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USWeb launches first network of developers

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We will raise the bar for the expectations of marketers, and for return on investment. Joe Firmage tries not to get annoyed by criticism of USWeb's franchising model, how it's all wrong for Web development, how it can only result in cookie-cutter product.

His company isn't building a national network of development firms so it can produce Web sites like so many cheeseburgers, said Mr. Firmage, USWeb's founder and CEO. The idea, he said, is to use the network to provide franchisees with economies of scale and access to a range of expertise -- tools that will cut costs, enhance quality and, in his words, give every marketer in the U.S. the means "to be a hero in his business."

INDUSTRY IS WATCHING

"We will raise the bar for the expectations of marketers, and for return on investment," said Mr. Firmage, who said USWeb, headquartered in Santa Clara, Calif., recently rolled out a $10 million marketing campaign aimed at making the company a global brand name.

Industry experts are watching USWeb closely. If Mr. Firmage is right about his business model, if his still-growing chain of 30 franchises in 22 states can achieve the quality and efficiencies he is predicting, the result could be something new -- a nationally known, nationally available provider of end-to-end Web services.

Mr. Firmage thinks that would be a huge help to marketers, many of whom, he said, are "flying blind when it comes to picking a Web developer."

SKEPTICS DOUBT USWEB'S NICHE

Others in the industry - including competitors and analysts - are less enthusiastic. They don't doubt that USWeb will find a niche in a market where there is more demand than talent. But they question how well franchising can work in an industry that puts a high premium on innovation.

"It's so difficult to franchise creativity. That's going to be their major roadblock," said Brock Stanton, the head of interactive marketing at WestWayne, an Atlanta advertising and marketing agency that will compete with affiliate USWeb Atlanta.

Josh Bernoff, a senior analyst with Forrester Research in Cambridge, Mass., said he thinks USWeb can build a brand name if it spends enough money. But even a good brand image, he said, has limited value in a service industry such as Web development.

"For those marketers who are totally befuddled by the industry, USWeb will be very attractive," Mr. Bernoff said. "But for those more in the know, they'll still go to the more innovative shops."

Mr. Firmage said he saw plenty of befuddled marketers in the 25 focus groups USWeb put together in San Jose, Chicago and New York.

The participants were marketing executives from medium- and large-sized companies men and women whom USWeb's research indicates will spend up to $1 billion this year outsourcing Web development projects. (That amount, USWeb says, will grow to $20 billion by 2000.)

AFFILIATES SHARE THEIR SKILLS

"We asked them who they would call if they wanted Internet or intranet services," Mr. Firmage said. "We got a lot of very blank stares."

Although only 25 years old, Mr. Firmage is no stranger to start-ups, or jumping on what he perceives as a lucrative opportunity. He founded Serius Corp., a developer of object-based programming tools, when he was 18, and sold it to Novell, Orem, Utah, in 1993 for $24 million. Earlier this year, he helped raise $17 million in venture capital - including $13 million from Needham, Mass.-based Softbank, which owns Comdex and Ziff-Davis Publishing Co. - to bankroll USWeb.

Mr. Firmage said he wouldn't have gone to the trouble if he wasn't convinced franchising would give him a leg up on the competition, which he said ranges from "ad agencies to the two guys in the garage shop."

The franchises have - and are expected to share - a diverse range of skills, he said. They include graphic skills, Java programming and electronic commerce specialties.

And in terms of purchasing clout, he said, the network is more than the sum of the parts.

"We can sit across the table from someone like Bill Gates and say, ~`We are going to be the biggest user of your tools in a few years. What kind of deal can we strike?' " Mr. Firmage said. "That's to the great benefit of our customers."

One example of what the franchise structure can do is seen in an Australian firefighters catalog, a project handled by affiliate USWeb D.C.

An Australian client wanted the company to put its firefighting equipment catalog online, with a price list that was password protected. But catalogs aren't the D.C. affiliate's strong suit, said Gerald West, CEO and co-owner of the D.C. affiliate. Most of their projects, he said, involve government work.

So the company turned to a USWeb franchise in another city that specializes in catalogs, Mr. West said. That company agreed to sell a catalog template at a very low price.

SHARING SAVES TIME, MONEY

"For us to do it from scratch would have taken us 80 hours of programming at a cost of $20,000 to $30,000," Mr. West said. "Say we bought the template for $1,000. We not only make money, we save our client money."

Mr. Bernoff, the Forrester analyst, said sharing is all well and good assuming it happens. But it still only goes so far.

Mr. Bernoff said he doesn't think USWeb is signing up the best development companies as affiliates in each market.

"It looks to me like USWeb is signing mostly second-tier operators in the cities they are in," he said. "They'll do a lot of big work; they'll do some good work."

But the best development firms, he said, don't want to be a franchise because they think they're worth more on their own -- now and in the future.

SELECTIVE IN AFFILIATE CHOICE

USWeb executives disagree. Toby Corey, the company's exec VP of marketing, points to the numbers -- 1,986 franchisees considered, 30 selected in 20 cities.

"We're being very selective," he said. The company has said it expects eventually to have at least 100 affiliates -- one in every major area of the nation.

Mr. Firmage said pricing is being left up to each franchise. He said USWeb gives its affiliates pricing reports, but only to help them determine competitive rates.

Each franchise that was selected was doing at least $1 million in annual business and had been in operation for at least a year, said Geoff Kerr, a USWeb spokesman. Because USWeb is targeting Web sites ranging in price from $10,000 to $2 million, Mr. Firmage said the company looked for a wide range of specialties.

"We looked for marketing, technology integration or your prototypical Web presence providers," he said. "We looked for people who have proven they can do it, and do it well enough to stay in business."

'AN INTERESTING CONCEPT'

Mr. Corey said it is critical to get good people because the best marketing campaign in the world can't overcome mediocre work.

"Quality is of utmost importance to us," he said. "Without that, we will fail miserably."

Anita Bloch, president of Red Dot Interactive, a well-regarded San Francisco Web development company, said she doesn't expect USWeb to offer much competition to her company.

But she says she thinks USWeb will get plenty of business, especially in cities where Web development talent is relatively scarce. And the industry as a whole could benefit because the baseline standard for quality is likely to go up.

"It's an interesting concept, but I don't think it will take any business from us," said Ms. Bloch. "I'm not sure what advantages you get from franchising. Good companies can open up multiple offices, which allows you to extend your expertise and infrastructure. I just don't see the franchise model working in Web development."

MAKING A POINT OF KEEPING CURRENT

But Mr. Firmage points out that each franchise (he prefers the term "affiliate") gets the marketing clout of the national operation. It also receives major technical support, he said.

"We have about eight people here who do nothing all day but evaluate the latest, coolest stuff," Mr. Firmage said. "We had about 200 vendor visits in the last few months. We know what's going on."

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