Forget music videos. Don't even think about infomercials.

If you want to sell to Generation Y, try fun-o-mercials. Think teens starring in Internet TV shows seen and heard through windows the size of wallet photos. Picture baby-faced actors interrupting six-minute sitcoms to stare out from the computer screen and pitch products. Below each window, envision a second box where viewers can click through games or commentary related to the mini-show.

That's the idea behind Digital Entertainment Network (DEN), a California start-up that spent $20 million in the first half of 1999 on its risky bid to become the first Webcaster to connect with 14- to 24-year-olds. It is among a swarm of online entertainment ventures chasing the largest youth cohort since the baby boomers.

DEN may be the most star-studded of the group. Even before filing to sell stock to the public this month, DEN had become a magnet for Hollywood refugees hoping to create an MTV for the Net Generation. Led by David Neuman, former president of Walt Disney Network Television, its would-be moguls also include leaders from the music and cable industries.

While the company booked no revenues in the first half of this year, it is paying Hollywood-esque salaries. The stock filing said DEN President Neuman earns $1.5 million, and chief marketing officer Edward Winter earns $1 million. Two more execs earn $600,000, and five are in the $250,000-to-$400,000 range. That excludes bonuses ranging up to $1 million and stock options potentially worth much more.

Working from converted warehouses in Santa Monica's film district, DEN's 220 employees are busy embedding commerce into full-motion video using formats they hope will appeal to click-happy youngsters and nervous advertisers.

"There is a serious crisis on Madison Avenue in that Generation Y is leaving television," says Neuman. Yet online marketing remains a "wasteland," Neuman contends, because banner ads are too small to convey effective messages.

So with Ford, Pepsi and Microsoft set to pay a total of $7.5 million as charter sponsors, DEN hopes to fill the void with an open-arms approach--one that harks to the 1950s, when sponsors had direct roles in TV programming.

DEN's strategy is to woo youngsters with short, episodic programs aimed at special-interest and ethnic groups. There are "Webisodes" for extreme-sports fans ("Aggronation") and evangelical Christians ("Redemption High.") The lineup includes interview shows, documentaries and sci-fi fare laced with ironic humor.

Eventually all will carry background music from bands launched by DEN's own label. DEN plans to offer bands more generous revenue splits than the big record labels do, along with guaranteed play time and guest spots online--all part of the plan to re-create the Hollywood studios' star-making apparatus on the Internet.

The interactive features such as chats and puzzles in the second window are designed to hold the attention of a generation that cut its teeth on video games. Behind the scenes, DEN will collect a database of Gen Y clicking habits it intends to sell to advertisers.

At least a dozen competitors, including Pseudo, WireBreak and Atom Films, also are experimenting with the short format, but most seem less intent on embedding commerce into their shows.

DEN executives like to say they are bringing down the "fourth wall" that separates actors from audiences and advertisers--a breakdown that may become one of the more significant Internet entertainment trends. DEN actors occasionally stop mid-show and endorse a product. In one episode of the "Frat Ratz" sitcom, a fraternity member who is shaving stops, looks at viewers and praises his Schick blade.

DEN producers also are devising "hypermercial" formats that contain visual cues to signal when a product can be purchased. How else would viewers know that a hip-hop song can be rewound and ordered mid-tune, or that the star's mini-dress comes in eight colors? One early hypermercial displayed a tiny boombox that, when clicked, opened a window displaying the band's concert tickets and CDs for purchase.

"We can do so much more with product placement in this medium than you could in TV," says CEO Jim Ritts. "Are we going to see a whole lot of Ford automobiles running through a lot of programs? I think there is a pretty good chance you are going to see that. We're unabashed about it--and by the way, it's cool stuff that the audience wants."

DEN began Webcasting in May and plans a formal network launch in November. So far, DEN's Webisodes seem full of stereotyped characters and locker-room humor. But they have oddball characters who could catch on, such as the spike-haired limo driver in "Limozeno" who chauffeurs real-world teen stars on errands while quarreling with the DEN actor who interviews them.

The question raised by some industry watchers is whether enough people will wind up watching Internet TV to attract the necessary ad and commerce revenue. Nothing seems to irk Neuman more than this questioning of DEN's premise. It kills him to read network TV execs carrying on about how TV is a "lean-back," passive experience that might not fly online.

"You can argue about whether or not we are doing it well," he says. "You can argue about whether this venture will succeed or fail. But eventually and inevitably, this will be a huge category. I don't think there is any serious futurist who would argue with that."

Media watchers do tend to get hung up on whether people will watch Internet video while sitting at desks. They forget that the global network will soon be staring out at us from many different surfaces--walls, refrigerators and portable devices.

And while long-form narratives may continue to work best on TV sets, some kind of new, short and interactive formula is bound to click online, because like every generation before them, today's youths hunger for art forms that mirror their world.

There's a danger, though, as Webcasters cozy up to advertisers. Young people have a way of surprising their elders, and if the new medium can't find a way to preserve creative freedom and independence, its audience may just find itself another diversion.


Digital Entertainment Network is creating short Internet TV shows aimed at young users. "Limozeno" is one of more than a dozen of its pilot shows, all archived and viewable on demand.

CAPTION: Show title: "Limozeno" is a wacky interview show in which teen celebrities are interviewed in the back of a 1969 Lincoln by the hostess and her driver, who constantly fight.

CAPTION: Sponsor: Pepsi is paying $2.5 million over 12 months to be a charter sponsor.

CAPTION: The video: Viewers click on the episode title to the left ("interview with Jeff Russo") and the video appears inside the top window, with pause and play buttons beneath it. Episodes usually are accompanied by secondary videos, such as the impromptu parking-lot dance scene titled "The Diva, the Dingbat and the Dude."

CAPTION: Interactivity: The bottom window displays items related to the show, such as photo galleries, or the "hair tonic" game shown here, with cartoonish animations poking fun at Larry the limo driver's hair.