LDIG owns ~17% of ALOY:
Teenage Wasteland
By Steven M. Zeitchik
Issue Date: Oct 23 2000
thestandard.com
They surf. They chat. They shop. They should have been a killer Net play. But sites aimed at teenage girls are, like, going nowhere.
It's well past midnight on Sunday evening, but you'd never know it from the active message boards on teen portal Bolt. Runchica writes about the problems she's having with her homecoming dress. Rockerbaby386 wonders where to draw the line on sleeping with friends' exes. And on a paganism bulletin board, noisy_mouse whines about the pentagram.
In the self-contained bubble of teen girl sites, everything appears normal. But don't let that fool you. When it comes to the investors who spend millions to attract teenage girls and fund their musings, uncertainty rules. What once seemed like a killer idea is stiffening into rigor mortis. The news that rocked the teen world most profoundly? The closing of beauty and fashion teen portal Kibu after less than two months. So dim were the company's prospects that it gave back some of its $23 million to investors.
Despite a large number of visitors, nearly every major player is struggling. Whether because of the unwillingness of teen girls to spend money on the Web, a crowded field that also features established players like Seventeen.com and America Online (dossier), or the wrong presentation, the portals may sometimes feel like they're under more pressure than an adolescent. San Francisco-based Snowball, a conglomeration of three affiliate-driven sites - gaming network IGN.com, student site Powerstudents.com and teen-girl portal ChickClick - has endured four rounds of layoffs and watched its staff dwindle from 500 to 250. ChickClick lost its two founders to Kibu. Former Snowball employees say the site no longer has any real marketing budget. Competitor iTurf (TURF) announced losses of nearly $16 million in the first six months of 2000, though it also projected a profit for the fourth quarter. Both Snowball and iTurf have seen their stock price drop to about $1. Meanwhile, other sites are struggling with their model. "Bolt is relying on community, but there's no business model behind it because advertisers realize that community sites are the least likely to get the response advertisers need," says Ekaterina Walsh, an analyst with Forrester Research (FORR). Bolt CEO Dan Pelson did not immediately return calls seeking comment.
If all this feels a little sudden, it's for good reason. Imagine you're an investor in late 1998 or early 1999. Someone approaches you with an idea for a portal aimed at teenage girls - a spend-happy, Backstreet Boys-loving mass you've heard so much about. The site will mix content, community and commerce. Demographic studies suggest that teenage girls love to shop, spend a lot of time online and enjoy reading the kind of editorial found in teen magazines. Being a faithful student of demographic marketing, you plunk down the cash.
But market segmentation is an art, not a science, and the very points that once argued for teen portals' gleaming future have been turned on their heads. Experts now say that not enough teens own credit cards, making it tough to spend the necessary dollars. (A Jupiter report released last month shows that while the number of teens expected to be online by the end of this year, 13 million, is relatively close to the 17 million adults who'll be in cyberspace, teens will spend only about one-fourth of what grown-ups will spend.)
A Web community, it's been discovered, can't replicate the mall, so while teens may visit, they don't necessarily stay - or buy. And on the Web, teens seem to want content that is "genuine" - like articles written by other teens. This is validated by the popularity of teen-run sites like Ashley Power's Goosehead. These factors have proven a heady combination. "All this hard work and big money goes into it, and they still can't make it work. That suggests a fundamental flaw," says entrepreneur Tim Cobb, whose own teen portal, Hipo.com, pulled up its stakes in late 1999.
In addition, while some sites feel that the target audience needs to expand to include women in their 20s - "Why would you want to spend so much to acquire customers and lose them in three years?" asks Snowball CEO Mark Jung - many believe the whole premise is flawed. "These sites aren't specialized enough," says Forrester's Walsh. "Not every 12-year-old likes the Backstreet Boys or scooters."
Still, the sites haven't struggled for eyeballs. Snowball drew more than 7 million unique visitors in May and was the 31st most-trafficked site on the Web, according to Media Metrix (JMXI). ITurf's Nielsen NetRatings (NTRT) in July topped 1 million unique visitors. But to achieve this, the site had to throw everything at the wall - from celebrity gossip to an anonymous crush-finder to an offer to buy leather boots. This may or may not be what teens want, but one thing is for sure: It doesn't work for the bean counters. "The amount of money it takes to build a world-class content site is very different from the money it takes to build a world-class commerce site," Cobb says.
In Snowball's case, all these visitors came with a steep price tag - the company engaged in an aggressive offline campaign that some insiders say went too far. "We spent so much on pens and T-shirts and hats that we had to throw away or give to charity," says one former employee. "We should have put that money away." For his part, Jung says that the time to brand was then.
Curiously, the portal most likely to succeed, New York-based Alloy Online (ALOY), brags about a lack of marketing dollars. Founded four years ago as an offline catalog, Alloy is expected to draw $80 million in revenue this year and projects a profit for next quarter. The portal has continued to land offline opportunities, including a book imprint, and, with 16.6 percent of its company owned by John Malone's Liberty (LDIG) Digital, it is primed for a run in the interactive TV market. "We didn't create a Web site. We created a teen media company around the Web," says Matt Diamond, CEO of Alloy.
Diversifying into other media has been a path sought by many sites. ITurf has similar offline appendages, including a bestselling book from its Gurl.com division in 1998 and a successful apparel catalog called Delia's. Snowball's ChickClick is producing a celeb-oriented radio show that it will stream on its site. Snowball also is trying to make up ground by extracting revenue from its user data through a partnership with Jupiter. "The logical extension of the value-add moves in two directions," Jung says. "If the starting point is pure advertising, the next step is direct response marketing."
Back on Bolt, visitors keep such jargon to a minimum, but there are politics and occasional glimpses of the teenage flair for the dramatic. One girl who calls herself LuckyLindy takes aim at other posters. "[At] sites like Bolt, collective Mensa members rail against capitalism in front of their million dollar computers," she writes. "I can only but laugh before I suffocate from the smoke before a burning Rome that is the west in the early 21st century." She might be exaggerating about the decline of civilization, but when it comes to teen sites, the sound of licking flames may not be far off. |
