THE SKY'S THE LIMIT: WITH OMNICOM AS A BACKER AND A DAZZLER OF A DEMO DISC, IT SEEMS LIKE BLUE SKY, NOTHING BUT BLUE SKY, AT RED SKY INTERACTIVE.

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There's something of a carnival barker in Tim Smith, founder and CEO of San Francisco-based Red Sky Interactive. Showman, magician, juggler, kite flyer and hot air balloonist. Scholarly nerd and techno-freak (check the ponytail). Combine that with a B-school degree from UC Berkeley and a stint at a big consulting firm, and in a few years you've got a full-blown midlife crisis on your hands.

Which leads to a round-the-world trip with a backpack full of books -- and that, of course, leads to the condition known as poverty. Returning to San Francisco, Smith plundered his bank account, bought the fastest Mac he could afford, borrowed a corner of a desk in a film and postproduction house and set up shop. "I was selling, programming, doing the work, testing and delivering it -- all from a back room at Red Sky Films," the 38-year-old Smith recounts.

Not a terribly auspicious beginning. And yet, Red Sky Interactive (www.redsky.com) is now a 35-person company, having done breakthrough work for clients like Nike, Hewlett-Packard and Bank of America. On the strength of its often breathtaking work in the interactive medium, the company attracted a sizable investment from John Wren and the Omnicom Group, a $6 billion global holding company.

Today, mid-life crisis firmly in check, Smith travels the country, speaking, presenting, pitching, judging awards shows, and developing ideas that sometimes find their way onscreen, and other times become chapters in books. "I'm the old iconographic head of the company," he says, only half-jokingly.

At an October conclave of international DDB Needham creatives in San Francisco, Smith presented the Red Sky demo disc, a CD-ROM of work done for high-profile clients. It is a notoriously tough, jaded, jetlagged crowd, but according to one attendee there, the audience burst into spontaneous applause and cheers in the midst of Smith's presentation.

This month, Smith will be in Manhattan, as a featured speaker at the One Club's Websites at an Exhibition, a show of groundbreaking new work that opens Dec. 9. In addition to presenting one of Red Sky's Web-based projects, Smith will discuss both the process and creative issues surrounding development on the Web. The show will in turn launch the announcement of the One Show Interactive, a separate awards show to be held April 23 in New York.

The Red Sky Dazzle

The Red Sky CD-ROM begins with what looks like a silent film-era movie of a huckster selling snake oil, touting great new inventions while claiming you won't believe your eyes or trust your sanity. Blowing smoke, the man disappears. The screen is dark. Well, not quite. In the background a moon seems to be shining dimly. A lantern dangles from a tree branch, creaking in the breeze. Clicking the mouse produces the sound of a match being struck, and the screen suddenly leaps to vivid life as a candle illuminates the inside of an old carnival wagon. The effect is so dazzling it makes you gasp.

In that brief instance, Smith has shown what makes Red Sky stand out from the pack. First, there's an incredible flair for onscreen showmanship, and inherent in that, an understanding of the ancient art of storytelling and our deep, instinctual need for it. Second, there's an appreciation for interaction, and for rewarding users every time they volunteer to click the mouse. Finally, there's Red Sky's use of sound effects, not as an afterthought, but as an integral part of the experience. Sound really is the unsung hero of interactive multimedia, and Red Sky will actually Foley their sound effects, to achieve just the right impact.

Just Blow Chunks

Much of the work Smith likes to show is for Red Sky's former client, the 800-pound gorilla of interactive advertising, Nike. The entire Nike relationship began with an unsolicited pitch. According to Smith, "We just woke up one day and decided we wanted Nike as a client. We put together a pitch on a floppy and mailed it off to Nike. They called us back within 24 hours."

The interface is a shuttered metal storefront, branded with a glowing Red Sky logo. Click, and the store front shutters fly open to reveal a naked Muybridge running man in full gallop. Click a button and a demented version of an optometrist's tool examines the man, and provides an analysis. Conclusion: "He needs shoes." Click another button and a small window opens to reveal a wacky song-and-dance animation of Nike sneakers set to an oily '50s soundtrack of uptempo let's-go-shopping music. It's 180 degrees from Wieden & Kennedy's typical work for Nike. As a result, Red Sky was on the map, with a series of clever interactive advertisements that reworked, repurposed and repositioned previous creative done by W&K to put Nike on the Web and extend the brand via floppy disc.

For instance, Red Sky took the "Virtual Andre" television spot and recast it as a Shockwave movie disguised as an arcade game. No matter how long you play, you will lose. And that's the point. Virtual Agassi is just too quick, returning everything you fire at him, even though you use a cannon and he uses a mere tennis racket. Leave the game, and Andre signs off with a final, "You suck!"

Smith is quick to share his success with Red Sky's creative director, Joel Hladecek, who has a rare background in immersive environments, amusement park ride films and modelmaking. The Red Sky creative credo can be broken down to a few simple elements, according to Hladecek. "Redefine the standards. That means that certain arbitrary standards we've come to expect, like mouse clicks and rollover behavior, are all suspect. Embrace the limitations of the technology, so an animation that normally might look good in 8 or 12 frames per second can be developed in a three-frame concept like a neon sign. That way the weakness of the technology doesn't show through the concept. Finally, creative has the last word."

New Vistas With Omnicom

The growing oeuvre caught the attention of John Wren, chairman of Omnicom. "We were doing great work, but for three years all our profits were plowed back into growing the company," says Smith. "A couple of times we barely made payroll." When Wren came calling, offering cash in exchange for a share of the company, as well as a chance to leverage the Omnicom client relationship, Smith breathed a sigh of relief and took the deal.

It's a relationship that is now going on a year, and Smith clearly relishes it. "We were working, the buzz was high, but we didn't have the cash we needed to grow the business. Basically, we were just grinding day to day."

Today Wren sits on the board, and according to Smith, inculcates a philosophy of support, recognition of great work and going by his gut. "You partner with a venture capitalist, they take a majority stake and they ride your ass with a bullwhip," Smith explains. "When John invested in us he said he wouldn't ride us, he said, 'We just want you to execute your business plan faster.' " Red Sky is looking to expand overseas, with a potential base in Hong Kong or Singapore markets, according to Smith. "We're three years ahead of the competition there, and we expect our relationship with Omnicom to open doors for us in Asia." When asked how the Omnicom relationship has impacted the bottom line, he demurs. "That's not what's important. It's not revenue, it's influence."

Liar's Pong

Meanwhile, Red Sky keeps pushing the envelope at home. In what may be the first interactive Web banner ad of its kind, the firm created a version of Pong for Hewlett-Packard. That may be a big technical breakthrough, and it may have generated an enormous amount of click-throughs to the HP Web site, but the particularly noteworthy part is that Red Sky fabricated a little white lie -- that an HP engineer, bored and alone in his cubicle, created this banner for the megalithic corporation. Yeah, right. Nonetheless, this meme has spread through the press and the nerd subculture like an information virus. This delights Smith. HP gets the glory, but Red Sky wins the awards.

What does the future hold for Red Sky? With Omnicom's investment filling his coffers, Smith has reason to be optimistic -- and in a buying mood. "Half our growth next year will come through acquisition," he says. "We're looking for companies in the same situation we were in three years ago: doing brilliant work but finding it difficult to achieve the next level of growth."

Being steeped in the language and techniques of filmmaking and postproduction will continue to benefit Red Sky. "This is a new medium, and the people that succeed will not be those who come to it from the world of print," Smith claims. "We're seeing the most exciting work from storytellers, performance artists, filmmakers, people who know how to create an engaging, entertaining experience. If you can't figure out that we've been here before and learn from history, I'm

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