Outside Looking In

The Web is adopting one of the worst habits of Hollywood: an addiction to blockbusters. It’s drunk with phenomenal, if ephemeral, riches. When only billions matter, only the broadest possible target audiences matter. The Web once promised something different – a low barrier to entry and the kind of intense consumer loyalty that only niche content can bring. But investors, it seems, are focused on the mainstream plays.

Don Rojas can’t understand it. He’s struggled for three years to keep his Web site up, but if he can’t make someone understand the promise of the Black World Today by September, he’ll have to throw in the towel.

“I’ll be 50 years old in October,” says Rojas sadly, sitting in his Baltimore office. “It’s a critical juncture in my life. I thought that apart from my family, TBWT would be the greatest achievement of my adulthood.”

The Black World Today is a daily news Web site for African-Americans, and Rojas, the site’s founder and editor in chief, must come up with some way to bolster his meager advertising revenue. The former editor in chief of the Amsterdam News, Rojas has worked for three decades as a reporter, radio journalist and newspaper editor. After a career in traditional media, he decided in 1995 to try to realize the promise of the Internet, figuring that publication costs were low and potential was high – not just for a profitable venture, but for crafting incisive news analysis and distributing it internationally. But since Rojas began, the Web has lost sight of that promise, and he can’t afford to keep the site going for much longer.

Rojas is the kind of visionary that made the Web possible. The man works long hours, is unwaveringly devoted to crafting high-quality editorial and won’t quit until he’s dragged from his desk.

As in Hollywood, though, the funding often depends on the pitch, not the product. Mastering the pitch involves making lots of connections and looking the part. It means confidently articulating over and over again, in the vocabulary of the new-media marketer, speculative business notions like brand, reach and – most speculative of all – revenue. Those who can’t talk the talk are left behind.

Venture capitalists attest that it’s the executive team that sells the company, which is a serious impediment to Rojas’ chances. Rojas doesn’t look the part, and he doesn’t speak the language. A bearded man with large glasses and a slow, professorial demeanor, Rojas speaks intricate English in a lilting Caribbean accent as he admits, “I’m not a businessman by training or propensity.”

Rojas needs someone to mediate between his vision and the VCs’. He needs a strong executive to walk in and convince an investor to hand TBWT what it needs – enough to at least upgrade the site’s ramshackle design, which obscures its high-quality editorial. But investors need to recognize the site’s potential first, and few seem able to see it.

Why should they look at TBWT? A news outlet that serves African-Americans can create an intensely loyal audience by taking advantage of the community’s ongoing feeling of exclusion from mainstream media. NetNoir and Black Voices are the two highest-profile sites, and Cox Media’s BlackFamilies.com has recently entered the scene, but Rojas believes they are not filling the need that TBWT could. “NetNoir and Black Voices are strong in the community dimensions, stronger than we are, but in terms of the journalism, we are unparalleled,” he argues. “People will come to us on a regular basis, because we’re addressing a hunger not only for information, but also for an interpretation and analysis of that information.”

TBWT has no promotional budget. It has managed to proliferate among African-American Web users solely by word of mouth. Those who do find the site tend to stay – Rojas’ 250,000 hits a month work out to around 50,000 regular readers. Seventy percent are college-educated, in their 30s to 50s, and earn more than $55,000 a year. And a group of readers has begun an impressive act of devotion: It’s raising money to keep the site alive. “I have visited many other Afro-centered sites since August 1997, and have not found one with the consciousness and integrity that TBWT has,” writes Gail Slatter, a New York Times photo editor. “TBWT is special … and what it offers consistently I have not been able to get anywhere else.”

Outside investors, though, don’t see much potential. Rojas dreamed of finding venture capital to build an independent international news organization. Last year he approached dozens of VCs around the country. “We are fabulous belt-tighteners,” Rojas says, and his investment proposal reflected that: $2 million to $3 million would establish TBWT as an international news presence in three years. “For $3 million, we could have bureaus in 20 cities around the country,” he says. “One in London to cover black communities there and in the rest of Europe, and a bureau in South Africa, West Africa and the Caribbean.”

But Rojas was turned down by every firm and fund he approached. “I went to the New York New Media Association, which runs a million-dollar fund,” he recalls. “Three of us went in to speak in front of five people at a table, and we had 10 minutes. At the end, they asked questions like ‘Why approach us? Why not go to wealthy black celebrities?'”

Despite the offensiveness of the question, it has an interesting answer. As have many others before him, Rojas found that black celebrities are not given to speculative investments in new media. “Looking in the black community is really frustrating,” says Joel Dreyfuss, a senior editor at Fortune magazine who has solicited funding from the African-American elite in the past. “Most black wealth is first-generation wealth. That’s not the money that goes into high-risk ventures.”

The NYNMA funding went to another company that presented that day – Bikini.com. Jeanne Sullivan, who runs the New York Angel Investors Program, the NYNMA fund to which Rojas spoke, recalls meeting him. “There’s no doubt he had a great team,” says Sullivan. “He was smart and articulate, but he didn’t have his revenue stream crystallized. Bikini was headed by a dynamic team which has strong links in the entertainment industry. They had syndication, knew how to leverage and make those opportunities work, and we gave them over $1.2 million.”

Fritz Jordan, an African-American VC and a cofounder of Vcapital.com, has his doubts about the site. “I’m more intimate with the black marketplace than other venture capitalists,” he says. “In the real world, you don’t have an enormous number of black consumers buying from black companies.” Although he’s never met TBWT’s founder, he suggests that Rojas may be too editorial-minded and not sufficiently aware of business reality. “He has the vision, the good entrepreneurial vision,” Jordan says. “But he needs to treat it as a company, not as a Web site.”

Other entrepreneurs have tried to create sites for African-Americans, and most have failed. This happened in part because of an inability to articulate the business logic of their ventures to investors, and in part because of a naive belief that breaking into the industry requires little more than a good idea and perseverance. McLean Mashingaidze Greaves, the president of Web-consulting firm Digital Melanin, ran a much-lauded site for young, urban African-Americans called CafeLosNegroes, until low revenue forced him to close the site down last year. “I was trying to establish a proof of concept,” says Greaves. “I had worked for VC firms and software companies, and I knew they would see this as really high risk.” After a few years of struggling, a continent away from Silicon Valley and across the bridge from Silicon Alley, Greaves – tired of stepping over drunks on his way to work – decided to cut his losses. “We were out of Bed-Stuy in Brooklyn,” says Greaves of his old working neighborhood. “It’s hard to build a company and maintain a positive outlook when you have crack dealers and cops with guns on your block.”

Fortune’s Dreyfuss fought to produce a site called Our World News, but gave up in 1997. “We had initial backing from Dow Jones and some operational financing from the Freedom Forum,” says Dreyfuss. “But for 18 months we couldn’t raise the money.” He blames the peculiar business perspective of the Internet. “The fact that we showed how we could make money was a mistake,” Dreyfuss says. “In an Internet business you’re not supposed to make money. You’re supposed to have traffic.”

There is no national black newspaper in existence today, and once-powerful papers like the Chicago Defender, the Pittsburgh Courier and Rojas’ Amsterdam News have seen their budgets and circulations steadily dwindle. Venerated magazines like Ebony and Essence haven’t grown for years, and there is no new significant competitor. But some bright spots are beginning to appear. Recently, traditional advertising agencies have become interested in pursuing African-American audiences. At the beginning of June, Paris-based Publicis bought a 49 percent stake in Burrell Communications Group, the largest U.S. agency in the African-American marketing sector, and Advertising Age reports that other agencies began negotiations for the second- and third-largest agencies. Young & Rubicam is reportedly talking with UniWorld Group, the second-largest African-American agency, and True North Communications (TNO) is discussing a stake in Don Coleman Advertising, the third-largest.

In addition, the Forbes magazine group has had success recently with American Legacy, an African-American history magazine. Rodney J. Reynolds, its founder and publisher, was distributing the magazine through black churches before he arrived at a partnership agreement with Tim Forbes in 1994. He published his first quarterly issue with Forbes in February of 1995. “I’d struggled to publish independently for 15 years or so,” says Reynolds. “One of the things I had to do to stay in publishing was establish a partnership that had the human and financial resources I needed.” The magazine, with a paid circulation of 85,000 readers, has been profitable since 1996, and its advertising pages grew 42 percent between 1997 and 1998. Even success, however, brings its own issues. When appealing to an audience that has for years been shut out of mainstream media, publishers must consider cultural authenticity. “There’s a growing fear that down the line when these enterprises begin to take in revenue, the management might change, the outlook would be different, and there will be no black voice,” says Lloyd Grant, publisher of the KIP Business Report, a newsmagazine.

Omar Wasow, a partner with CommunityConnect and a founder of New York Online, a community site with a largely African-American audience, says it’s a common concern. “In media there’s an issue of representation,” says Wasow. “The complexity and fullness of my humanity – will a nonblack institution get it?”

Venture capitalists argue that compromise is inevitable. “When people have social issues about money, it worries me,” says Steven W. Bengston, director of emerging company services at Coopers & Lybrand. “It’s hard to mix capitalism and socialism. You usually end up with lousy businesses.” Reynolds found that having a mainstream media partner didn’t compromise the cultural authenticity of his product. “It wasn’t a concern,”

Reynolds insists, in large part because American Heritage, another Forbes publication, had an editorial mission closely aligned with what Reynolds envisioned for American Legacy. “We went into it truly as partners. Each partner has to have respect for the other’s strengths and weaknesses, because at the end of the day we want to have a great product.”

Rojas is in negotiations with Digital Melanin to work together in the future, and a few outside projects – like consulting work for Charles Schwab, which contacted him recently – are keeping him open for business. But he needs an investor. “We don’t want to point fingers or say ‘They’re all a bunch of racists,'” Rojas says. “But there’s a trivialization of a growing market here.”

Greaves agrees. “It’s amazing, because Don has proved his concept and shown he can tough it out and keep the site going without any funding,” he argues. “So for me it’s a no-brainer, seeing as how there isn’t any clear-cut market leader. Anyone thinking of an iVillage-style IPO should be interested.”

E. David Ellington, the president and CEO of NetNoir, which took a 25 percent investment from AOL, shakes his head at the situation. “Our market is the size of Canada,” he says. “At the end of the day, if you can’t figure out a way to make the biggest boom market in the history of the world give us some seed capital, something’s wrong.”

Naming Your Net Play

In 10 years, your company name will be passe. That intercap-ridden, OutToGoPublic.com name you registered with Internic last week is going to make you look bad. “The putting-the-capital-in-the-middle thing was trendy at first, but now it dates you,” says one naming consultant. And if you thought you were clever to lock up a category name as your URL, just wait for the lawsuit headaches you’ll have when four other companies begin to compete with you.

Naming a company seems like it should be easy: Get some friends together and brainstorm yourself a brand. But most companies end up paying a consultant tens of thousands of dollars to conduct consumer recall studies, pull teeth at the U.S. Patent and Trademark Office to register the name as a trademark and (an added hassle particular to Web companies) hunt through Internic for an available URL.

Even then, sometimes the company wants to start over. Each week, it seems, another Internet company changes its name, sacrificing millions of dollars in branding to be called something else. Last week, the Mining Company renamed itself About.com and acquired 3,000 other domains (aboutkids.com, aboutpregnancy.com) to lead users to the site.

Darrell Hayden, president of strategic identity-development company Hayden Group, which charges between $15,000 and $20,000 to find a suitable name and corresponding URL, says that his Internet clients often don’t realize that it takes more than a domain name. “I’ve been in meetings with clients where they check Internic and pick one – ‘Alpha.com looks available!'” says Hayden. “And we have to tell them that it’s not necessarily available in the real world. And they say, ‘Oh yeah, right.'”

Barbara Heinrich, VP of marketing at iOwn.com, which last month changed its name from HomeShark.com (“We found the name had different connotations for different people,” she explains), says finding a name was surprisingly difficult. Using Lexicon Branding, a brand-development company, she says, “We cut it down from 3,000 names to 85. After figuring out what’s a clean trademark and what URL you can get – only then can you do the focus group.”

The URL alone can cost $10,000 or more if it’s owned by a greedy prospector; hiring an attorney to check out your Top 10 list can run $1,000 per name. To keep it cheap, About.com created a fake company name to do the domain-name acquisitions. “If we, as a public company with $80 million in the bank, want to buy a name, the price is going to be ridiculous,” says Scott Kurnit, chairman and CEO of About.com.

The company name is the first line of defense against the competition. But right now, the fashion in Web-related names runs contrary to legal wisdom. In the real world, trademark and patent lawyers advise their clients to establish a wide defensive perimeter around their names by choosing ones that are (in legal terms) descriptive, suggestive and, most important, fanciful. A fanciful name differentiates a brand from its competitors. Clorox, Kodak and Xerox (XRX), for example, are powerful brand names with no prior associations in a consumer’s mind.

The intoxicating “first-mover” temptations of the Internet, however, have driven many people to choose plainly descriptive category names – often before a company has even been assembled. “We bought the URL before we had the business plan, to be quite honest,” says Tracy Randall, VP of e-commerce at Cooking.com.

But to be memorable, a name shouldn’t be generic. “Someone with an abstract name, provided it’s loaded with positive, mysterious, exotic images, has a more efficient engine for building brand,” says J. David Placek, CEO of Lexicon, which charges Internet startups $40,000 to $50,000 to find a name and a URL. Already, some Internet companies are discovering the problems of not having established that defensive perimeter.

SpringStreet, an online apartment-finding service, recently changed its name from AllApartments.com. “I come out of the packaged goods business,” explains Sophia Kabler, SpringStreet’s VP of marketing. “You’re supposed to make words mean something over time.” And having such a generic name turned out to be possibly damaging in a world in which the 30 minutes between seeing a billboard and getting to a computer might mean handing business to Apartments.com or Rent.Net. In the end, says Kabler, “We didn’t want to be confused with our competition.”

[Bernhard Warner contributed to this story.]

New Media Meets Old Politics

In 1997, the planned Parenthood Federation of America received a grant of millions of dollars from an anonymous donor to put up a Web site and maintain it for three years.

One of Planned Parenthood’s missions is to provide counseling and health care services, including contraception and abortion, while respecting the privacy of its clients. The idea was for the Web site, dubbed TeenWire, to provide teenagers with an anonymous resource for reliable information about sexual health; a source they could access without having to rely on rides from parents or anyone else. A Web site was the perfect solution – but the volatile politics of abortion meant that this was no ordinary project.

The account was large enough to attract national talent, and Planned Parenthood’s selection process was rigorous. When the nonprofit began requesting proposals from Web shops in January 1998, respondents included Agency.com, Atomic Vision, Oven Digital, Studio Archetype and Think New Ideas. The field was narrowed to a handful of competitors. In the end, Atomic Vision, a Web development company based in San Francisco, was awarded the project. The company has since completed the site, which will go live in late February.

“One of the first questions Planned Parenthood asked each finalist was ‘How will it affect your business when your other clients find out you’re working with Planned Parenthood?'” recalls Janice Crotty, an independent contractor who advised Planned Parenthood during the selection process. “Atomic Vision’s immediate response was ‘We wouldn’t do business with anyone who was bothered by it.'” New York-based Think New Ideas took Planned Parenthood’s question to heart and withdrew its bid.

“There was a vague concern that Planned Parenthood might present a problem with other clients down the line,” says one source from Think New Ideas. “It was a significant account, but they were nervous about possible controversy.”

Many people in the Net business like to think of the industry as being post-politics, immune from conventional pieties. That illusion is gradually being dismantled. Think New Ideas is only one of a handful of I-Builders that’s publicly held. Scott Mednick, who was CEO of the company when it withdrew, and who’s now CEO of L.A.-based X-Ceed, says that being a public company makes all the difference when considering a client like Planned Parenthood.

“We couldn’t take the chance that it would alienate our investors or some client,” says Mednick. “Whether we agreed or disagreed with Planned Parenthood had nothing to do with it.”

It was a difficult decision made late in the process. Think New Ideas realized that some of the organization’s work involves the most controversial issue in modern American life. Among all the hot buttons out there – immigration, drugs, even gun control – confidential access to contraception and abortion is one of the most divisive.

However, Mednick’s dilemma indicates the end of the heady days when Internet executives could say they were above the politics of compromise. Early Web developers thought they were creating a medium in which the old rules wouldn’t apply. But if they want to court Fortune 500 companies, I-Builders will be forced to do business with the ideological sensitivities of decades-old conglomerates.

Political consultants on the Web have faced this music for some time. “As an Internet services company, it would be difficult, for example, to work for both a Democratic and a Republican candidate,” says Robert Arena, senior VP of Internet services for Hockaday Donatelli Campaign Solutions, a Virginia-based company that runs online political campaigns. I-Builders will only become more cautious as they grow. “Most of us are becoming very large companies with very large clienteles,” says Mednick. “You have to put other things before your personal beliefs.”

“Whether or not a CEO believes in UFOs shouldn’t be an issue,” Mednick continues, referring to the recent resignation of USWeb (dossier) CEO Joe Firmage. “But you have to worry about what the shareholders think.” As the Internet Economy matures, companies will have to dance, as most businesses do, around political controversy.

“As a public company, we have a threefold responsibility: to our clients, our investors and ourselves,” says Ron Bloom, the current CEO of Think New Ideas and a founder of the company. “When a situation has a political nuance to it, we have to analyze that.” The CEO of General Motors (GM) couldn’t have said it better.

Sharpton, Race, and Online Ads

On Martin Luther King Jr.’s birthday, the Rev. Al Sharpton stood in a ballroom in Manhattan’s Waldorf-Astoria and asked a roomful of marketing executives to pray. The ceremony opened Sharpton’s Invitational Summit on Multicultural Media, which let marketers loudly register a complaint: Black, Latino and Asian-oriented media outlets fetch fewer ad dollars than their white counterparts.

The summit focused on advertising, but the subject on many people’s minds was the Internet – as a catalyst for change or as a demonstration of how quickly the media can impose a traditional approach to the latest technology.

The Internet’s marketing potential, specifically its ability to reach very precise demographics at low cost, has not been adequately tested on minority markets. And if any group could understand how important the Internet could be in attracting minority-focused advertising dollars and how easily the Web could evolve to exclude ethnic minorities, it was gathered in this ballroom.

“There is a bargain that exists in a market-driven economy,” says Lloyd Grant, publisher of the Kip Business Report, a newsmagazine that chronicles black business, who spoke at the Summit. “I spend money with you, and you spend money cultivating me as a market. That deal has not been kept in traditional media [for minority markets].”

But the Web could enable advertisers to start again. “The Internet Economy is going to change everything,” says Grant. “It represents a new urban dictate: Get information out to the public based on who reciprocates in that trade agreement.”

Grant is worried, however, that big business may close the door. “Already, the big guys have moved in – AOL (dossier), Netcenter. These services reach millions of people. I’m not sure they’ll be interested in a niche audience.”

Some are even more pessimistic. “The Internet has gone mainstream incredibly quickly,” says Elinor Tatum, publisher and editor in chief of the Amsterdam News, a century-old black newspaper based in New York. “We’re still going to have disparities, because of the gap in access to the Internet between African-American households and the rest of the country.”

Tom Burrell, chairman and CEO of Burrell Communications Group (dossier), one of the country’s largest and oldest African-American ad agencies, says the Internet represents broader opportunities for African-American business. “It’s going to be used the same way traditional media is,” says Burrell. But the anonymity of doing business over the Internet means “you can get into it without having to deal with the race thing.”

Will Sharpton feel compelled to call another summit a year or two down the line, this time specific to the Web? “I probably will!” he told The Standard. “This is not a one-night stand at the Waldorf-Astoria,” he continued. “This is a marriage.”

Thinking Of You…Love, Sparks.com

[Author’s Note: This story is the great embarrassment of my time at The Standard. I helped to hype this company, and less than three years after the story was published, Sparks.com went completely and dramatically out of business. I’d already left The Standard by that point, but my former editor, Jane Goldman, offered me the chance to write the company’s obituary. It is to my lasting regret that I turned her offer down.]

On a summer evening in 1997, Felicia Lindau, a bright young advertising executive, was driving home from work and realized the next day was her mother’s birthday. She had no time to buy a card, and as she imagined the ordeal of sifting through endless generic cards under a drugstore’s fluorescent lights, Lindau stumbled on what may prove to be e-commerce’s last next-big-idea – selling greeting cards over the Net. The saga of what happened next is a model of how a new Web business comes into being – including the marketing hurdles, the technical nightmares and the tough lessons learned.

Her basic concept was this: Keep customers’ address books on file and remind them of important dates, carry a large selection of cards and guarantee same-day mailing. It doesn’t sound sexy until you consider the implications. The greeting card industry in the United States rakes in more than $7.4 billion in revenue each year. The average greeting card consumer is a repeat customer, a 25- to 54-year-old woman who buys between 30 and 40 cards annually: for birthdays, get-well wishes, anniversaries, promotions, deaths, Mother’s Day.

The average drugstore can only provide consumers with a limited assortment of cards – consistent sellers that appeal to a wide variety of customers. But if you combine the convenience of ordering from the office with a wide range of cards (from dirty, to clean, to downright obscure) and the ability to further personalize the card, well, maybe you have something. If the service works, someone like Sun (SUNW) Microsystems might want to send 10,000 personalized cards – at $3.95 each – to its Java group every year.

Lindau looked for other companies already working on what seemed to her like an exceptionally obvious idea. Surely, Hallmark or American Greetings (AM) must have thought of this. But as it turned out, some companies have made half-hearted attempts at selling cards over the Web, but none were leveraging what Lindau realized was the great potential of the Internet: personalization. This was when the company called Sparks.com was invented. This winter it expects to go live.

The appeal of the service is partially its ambition to carry an unusually wide selection of cards. But the real selling point is the system’s ability to handle complex tasks, like shipping the same card to multiple recipients without requiring you to fill out a different form for each one. A search engine, built from scratch by Phoenix Pop Productions in San Francisco, allows customers to search free-form for themes they’d like to see in a card. Search for “apology” and “affair,” and Sparks.com throws up a card showing a house being tossed into the air by a hurricane, with the message “Things have been a little crazy lately.” Nothing is printed inside, tastefully enough. Can you ask Hallmark for such a thing?
“We expect that 80 percent of our customers will buy 20 percent of our card selection,” Lindau explains. “But when that 1 percent finds the exact type of card they’re looking for, they’ll know why we’re the best option around.”
Sparks.com will keep their customers’ address books for them, and will e-mail them reminders like “Grandma’s birthday on Wednesday.” Eventually, Sparks.com hopes to strike deals with a company like PalmPilot to acquire customers’ digital signatures. The partnership opportunities are boundless: Companies like Virtual Vineyards could bundle gifts and cards, for instance.

Sparks.com was so named for a few reasons. First, as Amazon.com (AMZN ) proved, an online retailer must have the “.com” designation in the name, so anyone who has heard of the company knows its address. Second, Sparks.com is intended to denote a connection, a “spark” between people. Initially, Lindau wanted to name the company Jot.com – symbolic of the convenience and speed of the service – but early focus groups shot the name down. “You’re in the business of assuaging my guilt,” said one member. “Your name should be patting me on the back for being good and thoughtful. Don’t make it seem that by using your service I’m just tossing off a card. You’re making me a better friend.”

Lindau, 30, is an 11-year advertising veteran. At Foote, Cone & Belding she worked with Excite (ATHM ) and then with Amazon.com when each company was just starting up and looking for funding. A prospective Sparks.com partner introduced Lindau to Benchmark Capital’s Kevin Harvey, who introduced her to Benchmark’s Robert Kagle, the company’s primary backer. Kagle sank a little less than $3 million into the project on the basis of his affinity for Lindau. “She’s relatively young, and this is her first general management role, but that profile has worked well for us in the past,” Kagle says. He sees gold not just in Lindau’s original idea, but in the new category of gift portals. “The whole idea of being a gift portal, of capturing that place in the customer’s mind, is a great idea,” he says. “The card could be the forethought to the gift, rather than vice versa.”

In May, Lindau took on a partner, Jason Monberg, whom she met when FCB was working with CKS, an interactive agency. Monberg, 25, had worked as a Java programmer at CKS, part of the young code-building elite who found themselves making extraordinary amounts of money only a few years out of college. At Sparks.com he is the chief technical officer, a man for whom the 100-hour work week seems designed. “If you work at this pace for years, with no end in sight, that’s how you burn out,” Monberg says. “But if you work on one well-defined project after another, you can sustain your energy forever.”

The company’s office is a cavernous warehouse in San Francisco’s Potrero Hill neighborhood. Lindau and her staff occupy a wooden loft, as temporary shelving is erected below them. “We appreciate the dial-up connection, but we really need the T-1,” Monberg deadpans into the phone to Sparks.com’s ISP. “Not having it has been disappointing.”

Across the warehouse, the company has thrown together a passably clean conference room, complete with chairs, a carpet and a large wooden table. “That table was my dad’s,” Lindau says. Her late father was a self-made entrepreneur, who built a construction company from the ground up. “It’s going to bring us good luck,” she says.

The air in the office is like that of an underground resistance group listening to bombs rumbling above them and plotting their next move.
“The VP of engineering at eBay (EBAY) just told me they get 37 million hits a day,” Monberg announces.

“Oh my God,” Lindau says. “Is that more than Amazon?
“I think that’s more than Amazon.”

The online bookseller is Sparks.com’s greatest nemesis and Lindau’s worst nightmare. Pictures of Jeff Bezos are everywhere. Amazon.com’s founder smiles from within picture frames all over Lindau’s desk and from press clippings on a factory-floor bulletin board. In one picture, taken in January of this year, Bezos and Lindau stand together, beaming at the camera. Little did he know what machinations were at work to his right. “In two weeks, they could begin offering this service,” Lindau says to me as we cross the warehouse floor. “But our service will be better.”

Greeting cards are an ideal product for an online store. They are wonderfully uniform, they won’t be returned because they don’t fit, and they mail easily. But they’re not invulnerable. Each night, the company’s inventory is covered in plastic sheets to ward off moisture and dust, and when the cards are selected from the shelves, workers use surgical gloves to avoid leaving fingerprints.
Lindau says Sparks.com is built to handle 10,000 shipments a day. Serving the Web pages and taking orders online is difficult enough. The start-up’s process grows more complicated when someone needs to find a card amid rows of thousands, personalize the message and mail it off – 10,000 times a day. The wrong card with the wrong message to the wrong person, and a customer doesn’t come back.

Shipping tiny parcels to multiple customers is an intricate business. Systems like Dell (DELL )’s or Amazon.com’s are designed for customers who select merchandise and have it shipped to themselves. But Sparks.com’s system separates the customer from the recipient. When Lindau and Monberg first began looking at firms providing e-commerce solutions that might be able to handle the complexities of their concept, they narrowed their list down to two candidates: InterWorld (INTW ), a Manhattan-based company, and Intel (INTC ) and SAP (SAP )’s combined e-commerce arm, Pandesic.

InterWorld promised a tailor-made solution that was designed to be adaptable, and which would allow Sparks.com to own and improve the servers and equipment as they saw fit, but only after an intense, months-long period of studying the company’s business plan and expectations. Pandesic guaranteed a four-month turnaround to get the system up and running, but required that the company essentially hand their business over. Pandesic would run the business off servers belonging to SAP. Also, as Pandesic does with small start-up clients, the company charges a relatively small $25,000 up front, and then takes a percentage of revenue as payment, starting at 6 percent and decreasing along a sliding scale.
They chose InterWorld. Bruce Falck, CEO of Phoenix Pop, the company that is creating Sparks.com’s user interface, says Pandesic’s model wasn’t suitable. “In order to succeed here, you have to own every piece of everything you rely on, so you can make upgrades when you need to. With Pandesic, if you want to add a new feature, you need to call them and run it by their developers, because SAP is a really awkward system. Every new feature must be SAP-compliant.” Peter Wolcott, Pandesic’s president, agrees that his business is about delivering “standard e-process,” but points out it comes at a significantly lower price than more flexible systems.

The final technical lineup includes Phoenix Pop, InterWorld, which provides the transactional software, and Frontier Globalcenter, which hosts the site.
In late September, two weeks before the site would go live for a dress-rehearsal run among friends and family, a content planning meeting convened. Four people – Lindau, Monberg, Chris Lindau (Felicia’s husband) and Lizzie Nichols, VP of sales and marketing, gather in a conference room at the top of a narrow flight of metal stairs. There is an endless supply of good will and affirmation among the staff. Lindau is given to saying, “Agreed. Perfect,” when someone makes a suggestion or comment. Lindau and her husband get into a back-and-forth about the extent of what’s searchable on the site’s database.

“Can I search by the color of the card?” asks Chris, an advertising veteran.

“You can search by the color of the card, the color of the envelope and the paper type,” Lindau replies.

“Can I search by the skin color of the person pictured?”

“You can search by ethnicity, by gender, by the paper’s weight, by everything and anything,” answers Lindau.

Chris sits back in his chair, satisfied.

The group reassures itself that it has all the answers, although everyone knows they won’t be able to account for every contingency. Ask Monberg whether he’s considered all possible outcomes – including bankruptcy, lack of market interest, system failure – and he stares back disquietingly. “Either we’re going to succeed,” he says, “or a lot of other stuff might happen that’s all inconsequential to me right now.”

This is the era when start-up companies must be run like veteran institutions from the day they begin, Monberg lectures by e-mail. “There’s no room for error here.”

At a meeting that convenes later in the month, the conversation turns to whether Sparks.com should sell the names and addresses of their customers to advertisers. Lindau will not budge: Her answer has always been no. “The whole basis of what we do is trust with the consumer. We want people to trust us. There’s no way.”

“What if we sell them when we fold, in a big going-out-of-business sale?” Monberg asks, to laughter. But with a straight face, he answers his own question, ending the meeting. “Naw, we’ll owe all the money to the VCs anyway. Why worry about it?”

The biggest risk, according to Benchmark’s Kagle, isn’t that people won’t want to try the product, but that the company’s untested infrastructure won’t be able to handle the traffic. “Lindau knows how to draw people in to try the system out,” he says, “but if it doesn’t work the first time, we won’t get the repeat customers that will allow us to turn a profit.”

Sparks.com is a small start-up with one big strength: It’s a great idea that’s terribly difficult to implement. “I don’t think Hallmark will be interested in doing what we do,” says Nichols. “They sell a limited selection of their cards online, but have an enormous channel conflict as it is. Wal-Mart sells their cards, Barnes & Noble sells their cards. If they moved that operation online, the conflict would be too much.”
What about big scary Amazon.com? “We’re not in direct competition with them,” says Lizzie. “If we were, that would be a problem. If you look at Amazon’s portal deals, you’ll see they’ve bought every possible piece of relevant real estate on every important portal in the industry.

“So sure, if we were directly competing, they’d be all over us. For some reason, I don’t think that Amazon will see this as a big opportunity. It’s not a question of just retailing, which they’re definitely interested in, it’s all the other stuff – the reminder services, the personalization – that would deter them. But even if they decide we’re a real challenge, they’ll probably just acquire us.”

As October ends and Sparks.com readies a beta version of the site, the pace in the office grows more frenetic. Monberg carries monitors to and fro; the senior producer holds his head in his hands over a coding problem; Lizzie chats amiably on the phone; and a 10-person staff of temporary workers scans in new cards and indexes them. In the meantime, Lindau woos potential investors and infuses the office with her particular, preternatural brand of unflagging energy.

Order fulfillment, transactional systems and the search engine are all tested and as ready as they can be. Market interest, competitive pressures and traffic load are not. Who knows if the market will be there?

Technical considerations aside, the goal of Sparks.com is enormous: to create an automated system that will encompass every type of relationship in Western society. The content reads like a summary of modern human existence: “poetry, etiquette, superstitions and folklore, famous people, cancer benefits, new babies, Valentines, Dilbert.”

Are consumers ready to make a leap of emotional faith and superimpose their best wishes and deepest sympathies onto a card they’ve never actually touched bearing a computer-printed message they didn’t pen themselves? Sparks.com is betting on it.

From Startup to Secret Weapon

When Bill Lederer first began talking to the press after securing his first round of funding, he had the hunted look of a man who’d come very close to losing his shirt. Lederer put himself through college selling frames and art supplies with his father. Years later, when his father developed cancer, he decided to quit his burgeoning Wall Street career to return to the family business. After coming to terms with the industry’s real-world limitations, Lederer and his wife moved the frame trade to the Web. Lederer launched ArtUFrame.com, now Art.com, an online poster and print shop.

It was a hard road. Lederer came so close to folding that when he finally secured funding at a hotel in California, he’d maxed out his credit and had to ask the startled investor for plane fare home. Then everything changed. On Wednesday, Lederer announced that Art.com had been acquired by Getty Images (GETY), parent of a group of stock photography and footage houses, for up to $85 million in cash and 4.5 million shares of Getty Images stock, which, on that day, meant a total of around $200 million. “The resources Getty will bring, their progressive management approach, the enormous quantities of content …” Lederer drifts off and then remembers a more immediate bright spot. “This is going to provide real security for my family.”

Lederer’s Art.com has become the Getty family’s secret weapon against the rising specter of Bill Gates’ pet project: Corbis. Getty Images is the monster of the business, with more than 30 million images and 13,000 hours of film footage, while Corbis owns 25 million digital images and doesn’t have the reach of the other two big houses – the Image Bank and Visual Communications Group.

But Corbis is the most fearsome enemy of the bunch. “This wasn’t done with Corbis in mind,” argues Mark Getty, executive chairman of Getty Images and grandson of billionaire J. Paul Getty, but he doesn’t deny a particular distaste for his competition. “Corbis is different from the rest, because no one has tried to force a brand across all the different product lines,” says Getty. “And Corbis has spent more on technology.” Despite his sudden success, Lederer had a startling encounter with humility after his victory dinner with his VCs and Getty. “It was the most expensive dinner I’ve ever paid for,” he says. “On the way home the gas station rejected my credit card. I’d been reading a Wall Street Journal article about my getting $200 million, and there I was at midnight, stuck on the side of the road.”