. “We hit the cash flow brick wall. We had spent a lot of time and money developing skills and we were pursuing more capital investment, but this is a tough business in which to generate stability,” says Garrett.

So what went wrong? Was it a management issue or a structural one? Is it, as some in the industry have claimed, impossible to make money building websites?

Garrett, though committed to the medium, highlights the criticisms continually voiced by multimedia groups: clients using them for their own research and development; having to engage in expensive pitching exercises against up to eight other consultancies for relatively small contracts; and the lack of yardsticks by which to measure the needs of the client.

All of this, combined with the crippling cost of infrastructure which was necessary to attract clients in the first place, and it is a long tale of an industry with serious flaws.

Considering what has happened, Garrett is generous. “We don’t blame the industry as such, it’s a growth business,” he says. “We just don’t have any other way of supporting ourselves. You might say we were over ambitious.” However, he is pretty exasperated at working in an industry where the clients expect “the IBM solution at start-up rates”.

Not everyone goes along with the scenario. A recent editorial in new media monthly Revolution, entitled Are agencies their own worst enemy?, argued that it was the design groups that were to blame, for failing to communicate their worth to the client in a business where the knowledge to buy new media services with confidence is still at a premium.

Some of the reaction within design to the Webmedia closure of its production facility was similarly dismissive, with rivals arguing that the production market was, in fact, relatively secure. Ivan Pope, co-founder of Web-media when it worked out of a basement in the Internet café Cyberia in 1994, pointed out at the time of the company’s redundancies, “If the industry is so crap, why is everybody going to employ their (Webmedia’s) staff?”

However, this disguises the fact that a lot of clients are bringing their new media operations in-house and several of Webmedia’s former clients did exactly that after the company folded.

Pope’s former partner Steve Bowbrick, who is now running Webmedia as an Internet consultancy firm, is sticking to his view that design groups are working in an immature industry. “When you start a new sector, you hope that client sensitivity to price will go away and that clients will begin to focus on the quality of work and the value of relationships. Yet our experience didn’t bear this out. It’s an irrational model.”

Bowbrick is frustrated that independent companies like Webmedia were treated like ad agencies, yet paid fees that never reflected the amount of support and strategy invested.

He has this stark warning for the dozens of design consultancies following in the wake of pioneers like himself or Garrett:

“The people who are really coining it are in pipes. At Webmedia we handed all our technical requirements to a small firm of the same age. Instead of focusing on the glamour end of the business, they just concentrate on pipes, systems and architecture. As a result, they’re thriving because they’re important.”

Five ways to fail:

Go on expensive trips to pitch for sites that will never get built

Invest time, money and resources in pitches that are awarded to existing suppliers or friends of clients

Give your ideas away for free

Get involved in internal politics. For example, work to a brief from the IT department, then change that work after a new brief from the marketing department

Bad management