INTERACTIVE: MEDIA & MARKETING: MODEM MEDIA MARKS 10 YEARS IN INTERACTIVE BIZ: PIONEERING SHOP IS POISED TO STAY IN THE 'TOP TIER' OF AGENCIES, SAID INDUSTRY ANALYST

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In 1987, the founders of Modem Media, G.M. O'Connell and Doug Ahlers, were busy setting the world on fire. Well, not the world exactly, but their one and only computer and part of Mr. Ahlers' parents' condominium in Norwalk, Conn.

The pair had borrowed the Ahlers family space for six months to establish their fledgling interactive business, then called Electronic Digital Marketing. When Mr. Ahlers installed a new board inside the company computer, flames and smoke soon followed.

The entrepreneurs saved the apartment, salvaged the hard drive (which held all the company records), and continued to fan a different kind of fire they both had about digital marketing.

'INTERACTIVE FAIRY DUST'

Modem is now celebrating its 10th anniversary in an industry that's barely that old.

"Once you get interactive fairy dust sprinkled on you, you can't stop. We saw the opportunity to create the first marketing communications company dedicated to the interactive community," said Mr. O'Connell, now president and chief operating officer of TN Technologies, the holding company formed in 1996 for Modem and other True North Communications interactive properties.

VIRTUAL MALL BUILDING

Mr. Ahlers, managing partner of Modem, added, "Our vision about the potential of what this medium could be as an advanced medium was there from day one."

General Electric Co. was Modem's first client, supplying not only cash flow, but also the big name Modem needed to begin building a stable. Godiva Chocolates and J.C. Penney Co. (still a client) followed.

The agency's first work focused on electronic malls like GE's GEnie online service. The problem was, there weren't many online malls, so Messrs. O'Connell and Ahlers often ended up helping to build the places where their clients could sell.

They became so well-known for their virtual mall building that Mr. O'Connell was once introduced at a 1988 conference as the "Eddie DeBartolo of online malls."

RADICAL IDEAS FOR ZIMA

Mr. Ahlers said, "We saw that companies would need help and assistance in making electronic marketing and selling happen. But the problem was the only method of distribution was online services. And they weren't set up for that back then. So we did it. It would be kind of like Procter & Gamble creating soap operas so they could sell soap."

Robert Allen, now Modem Media president, joined Messrs. O'Connell and Ahlers in 1989 and the company began to grow with new clients and services such as fax on demand, CD-ROMs and telephone interactive response. Those services continue to account for about 25% of Modem's revenue.

A few years later, in 1993, new talk about the Internet began springing up. Modem had been working with Coors on voice-response promotions, and the beverage company was getting ready to launch the new Zima brand.

Modem had some radical ideas for the time, including building an online community called "Tribe Z," and an episodic format on the site.

The aggressive Zima team agreed with Modem's plans, and Zima.com was born. In 1995, the Zima.com campaign was one of the most well-known of the year, being one of the first big consumer brands on the Web.

1998 THE YEAR FOR ADVERTISING

More big clients followed, including existing clients AT&T and John Hancock Mutual Life Insurance Co. Today, the 200-employee Modem Media serves marketers such as Citibank, Delta Air Lines, Fila USA, Tropicana Dole Beverages, Unilever and the U.S. Postal Service.

In January 1997, an initial public offering was filed for TN Technologies, but has since been put on hold.

As for 1998, the Modem Media executives say it will be the year advertising on the Net gets its due.

"1998 will be the first year companies can say, 'OK, we know if we spend $1, we're starting to know what the return will be,' " Mr. O'Connell said.

FIVE TO EIGHT 'TOP TIER' AGENCIES

Dana Tower, senior analyst at Forrester Research, said Modem Media will remain in the "top tier" of between five and eight interactive agencies in the next year. Other top tier agencies include Agency.com, Organic Online and Studio Archetype, he said.

Modem Media "has been a marketing and business strategy company from the beginning, and they have kept that out in front all along," said Mr. Tower.

After a few more close calls with fire (let's just say popcorn popping in the Modem Media offices is now forbidden), the internal fire for interactive marketing and advertising burns on.

"At the end of the day, I don't care how many geeks or creative types you have. You better have someone truly concerned about the brand and about how the brand

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