Party May Be Over for Web Services

P> During the past two years, companies such as McLean, Va.-based Proxima, EarthWeb and Organic Online have emerged to service clients who want to place their marketing materials on the World Wide Web. The Web site developers charged exorbitant fees -- $3 million and more -- to create the sites. And they've done quite well financially. But this lucrative business might be short-lived.

According to John Cowan, who edits the Webmaster Report, a national newsletter that analyzes trends in the industry, a shakeout is indeed likely in the industry. Increasingly, the rationale for spending millions of dollars on a consultant to create a Web page for a corporate customer is being questioned by Webmasters. Perhaps suppliers of shrink-wrapped software will dominate. But the Web market moves so fast that newer products may replace those that look threatening today.

"Web developers will have to provide a lot more value-added services if they want to keep Web-related business," said Robert Arn, president and CEO of InContext Corp., Toronto, maker of one of the software packages. "A lot of developer people have creamed off the easy stuff. They're doing the consulting and developing Web sites where there wasn't a lot of value added on the creative side. There has to be a mixture of providing creative services and allowing the client to use the easy-to-use tools to take the drudge work out. The smart agencies will do this."

This is not just pure business bluster; it is backed by facts. And its proponents call it one-button publishing. InContext has signed deals with CompuServe, America Online and an array of Internet service providers to make the software service a reality. What's more, companies such as Micro-soft, Corel, Xerox, Fujitsu, Toshiba and Spyglass are also working with InContext, incorporating its technology in their own software. Adobe is also working on similar deals, sources said. Already, thousands of users have purchased these tools.

Here's how one-button publishing works. A marketing person at a small company of five that sells smoked salmon from Seattle searches for a national outlet to help it move its product. Ads in national magazines are too expensive, and a traditional full-scale PR campaign takes too much manpower. Web consultants are also pricey. So the marketing person purchases InContext, for example. The program is loaded on the PC. Some marketing materials are created, say, in ClarisWorks. Then, they move the mouse to the "Edit" section of the on-screen menu. And instead of saving as a text file, it is saved as a CompuServe file, or America Online file or Prodigy file. "It treats the Internet service provider like a remote disk drive somewhere," said Arn. "You save it to that disk somewhere named CompuServe, and it goes into your account and is published automatically."

So, just hours after deciding that your company should be on the Web, it can be there. "You don't need to think about getting a consultant and a server. You know what it is you want to say," said Arn. "All you have to do is be able to get on the Internet. If you can get on to browse, you can also get on to save your material anywhere in the world with any host service." Internet services provider PSI in Seattle, through a deal with InContext, has promised to lease 1 Mb of disk space, enough for a business card-sized promotion, on its servers for about $9.95. Some 30 Mb to 40 Mb of space can be had for about $100. So the challenge to the hegemony of Web consultants has truly begun.

Web consultants dispute the premise of InContext, Linkstar and Adobe Page Mill. "The big sites that make the most money will be A-level sites, such as television channels, giant projects created by studios, major publishers, entertainment companies and Internet service providers," said Nova Spivak, a partner at EarthWeb, a company that has gone from no employees to 30 in more than a year. "They will continue to be supported by national marketing campaigns. The global players are getting involved, and they'll spend as much money as necessary to keep up with the competition."

Spivak, whose company has created sites for the Metropolitan Museum of Art and the New York Stock Exchange, said the Web page development industry will undergo a shakeout, with lower- level efforts looking like a "playground," and expensive projects being reserved for the rich.

Others, such as Michael Hudes, president of Organic Online, said that high-end Web developers are needed to make Web pages into "cultural events, which go beyond the reproduction of static brochures."

But Arn and other software makers reckon it won't be that simple. "I think the consultants will have to move up the food chain. They must provide more value-added services," said Arn. "The day when consultants could charge top dollar just for building a home page has simply gone. It was resting on a kind of mystique that was not a big barrier."

Arn suggested that if agencies want to keep their Web development business, they should form an alliance with a software company that will provide clients with technical services. "The agency can then focus on creative strategy, and on thinking up ways to get prospects to visit the client's Web site."

InContext has blossomed, just as the Web developers have, during the last two years. The company employs 44 and is traded on the Vancouver Stock Exchange, a volatile market where share prices swing wildly. Founded in 1991, InContext was a subsidiary of Meridian Technologies, a company that moved from diskless workstations and networking to computer hardware.

The company itself has held discussions in the past with agencies, and is interested in doing so again. "I'd love to talk to developers about that and what they see as the right balance," said Arn. "It is a good time to be talking about this. For the last few years, companies have been heatedly talking about the Internet. Now, the market categories are starting to differentiate. And category leader- ship differentiation will provide a competitive advantage."