Weighing location

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When washingtonpost.com and Newsweek Interactive went looking for a Web shop, they sorted through agencies in New York and San Francisco before settling on close-to-home Webnet-Marketing, Bethesda, Md.

"There are some quirks to the Washington market and we needed an agency that understood the market," said Greg Eckstrom, VP-marketing at Washingtonpost.Newsweek Interactive, a new-media subsidiary of Washington Post Co.

That points up a wobble in the interactive agency orbit: While marketers value capabilities in establishing Web sites, building e-commerce and creating brand awareness, physical location of the agency remains an important consideration.


Ask industry insiders about big interactive players and many of the same shops come up: Agency.com, Giant Step, Lot 21, Organic, Razorfish and Red Sky Interactive. The well-known agencies with varying strengths and weaknesses all are based in major markets such as Chicago, New York and San Francisco, where they have access to a large pool of talent and clients.

But off-the-beaten-path towns such as Chester, N.J.; Calgary, Alberta; and Columbia, S.C.; are home to many interactive shops. Even cities such as Houston and Bethesda, Md.--not exactly small towns--are out of the mainstream of interactive media.

So are they able to attract needed talent and cultivate client relationships?

For Mr. Eckstrom, Webnet-Marketing's location was an asset.

"I don't need to go to New York or San Francisco if there's someone [here] who has the capabilities," Mr. Eckstrom said.

In many cases, the Internet makes proximity a moot point.

"We look for talent, creativity and innovation wherever we can find it," said David Stern, VP-interactive marketing at Unilever U.S.

Unilever's Ragu brand works with Ann Arbor, Mich.-based Fry Multimedia for online advertising. "One of the best things about this medium is that it makes us not bound by geographic concerns. It opens up a pool of talent for us that wasn't available before [the birth of the Internet]," Mr. Stern said.


Remote agencies that have hired staff and landed clients face considerable challenges, especially when big-city shops invade their turf with regional offices. But being outside a major metropolitan area also has a big plus:

"One advantage is a lower-price work force," said Peter Krasilovsky, an analyst at the Kelsey Group, an Internet consultancy.

In the Southeast, for example, one expert said Web shops in smaller cities pay senior-level executives average annual salaries of $60,000 to $80,000. But in larger cities, such as Atlanta, such salaries jump to $100,000 to $150,000.

And the talent pool itself is different, Mr. Krasilovsky said.

"Often, workers are deeply tied to their communities, so they are more stable once on board," Mr. Krasilovsky said. As a result, they are less likely to jump ship as often as employees in major markets such as New York.

As for the Big Apple, said Brayton Johnson, Webnet-Marketing's president and co-founder, "I hear turnover is so horrible--people will go across the street [to change jobs]. But since we started four years ago, we have lost only two people."


"People here in the Midwest work very hard and are very focused," said David Fry, president of Fry Multimedia, an Ann Arbor shop he founded in 1993 because his wife was attending medical school there. "A certain class of individuals is interested in coming to Ann Arbor, especially if they are married or have children. They are searching for something a little more laid back."

Beyond Interactive, which Grey Advertising, New York, recently acquired, also is based in the Michigan city.

Nearby universities and businesses often provide interactive agencies with creative and technologically skilled employees.

"We originally found it to be a big advantage being in Ann Arbor," Mr. Fry said. "There are a lot of universities within a 50-mile radius. We also have automotive, pharmaceutical and electronics industries nearby. As those industries grow and are developing Internet skills internally, there is more talent for us to draw from."

Such shops--often seen by clients as jewels in the rough--compete with Silicon Alley or Silicon Valley-based agencies for the same clients.

Calgary, Alberta-based Critical Mass, for example, has won big-name clients such as Mercedes-Benz USA, United Distillers & Vintners' Smirnoff vodka and Procter & Gamble Co. Critical Mass recently won Reflect.com, a beauty site from P&G.

"Our initial P&G client, the one who awarded us the Reflect.-com assignment, told us he believes he 'discovered us' and was worried other larger clients would at some point also discover us," said Jerry Johnston, president of Critical Mass, in which Omnicom Group recently bought a 50% stake for an estimated $20 million.


Given the ability to communicate via the Internet, even New York-based clients are willing to work with shops in smaller cities.

Fry, which has pitched against agencies such as New York-based Razorfish and San Francisco-based Organic, has attracted clients including Godiva Chocolatier in New York and Crate & Barrel in the Chicago suburb of Northbrook, Ill.

Critical Mass' Mr. Johnston claims interactive agencies don't need expensive, full-service offices in big cities.

"What the client cares about is service and who is the key account person. Our production offices don't have to be near clients," he said. "We run our business lean and mean, so we don't have a lot of overhead. So we are literally a low-cost provider."

Scott Wise, co-president-CEO of 2.0 Interactive, Houston, said quality of service--not geography--is important to his clients.

"We are trying to provide small, medium and large-size companies the same skill sets normally available only from Razorfish or other [big-city] agencies," Mr. Wise said.

But the quality of the talent pool varies greatly outside major cities.

"It's hard to get talent in Houston," Mr. Wise said. "We are speaking frequently to MBA classes and educators about the [interactive] marketplace. The city has been short-changed in the information technology arena. But that is changing."

Smaller-market employees, because they often are older, married and have children, may be less inclined to work long hours.


"They tend to go home at night," Mr. Krasilovsky said. "They have less of an entrepreneurial mindset. It's true: When you are working with companies outside of major markets, you are going to run into less sophisticated people."

But older, more settled people are just what some interactive agencies want.

"We look for people who want a different quality of life," said Debra Taeschler, president of Chester, N.J.-based Grafica Interactive, a 65-person agency that has pitched against Agency.com, Razorfish and others.

"If you are young and looking for work, you go to [New York]," she said. "But our employees are having children. The glamor's done. They are ready to settle down."

Finding these folks "is like finding a needle in a haystack," Ms. Taeschler said.

And it can be difficult at times to expand a client base absent opening an office nearby.

"There is a feeling that with enhanced communications, it doesn't matter where you are," Mr. Krasilovsky said. "But if you are first establishing a relationship [with a client], it's best to be in the same regional area."

As a result, many shops in remote cities have opened offices in bigger cities to be closer to clients. Critical Mass' Mr. Johnston, for example, works out of a Chicago service office.


And Renaissance Interactive, Columbia, S.C., will open an Atlanta office this month.

The shop, founded in 1994 by four friends who were Duke University graduates, sprouted in Columbia because the father of one of them offered free office space.

"The whole driver was deciding where we could get up and running for as little money as possible," said Mark Buford, senior VP-sales and marketing at Renaissance.

But as Renaissance grew, it added clients, such as BellSouth Corp., Siemens and Kimberly-Clark Corp., that needed hands-on assistance.

"The challenge became needing to travel to our clients' cities and not being in a central location like Atlanta," Mr. Buford said.

That may become the norm as, ironically, it becomes clear that even in the Internet era, proximity to the country's largest business centers still dictates long-term viability.

"You also get a lot of pressure from the investment community to be in major markets," Mr. Krasilovsky said. "That's contrary to what we were saying five years ago, which was that communications would change everything and it didn't matter where you were."

Copyright December 1999, Crain Communications Inc.

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