E! ONLINE OPENS SHOPPING AREA: INTERACTIVEAGENCY NAMED AOR, IN CHARGE OF CREATIVE AND MEDIA

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In an ambitious move to drive more revenue to its Web ventures, E! Online today launches Shop.eonline.com, an electronic commerce site to sell merchandise tied to E! content.

Also, E! Online has named InteractiveAgency, Santa Monica, Calif., as interactive agency of record to handle creative and media buying for Shop.eonline.com. Billings are undisclosed. E! Online does not have an AOR.

"We've realized that multiple revenue streams are needed to make [online] a robust, big business," said Jeremy Verba, president of E! Online (www.eonline.com), Los Angeles, which launched on the Web in August 1996.

"Our users are looking for information, but they're also looking for product," he said.

Shop.eonline.com is positioned as a "contextual sales" environment in which users seeking out specialized information, such as movies of a particular genre, can buy merchandise related to that content. For example, Shop.eonline.com might sell posters or sunglasses tied to "Men in Black."

HANDLING IN-HOUSE

In a departure from most content site commerce models, E! Online is handling all commerce in-house. Rather than striking deals with partners, such as online malls or retail sites, E! Online has built a proprietary system to handle payments online, using CyberCash software for secure credit-card processing.

"We don't want to send users away," said Pete Sheinbaum, manager of Shop.eonline.com. "It's not a meaningful way to do commerce on the Internet."

Most content sites, such as Hearst HomeArts.com and Wired Digital's HotBot (which has been acquired by Lycos), partner with commerce sites such as bookstores or music stores to handle commerce, primarily for financial reasons.

"[Electronic commerce] is very difficult to execute," said Maria LaTour Kadison, senior analyst-online retail strategies at Forrester Research. "It's a huge undertaking."

Perhaps of even greater concern, "Most content sites are so leery of the editorial-advertising line that they try to keep commerce separate from editorial," said Jim Nail, senior analyst-media and technology strategies at Forrester.

TV PROMOTIONS

E! Online has a separate editorial staff headed by Editor in Chief Lew Harris, who was previously entertainment editor at Time Inc.'s People magazine.

"Editorial's first and foremost goal is to create compelling, interesting content," said Mr. Verba. "They are not hawkers of entertainment products. We would lose our business if we did that."

E! Online has signed deals with hundreds of suppliers, which it declined to name, to provide merchandise that will be branded as E! Online products. E! will handle not only ordering and payment processing, but fulfillment, which is a very complex process, analysts say.

It will promote the site on its cable channel E! and sister channel Style, and is also considering print and guerrilla marketing, such as posting messages in entertainment news groups.

The content company declined to say how much it has spent developing the site, or which software it's using for transaction processing, which can cost hundreds of thousands of dollars. It has spent almost a year building the site.

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