ADVERTISING IN THE ELEMENTS
By Greta Mittner
Red Herring Online
November 9, 1998
Yes, Homestead Technologies is another community site --
but with a twist.
"People build Web pages on our site not to meet random
people, but to communicate with people they already
know," says Justin Kitch, president and CEO of Homestead.
In other words, instead of providing a place for Internet
users to build new affinity groups, à la Geocities (GCTY),
Homestead offers Web space and design tools to existing
real-world communities to help them share information.
These tools include what the company calls Elements.
Elements are essentially anything other than text that goes
on the Web page. The options include pictures, icons,
designs, buttons, and stock tickers.
Mr. Kitch is not just spinning this new buzzword for extra
PR time; he's banking the company on it. The CEO sees
microcommunities as the perfect forum for a different kind
of advertising model than the Web's traditional banner ads.
Each community will be able to choose which advertisers
they want on their Web page according to what would be of
greatest use to the group. For example, a professor might
create a Web site for his class, with a reading list -- and
also an Amazon.com (AMZN) button, for instance, to allow
students to buy their books. Or, an investors' group could
put a branded ticker on their page that would take them
directly from the site to an online trading site like ETrade
(EGRP) to check on their stocks. Both the button and the
ticker double as advertisements and useful Elements.
It's elementary
Michael Geller, Homestead's vice president of marketing
and sales, likens this kind of advertising to affiliate
programs, except that all Homesteaders will have access to
the Elements without having to apply for them. The
Elements are drag-and-drop instead of complicated HTML,
and Homestead will charge the advertiser for every time an
ad Element is placed.
But why would Homestead users, part of the group of
traditionally finicky online community members, place an
advertisement on their own page? Because the Elements are
cleverly disguised as useful links.
The incentive for the user will depend partially on the
functionality of the Element and partially on the negotiating
Homestead does with the advertiser. In the case of an
e-commerce button, the Web page owner might receive a
commission for each purchase, as in normal affiliate
programs. Other Elements, such as stock tickers, have
intrinsic value in their functionality. Users will want the
Element on their Web pages because it provides a
convenient link to the information or product the users
want.
At least, that's how Homestead is hoping people will see it.
Anything but banners
Mr. Kitch's enthusiasm for this unique community model
lies in his belief that "companies are looking for any way
they can to get out of the advertising banner box."
Tim Bajarin, an analyst with Creative Strategies, agrees.
"There is no question that we need some other forms of
getting attention. The feat is to shake up the advertising
model," he claims.
However, while reports and forecasts have noted declining
CPMs (clicks per thousand), not everyone agrees that the
failure of the ad-banner model to work is the primary
culprit for this decline.
"The competition for the existing pie is growing faster than
the advertising," says David Simons, an analyst with Digital
Video Investments. He's not convinced that any new-fangled
ad trick is going to bring in the bucks. He calls the
Homestead strategy "cute" and compares it to a Tupperware
party in your house each night.
Homestead might not be offended by this comparison.
Tupperware is big, branded, and, as far as we can tell,
fairly profitable.
A mind for competition
Right now Homestead is pining for competition -- but only
the kind it sees as useful.
"Competition validates our concept," says Mr. Kitch of his
advertising Elements. "We won't have to explain it all the
time."
However, other types of competition will be less welcome.
Right now Mr. Bajarin raves about the site's easy Web page
building tools that are entirely drag and drop, yet flexible
and interesting enough to allow the building of satisfying
Web pages. However, other sites might be quick to adopt
these features.
"If you have the right money and people, you can do it,"
says Mr. Bajarin. "[Lycos'] Tripod and GeoCities will
follow suit." But Mr. Bajarin doesn't think we should
discount loyal users staying with Homestead.
Community as commodity
In an effort to build its brand before the competition heats
up, Homestead has landed its first round of funding, signed
partnerships with Deja News and CollegeBeat, and even
dropped its original name, Kartoffel Soft. That last item, at
least, was a good move.
The company's first round of financing in June of this year
brought them $4.5 million from a group led by Draper
Fisher Jurvetson. The company will most likely be looking
for further funding in the spring, but claims to have
already received additional funding offers. Intel also
announced an investment in the company in September.
Under the Deja News partnership agreement, the two sites
will build a co-branded community service for Deja News
users. Homestead will offer a Deja News Element that any
Homestead user can incorporate into a Web page. This
Element will provide the user with direct search access to
Deja News's discussion forums and Usenet newsgroups.
Homestead has also had offers to sell the use of its services
on company intranets. "We are about 50 percent committed
to that right now. We'll make a decision early next year,"
says Mr. Kitch.
The CEO appeared to be more than 50 percent sure of his
exit strategy, however. "Our investors would be very
unhappy with anything but an IPO," says Mr. Kitch. "There
is an enormous opportunity here to be the brand [in
community]."
Mr. Simons remains skeptical, however, "Why can't anyone
else do the same thing?"
The analyst would like to remind us that although
Homestead may have a good product, a good product
doesn't always succeed on the Web. "AOL is a shining
example that mediocrity can win," says the analyst. And as
he sees it, AOL (AOL) has a huge piece of the advertising
pie, while tiny Homestead is still chasing its dream. |
