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Online merchandising and development of kids' licensed products is still in its infancy. But like the parents of a newborn, online purveyors have high hopes for their progeny.

"I haven't yet seen an instance where a company has licensed a product for a media company to create a Web presence only," says Bruce Judson, general manager, Time Inc. New Media. But "I think we will see personalities and characters move from the Web to other media in the 2-to-5 year time frame."

Audience estimates from Jupiter Communications, which publishes a monthly Digital Kids Report, claim that by 2000 there will be 15 million consumers under age 18 using Web-based or online services consistently.

While that number hardly competes with the existing market for licensed toys, books, and entertainment products, it's an audience worth grabbing, says DKR Editor Diana Simeon.

"Given the choice between a piece of plastic or figurine and an interactive environment with characters, I'd say the one that [explores the] relationship would be better," Ms. Simeon says.

Currently, online sites are used more often to promote kids' entertainment, rather than to sell products. These sites let kids interact with characters they've seen.

For example, Walt Disney Co. is planning downloadable coloring book pages, stories and games from its movie "Toy Story" ( But in most cases, the products must be purchased elsewhere.

Some marketers are proceeding with plans to develop characters online.

Nickelodeon, for example, is considering the development of characters for its online sites that could be redeployed in Nickelodeon magazine or on the TV network, says Dan Sullivan, VP-general manager, Nickelodeon Media Works.

Kidstar Interactive Network, which includes a radio program, quarterly magazine, phone-in entertainment and online presence on Microsoft Network, is considering the same move, says Kathy Herman, online manager.

Kidstar lets advertisers sponsor content areas branded by its characters, such as the comical, environmentally incorrect Phil Dumpster, who is in part sponsored by King County Solid Waste Department in California.

There's potential to influence kids' brand choices through licensed characters online, says Marian Salzman, director-department of the future at TBWA Chiat-Day, New York.

Aside from major entertainment sites, even a package-goods marketer can brand products or potentially develop licensed characters or ideas for kids on the World Wide Web, she says. An example is the virtual Kellogg Clubhouse on Kellogg Co. site (

"Not being there [online] means you aren't as hip as you can be, and that's important to kids," Mr. Salzman says.

In addition, a benefit to the online-first route is its lower cost, compared with traditional methods.

It costs well under $1 million to establish a Web site, and linking with an existing site can cost under $1,000 a month.

"The cost of developing a videogame with a new character is really expensive [compared with] being online," says Ms. Herman, a former Nintendo executive.

However, the benefits from these efforts can be hard to measure, some say.

"You have to be careful how much you spend [merchandising on the Web] because the revenue's not coming back" through immediate online sales, Ms. Herman says.

She adds that marketers may build loyalty to their licensed characters with an online site, but it's difficult to measure how that translates into product movement. Concerns such as these have prevented other marketers from spawning characters online.

"It's not our intent right now to license any Disney characters for [non-Disney] online activities," says Jake Winebaum, Disney Online president.

Disney, likewise, isn't creating licensed characters specifically for online merchandising but could sell merchandise from existing characters online, much as it now does in its retail stores. Mr. Winebaum says when launches the first week of February, it will "likely sell our products in our own [cyber] store," rather than other vendors in online malls.

However, it's far more common for media brands, like Disney Interactive or Viacom's MTV, VH1 and Nickelodeon Networks, to sell existing goods exclusively online, rather than through direct-response ads on TV or other outlets.

Of the 36 products currently available in Nick at Nite Online's "The Goods" shopping area on America Online, nine were exclusive to the area, Mr. Sullivan says.

To further the idea of online licensing, Licensing Industry Merchandisers' Association in June will release a comprehensive category-specific licensing guide that will introduce its membership to interactive licensing opportunities.

The group believes the guide will lure licensees and licensors into the online marketing web. LIMA Executive Director Murray Altchuler admits that while right now they aren't rushing online, "that's not to say it won't happen at all."

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