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REDGATE FACES LIFE AFTER LEONSIS AOL'S NEW-MEDIA SHOP ADJUSTS AFTER ITS FOUNDER CLIMBS CORPORATE LADDER

By Published on .

Think of Redgate Communications Corp. the way Steve Case thought of the company this time last year.

The president-CEO of Vienna, Va.-based America Online wanted a partner that would help establish the AOL brand among consumers and at the same time introduce marketers to the online service. He saw Redgate, a brazen new-media agency in Vero Beach, Fla., and its President-CEO Ted Leonsis, as potentially important pieces in the puzzle.

"I think we were viewing the future through the same prism," said Mr. Case. "We're trying to open our arms and partner with as many companies as we can."

Last May, the online service company bought Redgate for $35 million in AOL stock. The reason was clear: AOL has been on a tear, signing up new subscribers-up from 800,000 last May to more than 2 million currently-and wanted a company that could help bring in both marketers and new subscribers.

So after 10 years of serving clients, Redgate now finds its charter fundamentally changed.

Mr. Leonsis, Redgate's brash founder and visionary, has moved to Virginia to oversee content, marketing, corporate development and new-media opportunities as president of AOL Services Co. He also oversees AOL's efforts to bring advertising into the system.

The task of running Redgate has been left to Exec VP Ray Oglethorpe, who handles new-business development and account services, and Chuck Clemente, exec VP-chief operating officer, who oversees all creative output.

Though Redgate still manages customer databases and produces advertising (both traditional and new-media) for clients including Apple Computer, IBM Corp. and Sun Microsystems, the company also is charged with helping marketers and agencies navigate the new-media landscape.

"We're no longer competing with [other agencies]. We're partners," Mr. Clemente said. "We're evangelists more than we ever were. We don't want to be out there alone on the `bleeding edge.'*"

For years, that's where Redgate found itself. But with wider acceptance of technology and many marketers and agencies wanting to learn more, Redgate sees the opportunity to teach new media-and ultimately drive business for its parent.

The agency has taken over several aspects of AOL's subscriber marketing, including marketing research and corporate branding. Redgate created the AOL tagline "It's where you belong."

Redgate also is developing a magazine for AOL subscribers.

On AOL, Redgate operates an area where companies like Sony Electronics offer downloadable product information. The company also helped launch 2Market, a catalog featuring 27 marketers that's available on both CD-ROM and AOL.

Redgate has played an integral part in AOL's efforts to attract advertisers. The agency helped develop a business model for online advertising and has joined forces with AOL executives on sales calls.

AOL's ad pitch is typical Leonsis: hard-nosed and bullish. Advertisers will be expected to plunk down as much as $300,000 to build areas on AOL that Mr. Leonsis likens to "houses on the Potomac."

Though it also does "traditional" marketing-print ads and collateral material-Redgate long ago carved its niche championing the use of CD-ROM databases, fax on demand and an array of multimedia technologies. It is regarded by some as one of the first new-media agencies.

Pioneering has sometimes put Redgate in a unique position: Competitive companies share space on the client roster.

When AT&T went hunting for an interactive agency recently, Young & Rubicam, New York, paired with Redgate to go after the business, even though AOL owns Redgate and could be considered a conflict with AT&T, which owns Interchange Online Network. Y&R was later dropped from the review, which is still ongoing.

But because much of Redgate's work is project-oriented, clients have been comfortable with the arrangement, said Mr. Oglethorpe.

U S West, for example, has retained Redgate since 1993, despite the fact that Redgate also works for competitor BellSouth Corp.

"In the new-media world, partners are vendors are customers are competitors," said Robin Baca, director of public relations at U S West Marketing Resources. "While there are things we need to be careful about, there is also the ability to bring together partners in matchmaking."

Asked about client reaction to Mr. Leonsis' departure-clients who had listened to his passionate monologues on the age of new media-Mr. Clemente claims few needed assuaging. In fact, those with a large consumer customer base found the prospect attractive because of their ability to tap AOL.

The company built "an environment around him," Mr. Clemente said. And if Mr. Leonsis is needed for strategy, "We will brief him, he comes in and does his wonderful thing, and then he moves on and we execute his plan," said Mr. Clemente. "He's not going to go away."

After 12 years in new media, Mr. Leonsis is still amazed when people turn him down on proposals-and buoyed to hear when they realize they've made a mistake.

One longtime client, Mr. Leonsis said, called him shortly after rival MCI Communications Corp. announced an Internet product that would allow the telecommunications company to compete on the information superhighway. The client, Mr. Leonsis recalled, apologized for not acting on a three-year-old proposal pushing the same concept-one which would have made the client first in the category using CD-ROM, infomercials and interactive TV.

"It was new and they were afraid of it," Mr. Leonsis said. "It looked like it was bleeding edge, but it's moved into the mainstream much faster than we thought. Now they're apologizing," he said, "but saying, `Just make sure you do great direct mail for us next quarter."'

New media, it seems, remains old news at Redgate.

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