Getting to Know them.

Part Two The Millennium Consumer

Is there any doubt the 21st century will be ruled by the consumer? Not lately To win favor, companies will have to understand these impatient, tech-savvy price-conscious customers even better than they know themselves.

Targeting members of minority groups has always been a challenge. But with virtual communities taking off, all you really have to do is show up.

Since the dawn of Internet time, consumers have wandered like nomads, wading through an insufferable dearth of useless home pages and maddeningly meaningless Web searches in an effort to find some place to call home on-line.

Now, for some, the search might be over. Lifestyle-oriented web communities are popping up and digging in roots, bringing splashes of color and cultural flair to what was once a sterile virtual wasteland of starched corporate logos and vacuous anonymity. These sites, which cater to historically underserved minorities, are fast becoming trusted first stops on-line for those seeking bonds with deeper emotional resonance than the common desire to find the lowest possible price on a lamp.

Not surprisingly, companies with products to showcase are taking notice. They now have a way to target groups that were heretofore either too geographically dispersed or just too complex to figure out. The Web, seamless and ubiquitous as ever, leaps tall global obstacles with a single mouse click. And through strategic partnerships, these targeted, specialized virtual communities are teaching some Fortune 500 companies a thing or two about diversity in marketing--and how serving an entire constituency is not only possible, but profitable.

A Woman's Place is On the Web

To ridiculously understate it, Candice Carpenter's life is really, really busy And, with a Barnum & Bailey-style schedule designed to wrench precious additional seconds from every harried overbooked minute of the day, a little eccentricity goes a very long way. The 47-year-old iVillage CEO holds all business dinners at her Manhattan Upper East Side apartment, employs a personal trainer who makes crack-of-dawn house calls, and has somebody perpetually on hand to handle all things mundane. "I never even change a roll of toilet paper," she admits. That's not because she's above it, mind you, but because it would be time not focused on her main priorities: her two young daughters and her company.

To wit, Carpenter is the self-styled poster child of just the kind of nightmarish time crunch squeezing working women as more of them climb higher in the corporate ranks. "Single, CEO, mother--it doesn't get much uglier than my life," Carpenter says with a wry smile. Which is why she might understand better than most what her company's 2.7 million members--women between the ages of 25 and 54--are looking for, and why she is positive women in that age group will be "the most important economic population on the Internet." Not only do women now make up more than half of all on-line users, and not only are they spending 75 cents of every retail dollar in the physical world, but they are beginning to account for a hefty share of the corporate allowance as well. "Today women buy about $40 billion worth of hardware and software as CEOs and CIOs in their companies," notes Carpenter. "Companies were really slow to wake up to that."

Even in on-line communities not specifically divided along gender lines, women are decidedly tipping the scales. "Women are the X factor," says Barry Cooper, CEO of BlackVoices.com, a site whose membership is currently 70 percent female. "The Internet was first built for white, geeky guys. Today everybody has to shift strategies to appeal to women. They are going to decide whether a lot of these sites stand or fall."

At the moment, they're giving a slight edge to iVillage over close rival, Women.com, a venture backed by Hearst and Conde Nast. According to on-line traffic monitor Media Metrix, iVillage has about 1,000 more unique visitors per

month than Women.com. The two are both aggressively pursuing women, with considerably different styles; where iVillage has the feel of a one-stop community, Women.com is more of a self-serve information warehouse and portal into a dozen different magazine sites. It remains to be seen which model women will prefer, but because the population is so large, most agree this town is big enough for three or four strong market leaders. "This is an enormous space," says Jordan Rohan, research analyst for Wit Capital, a co-manager of iVillage's IPO. "If you want to think about the traditional media analogue to this space, it's every women-focused magazine, every women-focused cable network, and so on."

That's a good thing because another player, Oxygen Media--headed up by Geraldine Laybourne and currently in overdrive to launch in February--is entering the fray as a hybrid cable channel/Web venture, and, if it actually works, it may pose more of a long-term threat in this space. "With the convergence of PC and television, whichever community is most adaptable to that medium will emerge as a winner," says Stephen Sponder, CEO of BizProlink, a B-to-B Web portal community.

But not everyone is convinced that the marriage of Internet and cable, at least where content for women is concerned, will be one made in heaven-not because the technology isn't there, but because the two simply serve different purposes. Women use the Web for function rather than fantasy, to solve problems and get things done, says Carpenter, while TV is strictly for escape. "Ally McBeal is a complete experience," she says. "I don't need an Internet connection to make that better. It's a total escape fantasy. Her life is more screwed up than mine, and I feel good. That's it."

iVillage, for its part, aims ambitiously at solving as many problems as possible for women who have absolutely no time. In some cases, the solution will arrive in the form of information, packaged neatly within a range of topics, from beauty to personal finance, relationships to adoption. In other cases, women will find solace in the community itself, says Carpenter, and in swapping stories on its bulletin boards. "It's really about a support system."

But while the editorial might be impressive, Carpenter's media savvy--formerly CEO of Q2, an upscale (now defunct) version of QVC, and, prior to that, a Time Warner executive--is perhaps best illustrated by the architecture of the site and the vast number of revenue-producing sponsorship opportunities available. "They've created a context that makes a lot of sense to advertisers," says Rohan, comparing it to CBS Marketwatch, which offers advertisers no fewer than 11 ways to promote their brands.

Of course, these kinds of relationships tend to lead to sponsor-driven editorial content, which has raised a few eyebrows in the off-line magazine world, where the separation of advertising and editorial is meant to be as sacrosanct as that between church and state. But Carpenter says the criticism has quieted. "People have gotten over the idea that the magazine model is how this will all come out." She adds that the content is developed together with iVillage editorial staff and ultimately benefits both sides. "Ford knows more about safety than iVillage does. Nike has more information on the impact of sports on teenage girls. Every company is a treasure trove of incredible information."

Helping companies unearth this wealth of knowledge has become an integral part of iVillage's multi-legged revenue model, which also includes traditional banner ads, licensing content, and commerce revenue from its own retail shop, iBaby. But the strategic partnerships, with blue-chip sponsors such as Ford and AT&T, are really its crown jewels; through them, iVillage acts as consultant, sharing its own aggregated data to help companies better understand female consumers and market to them more effectively. Admittedly self-serving, Carpenter takes the tack that "the Internet is about successful branching,"

adding that "some companies have this obsession with doing everything themselves, and that's just the not the way its going to work on the Internet."

Other companies, she observes, are moving too slowly with their Web strategies, mired in traditional bureaucracy and quibbling over nickels and dimes rather than experimenting with the technology. "The amount everybody is spending right now is like a rounding error. It's not like it's going to make the slightest different to your P&L," she says. "What matters right now is getting the competency fast, and getting better than your competition."

The time iVillage has already spent tooling away on the Web, says Carpenter, experimenting, failing, and learning from mistakes should be ample to shore up competitive advantage against an onslaught by the likes of Oxygen Media. "Our cycle time over Oxygen is four years--that's huge," she says, emphatically, adding that she doesn't envy Oxygen's long road--even by Internet standards--to profitability. "Internet P&Ls are ugly. And cable P&Ls are ugly. You add them together and it's really ugly."

Speaking of which, iVillage has yet to show a profit. (Surprise, surprise.) But with a market cap of more than $500 million, steady gross margin growth, and outperformance of expectations for nearly every quarter, Carpenter says the company is on target for a standard 5-to-7 year curve for on-line (or off-line) media companies. iVillage also boasts a higher revenue-per-thousand-page-use than older on-line media companies--$30 compared with C-Net's $27--and the average portal, which sees around $7. "We'll never have the scale [of a portal], but we have a much better ability to monetize the traffic we have."

And that's an advantage iVillage is going to have to exploit going forward because some industry experts, such as Stamford, CT-based GartnerGroup, are still naming the general interest portals as heavy favorites. But Carpenter contends that iVilage has an indefinitely open window--thanks to the good old-fashioned differences between the sexes. "Women consume media very differently than men do. The portals, in order to succeed, must serve everyone, and if you serve everyone, by definition, you leave opportunities for other people to serve each segment better," she says. "That's just the nature of the game."

In Search of Untapped Millions

For some, just leaving a steady career with an established brick-and-mortar outfit to head up a dot-coin in an uncharted space is enough to inspire ulcers. But for Walter B. Schubert, Jr., starting his company, the Gay Financial Network, or gfn.com, was the easy part. It was the prospect of being the first gay man to come out on the New York Stock Exchange that made him positively queasy.

As the oldest of six children raised in a conservative Irish Catholic family--and the man of the house since his father's death of congenital heart disease in 1979--Schubert felt financially responsible for his brood and worried that coming out might cost him their livelihood. But by age 36, living a double life had already taken a heavy emotional toll, and Schubert decided it was time to start integrating his life in a more truthful, holistic way. That meant disclosing his identity to his colleagues on the NYSE, where, as a third generation seat holder, he had worked for 15 years. The reaction was a mixed bag, at best. "There I was, this likeable, loveable guy everyone had known for 15 years," says Schubert, or Schubie, as he is best known on the Street, "and once I was out, I became 'the gay guy'"

Undaunted--and inspired by NYSE CEO Dick Grasso's words of encouragement--Schubert almost immediately went to work on his dream: to build a company where gay men and lesbians could take advantage of a wide range of quality financial products and services without ever having to hide who they are. People seeking financial counsel, argues Schubert, should be able to add their sexual identity to a long list of characteristics (i.e., gender, occupation, marital status, long-term goals, etc.) to help a specialist develop a customized investment plan. "I have never heard of anyone maximizing their investment potential when they felt as though they had to minimize their life's experience."

The traditional thinking says that homosexuals, underserved in the general market, will be more likely to extend their loyalty to a gay-identified site, if given the option and a quality product at a comparable price. If that's true, then Schubert's audience is potentially worth billions of dollars, as gay singles and couples, often with double income and no children, tend to have far more discretionary income than their same-age heterosexual counterparts. And more of those dollars will make their way on-line as the worldwide gay and lesbian Internet population increases from 9.2 million in 1999 to 17.1 million in 2005, according to forecasts by research firm Computer Economics.

True, at first glance, with its daily financial news updates, stock quotes, and indices charts and graphs, gfn.com looks like any mainstream financial services site. But closer inspection reveals a veritable smorgasbord of customized content that community members would be hardpressed to find elsewhere, such as feature articles exploring property partnership agreements and a ranking of the 50 most powerful gay-friendly companies in America (IBM, AT&T, and Bank of America ranked at the top in 1999).

Schubert recognized early on that in order to compete effectively with general interest financial portals, his site would have to be not only on a par with them, but better, because gay people weren't about to buy products just because the word "gay" appeared on the label. "Over the years, the community has been visited with gay-identified products and services that were substandard for the same price," he says, "so they're a bit wary."

To prove that gfn.com meant business, Schubert began signing content deals with more mainstream financial sites, such as TheStreet.com, EDGAR Online, and IPO.com. Gfn.com has also partnered with GMAC for mortgage products, Telebank for on-line banking, Conseco for annuities, and Fleet for on-line trading--all at cheaper prices than consumers might find in the physical world. "When you're successful at aggregating a large pool of warm prospects that these financial services companies are looking for, their marketing costs are significantly reduced," he says. And with a little diversity training help from gfn.com, some of them are slowly starting to develop campaigns targeting this segment. "Very few Fortune 1000 companies are doing it," says Howard Buford, president of New York-based Prime Access, an advertising and marketing firm that helps companies develop ad campaigns for the gay, Latino, and African-American communities. "But the ones who are, are finding it to be extremely lucrative so they tend to go i nto it full force."

In the recent past, companies like Disney and American Airlines that have developed gay-friendly policies or advertisements have come under fire from conservative and religious groups, which may have deterred others so inclined from doing the same. Wishing to serve their entire constituency, companies "end up, in their own minds, between a rock and hard place," says Schubert. "None of our strategic partners has suffered a negative campaign, but if they did and I was on the evening news and was asked for a comment, I'd say, 'What? We're not allowed to make money?'"

Speaking of money, gfn.com is one of, it seems, the few dot-coms with little interest in an IPO--at least not for now. It completed its second round of financing last year: $6 million with a $50 million valuation. Schubert says that may seem like small potatoes compared with the overblown market caps on today's gold rush market, but he also points out the company has spent only $1.5 million to add more than 80,000 members, putting its cost of acquisition at $12 a head. "That's pretty damn good," says the 43-year-old CEO, who plans to achieve profitability in 2000 by keeping the site highly interactive and by utilizing multiple revenue channels, including referral commissions, ad sales, and on-line brokerage fees.

But the real key to success for a pure Internet play like his, Schubert says, is to have something real. "If you can't envision your business as a brick-and-mortar business, if you can't see it as a storefront with a real office behind it, then you probably don't have a real business, and you won't survive." A bit unorthodox, considering the many predictions of gloom and doom for brick-and-mortar companies who can't think like virtual stores. But then Schubert's thinking isn't always mainstream--and that's something his father encouraged in him. "He taught me to be a leader. He told me to think for myself, stand up for myself," he says, "and never be afraid to be different."

Raising their voices

It might be a dot-com startup, but in Internet time, BlackVoices.com is practically ancient. The Chicago-based company debuted way, way back in the virtual days of yore, when America Online was the Internet and "information superhighway" was just gaining prominence as the newest catch phrase.

Its CEO, Barry Cooper, then an editor at the Orlando Sentinel, was busily assessing the future of a brave new world, and how it might impact the African-American community. "I definitely thought African-Americans would get on the highway," says the 43-year-old Cooper, "but they would find there was no content in cyberspace for them." His solution was to develop a site for African-Americans within the Sentinel's AOL area. The powers at parent company Tribune opted to take a chance on it, figuring that if Cooper was right, the additional traffic would boost the company's per hour foot traffic, which would mean more revenue and a higher profile for the Orlando paper.

Cooper was on target. Over the six months following the introduction of Black Voices, the Sentinel's hourly usage jumped from 60,000 hours per month to 100,000. BlackVoices.com was spun off as an additional independent Tribune company, with Cooper at the helm.

Today, BlackVoices.com--sporting the tagline, "Where African-Americans Live Online"--garners more than 20 million page views per month, which Cooper says is roughly two to three times that of its nearest competitors, NetNoir and BT.com. That lead is critical; by Cooper's own estimates, today's market can support a precious few players. The rest will face consolidation or will simply have to close their doors in 2000.

"I think any one of them has yet to really take off," says Prime Access president Howard Buford. But the ultimate success of the winner will depend on several factors. "One, vision in management and a very clear understanding of who the black community is and what their needs are. Two, quality of financing and capital. And three, a willingness to take risk."

It's a tall order for any dot-coin, and particularly challenging for lifestyle-oriented sites that have to guard (or steal) market-share from a broadening array of general interest portals and news sites. To win, BlackVoices.com must be a comparable or better source for information--which Cooper thinks it is. "There are problems that affect African-Americans that might not affect other groups," he says, citing discriminatory lending practices as one such issue. "Where are you going to go to talk about that? With a source you trust. Do you trust the New York Times to talk to you about that or do you trust BlackVoices.com?"

But Cooper's site also has another weapon: a bustling career center with searchable databases filled with resumes of black job applicants, along with feature articles discussing various career tracks. BlackVoices.com charges companies for access to its resume database, which makes it a lucrative revenue stream. "It's a tough time to hire anybody. The economy is so strong, everybody is employed. That makes it doubly hard to hire talented minorities," says Cooper, who estimates 40 percent of his company's income comes from recruitment advertising dollars. In 1999, ad revenue was up to $1 million compared with $115,000 for all of '98; projections for 2000 are between $3 and $4 million.

But considering ad dollars are the site's bread and butter, sponsors don't get in that easily. The trust that BlackVoices.com members have in its editorial content is the cornerstone of its strategic model, and Cooper mandates careful screening of ad themes and slogans. "We've turned down advertising for racy movies that don't show African-Americans in a good light. We've rejected alcohol and tobacco advertising," says Cooper. "It's not that we have a policy against that advertising, but we'd like it to say something other than, "It's a party. Have a drink."

In essence, Cooper wants BlackVoices.com to reach its audience on a higher plain, to raise the expectations of the community, and to drive advertisers to meet them. "I think oftentimes the African-American community is taken for granted," says Cooper. "Companies realize African-Americans spend a large amount of their disposable income, probably more than their counterparts in other groups. They are great consumers and because of that, some advertisers think if you just present the product, they will come. And we think that's not quite true." On the contrary, he says, black consumers are more discriminating than ever before. Time was, companies could simply assume their mainstream advertising campaigns were reaching minorities as well, says Buford. "But today, with companies beginning to court the African-American community, the system has changed. Those companies [that do it] have a distinct competitive advantage. Especially with diversity of hiring--then they start to get this kind of quality input from emp loyees internally."

In the near term, Cooper has but one goal: to make BlackVoices.com an unadulterated financial success. And that means ramping up additional revenue streams such as its leisure events programs, which gathers members together in vacation spots for real-world meeting, and its own on-line retail shop, Isoko.com. But this sports-journalist-turned-CEO has no illusions about how much work will be involved. "Our revenues need to grow at a very fast rate," says Cooper. "We're working in Internet time."