Tori Clifford doesn't remember how old she was when she first used a computer. It was "a long, long time ago," she says. "I just remember the keyboard, and I remember punching the buttons." Her mom thinks she was 2 or 3.
Tori's 12 now, and heavily wired. Last summer she got a new computer for her room, powered by a Pentium II Celeron 366, to replace her ancient CTX Easybook ("I saved too much stuff on it and now it's really slow"). She has a tiny HP Jornada that she can take to school, and she sometimes uses the family Toshiba, the one with her mom's favorite animal in the middle of the screen ("I found that cow off the Internet -- I just thought, `Let's put a cow on our background' "). All these machines -- like every other computer in the big brick house on the Montgomery County cul-de-sac where she lives with her parents and her 17-year-old sister -- are networked together and hooked up to a server in the basement that connects them to the Internet through a cable modem, the kind of "broadband" connection that makes them much faster than most home systems.
Offline, Tori plays lacrosse and soccer, writes poetry, reads voraciously (Piers Anthony is a favorite) and dreams of an acting career; in fifth grade she was Helena in "A Midsummer Night's Dream." Online, she talks to her friends on AOL, checks out the occasional Star Wars chat room, and cruises the Web. "I'll use a search engine," she says, "and type in, like, `soccer,' and find a million sites like `Jennifer's Super Soccer Site.' " She thinks it's fun to call up other people's home pages and see what kinds of stuff they like. And she's totally comfortable doing homework in cyberspace. Once she had a science project for which she had to observe the moon, "and there were some nights where I just forgot to or I wasn't feeling good and didn't want to go outside, because it was January." Not a problem. "I found this really cool site where it showed pictures of the moon from the previous night and the night before that."
Then, one day last spring, she crossed a different kind of Internet frontier.
She was looking through a magazine -- she thinks it might have been Seventeen -- and her eye was drawn to a blurb about a new Web site. It offered a way for kids like her, who are too young to have their own credit cards, to complete purchases online. "It was like, ` iCanBuy.com, your parents can give you an allowance and you can just go buy whatever you want.' And I said, `Ooh, that sounds cool!' "
She told her mother about it and they checked out the site together. Pretty soon she had an iCanBuy account with a $100 balance. Every time she signed on, she was greeted by a purple screen that proclaimed itself "Tori's Room" and reminded her how many days it was until her birthday. She began to compile an iCanBuy wish list, so people interested in buying gifts for her would know exactly what she wanted. On May 23, she made her first purchase: a purple-blue synthetic Vee Luv sweater from MXG with cranberry and gray stripes. It cost $32, plus $4.99 for shipping.
ICanBuy has e-mail too. So she sent one to her mom to say thanks.
`Shopping: The Kid Factor'
Tori may be exceptional, but she'll have plenty of company before long. She's in the vanguard of a generation that's growing up as intimately bonded to networked computers as its parents were to TVs and toaster ovens. Or even more so. "This is the first time in the history of the human race," as the president of Lego Systems put it recently, "that a generation of kids has overtaken their parents in the use of new technology."
It's a radical development, and many of its implications have been widely noted. On the plus side, there are the fantastically expanded access to information and the life-enhancing opportunities for communication and community that digital technology brings to both children and adults. On the minus side, there are serious concerns about online safety and "inappropriate" content (read: porn, hate and violence) -- concerns that have dominated the American conversation about young people and cyberspace to date.
Less widely noted, however, has been another implication: the tremendous potential of the new medium for advertising, marketing and selling directly to kids.
"Consider also what it means to us as marketers," continued the Lego president, Peter Eio. He was speaking in June before a hotel ballroom full of eager listeners at an annual industry conference called "Digital Kids." The conference, put together by the Internet research firm Jupiter Communications, drew some 600 attendees at about $1,500 per person to San Francisco's Argent Hotel. That was roughly twice as many as the previous year's Digital Kids and three times as many as the Digital Kids before that.
Among the formal sessions at the conference were panel discussions labeled "Marketing to the Postmodern Kid," "Shopping: The Kid Factor," "Brands for the Millennium" and -- as befits an industry in which most of the profits are projected, not yet real -- "Surviving the Drought: Revenue Strategies for the Near Term."
But this was a gathering of optimists, not pessimists, as could be seen from the headlines that flashed by on the big screen as a pair of analysts summarized a Jupiter-sponsored survey of American households:
"Online: A Marketer's Paradise" . . . "As Schools Get Wired" . . . "and Kids Spend More Time Online" . . . "Online Becomes Infectious" . . ."and with Increased Use, TV Takes It on the Chin" . . . "The Inhibitions to Buy are Less for Kids than Adults" . . .
There were numbers to go with the headlines, of course. More than half of American households now have computers, and more than a third are online; by 2003 the latter figure should be two-thirds. Fifty-six percent of all kids (defined as 12 and under) and 72 percent of all teens are projected to be online by then -- more than 40 million kids and teens in all. A final statistical projection, headlined "Online Shopping: A Ticket to Ride," predicted that kids and teens would be spending $1.3 billion online three years from now -- a number that was cited, mantra-like, throughout the two days of the conference.
Outside the Argent's Metropolitan Room, where the formal sessions were held, clusters of enthusiastic conferencegoers from Nickelodeon, Hasbro, Disney, the Learning Company and Discovery Communications mingled with equally jazzed cadres from small-but-ambitious outfits that are not yet household names: Zeeks.com, MaMaMedia, Headbone Interactive, Curiocity's FreeZone. Cell phones sprouted in the lobbies and on the stairwells after every session, and snatches of earnest networking ("That's why I'd like to get you into a meeting with this individual I'm talking about . . .") were everywhere to be overheard.
Enthusiasm pervaded the panels as well, with only the occasional dissonant note (the Internet had gotten some terrible press after the shootings at Columbine High School, which had occurred seven weeks earlier; meanwhile, privacy concerns had risen to the point where Congress and the Federal Trade Commission had gotten involved). One of the liveliest presentations was by Nancie Martin, the woman responsible for Mattel's hugely successful Barbie site.
"Pretend you were born after 1990," Martin urged her listeners. "You want toys and games that are meant for you, and not for who someone thinks you should be . . . You want to play your own way." What's more, as a '90s kid, you've grown up wielding a remote control and a mouse; you're accustomed to controlling what's on your screen. So how can a marketer build a site that's "sticky" enough to keep you from clicking right past it?
Martin's answer was "My Design," which lets kids create their very own FOB (Friend of Barbie) online. "You get to choose all kinds of stuff about her, you get to decide what her face or her skin color is, her eye color, her hairstyle, her hair color," she explained. "And you get to choose what she's wearing and her accessories -- because of course, without accessories we're nothing -- and you get to make up a story about her." When a customized doll is done, it can be ordered for $39.95 plus shipping and handling. "We are counting on a conversion experience of them playing with it and saying, `Mom, look what I made!' and eventually getting to the point where Mom says, `Well, I guess I'll buy it for you.' "
"My Design" has helped make Barbie.com the most popular site for girls 6 to 12, Martin said. Still, because those girls don't have credit cards, "purchase conversion can be a challenge."
A challenge, but also an opportunity.
For it is precisely this problem -- completing sales to underage consumers -- that companies like iCanBuy are being created to solve.
`It Was Obviously the Next Big Thing'
In the biography of iCanBuy cofounder and CEO Paul Herman that is posted on his company's Web site, mention is made of the fact that he first subscribed to Business Week when he was Tori Clifford's age. "I can't help it," he says, smiling, when asked about this. "You know, some kids are playing baseball, some kids are playing music . . ."
Herman is tall, lean and dark-haired, with the restless energy of a man used to sprinting through airports in a suit. He was born in 1968 and grew up on the North Side of Chicago, where he actually did play a lot of sports ("baseball, basketball, football and hockey -- and I played them all on concrete"). After graduating from the University of Pennsylvania's Wharton School of Business, he took a job in the Washington office of consulting giant McKinsey and Co. But he knew he wanted to start his own business, and he soon began looking for a consumer need to fill.
The Internet, meanwhile, had been evolving at warp speed from its original incarnation as a noncommercial communications device. "It was obviously the Next Big Thing," recalls Doug-las Rushkoff, who teaches a course in Virtual Culture at New York University and has been writing about the new medium for more than a decade. People were saying, " `How do we make money with the Internet? How do we make money with the Internet?' " But as recently as the mid-'90s, "the Shopping Gods could not inhabit it easily. It was not friendly to them."
Then two things happened to change that, Rushkoff says. The development of the World Wide Web, with its graphics capabilities, pushed the Internet away from its original, conversational mode and made it "a broadcasting interface." At the same time, marketers began to see that the Net itself -- sexy and revolutionary though it was -- was not the thing they should be trying to sell. It was just a tool for selling the same kinds of things they'd been selling before.
"E-commerce" -- a term few Americans had heard as recently as a year and a half ago -- had a breakthrough season last Christmas, with online holiday sales vastly exceeding expectations. "Every day there was a new story about someone's server being overwhelmed," recalls Steven Bryan, CEO of Zeeks.com, a lively online "community" site that offers a variety of activities for kids 6 to 13. "You know, Toys R Us and everybody from Victoria's Secret to Sharper Image -- everybody's stock was soaring just on the incredible increase in Christmas purchasing." Around the same time, Bryan remembers, he read a prediction -- made by a Jupiter competitor -- that parent-funded, online allowance schemes would be available soon. "I believe they said three to four years out," he says.
Less than two months later, he picked up a copy of Paul Herman's favorite childhood magazine and read a story headlined, "Shape Up, Kid, Or I'll Delete Your Allowance." It was about iCanBuy.
Herman had found his consumer need and started his company; it was based in San Francisco, and his partners were his wife, his brother and a former colleague. Their idea was simple enough: iCanBuy, as the Business Week story described it, "allows parents to use a credit card to set up an electronic debit account" -- in effect giving their children a digital allowance. Once registered and funded, the kids can shop by themselves at iCanBuy's online partners, merchants like eToys, Alloy Online and GotMerch.com, until their parent-authorized money runs out. ICanBuy takes a small cut from each transaction. Some users, like Tori Clifford, will make their way to the iCanBuy site directly; others may be "driven" there from community sites like Zeeks or Headbone, which -- by partnering with iCanBuy -- can offer online shopping to their youthful members (and collect a share of the profits) without having to develop the capability themselves.
"We can be the mall for the communities," Herman says. "We give them a way to make money on transactions." But there's more to it than that, as Steven Bryan explains. By "closing the loop" -- by proving that kids will actually buy stuff online -- the iCanBuy connection makes a site more attractive to advertisers as well.
Because its target demographic was children 10 to 16 (actual users have been as young as 5 and as old as 19), iCanBuy's founders anticipated parental concerns about Internet safety. So they developed technology that brings a modified version of a merchant's site within iCanBuy itself, rather than simply creating a link and sending kids out to browse on their own. Age-inappropriate merchandise is excluded from the iCanBuy version. Parents can monitor what their kids are buying and put specific shopping sites off limits if they choose.
Herman and his colleagues also anticipated parental resistance to a pure purchasing vehicle. So they created features that allow children to bank and donate to selected charities as well as shop. "Nothing like iCanBuy currently exists in the marketplace," the site boasts.
That was true when the service was launched in March.
It isn't anymore.
Two competing sites -- doughNET ("Get Smart About Your Money") and RocketCash ("Buy Cool Stuff Online") -- launched on June 1. There are significant differences among the three. Both doughNET and RocketCash, for example, are aimed mainly at the 13-and-over set, and thus don't feel the need to be quite as protective of their users. DoughNET recently launched a banking component that's integrated with its shopping function in a way that iCanBuy's is not (i.e., you can withdraw money and immediately spend it online). RocketCash thinks its users just want to get on with their shopping, so it doesn't bother with banking at all. But overall, Herman acknowledges, they're enough alike to make the competition among them intense.
And as summer turned to fall, he had his eye on at least four other players who were gearing up.
`There's a Way to Make Them Click'
Idit Harel doesn't care who wins the digital allowance race, as long as they hurry up. "We're so happy with all of them!" she exclaims. "We've been waiting for those companies to be born and to grow and to emerge and to launch for the past three years!"
Harel is the 41-year-old whirlwind behind one of the most ambitious start-ups in "the kidspace," as the portion of the commercialized Internet aimed at children is universally known. MaMaMedia, which is aimed at kids 5 to 12, is a community site that seeks to "marry the power of the computer with the potential of the child" through a varied menu of "playful learning" activities. Unique in many ways, it is also a kind of kidspace paradigm: an education/entertainment site that's out to establish itself as a profitable brand.
At the MaMaMedia offices, on the third floor of the SoHo Building in lower Manhattan, exposed cooling-system ducts hark back to the days when there was no air conditioning; cute stories created online by MaMaMedia kids are tacked to doors; and small groups of mostly young, mostly cheerful-looking employees sometimes cluster near a framed photo of top Silicon Alley entrepreneurs to say things like, "I'm asking you to behave like a member of a media company" or, "I want to find a way to do the deal." Perched at an oversize desk in her glassed-in space nearby, Harel -- a rapid and indefatigable talker with a slight build, a pixie haircut and a stubborn Israeli accent -- explains how this odd mix of commerce and epistemology came to be.
Unlike most other community sites for kids, such as Zeeks and Headbone, MaMaMedia is based on a formal theory of how children learn. It's called "constructionism," and its godfather is Seymour Papert of MIT's famed Media Lab, where Harel spent a decade or so before striking out on her own. The theory's central premise, as an article posted on the MaMaMedia site puts it, is that "children learn best when they are in the active role of the designer and constructor."
Long before the World Wide Web was even dreamed of, Papert and his colleagues had come to view computers as the ultimate constructionist tools. Horrified by educators' tendency to use the new technology for rote drills, Papert invented Logo, a programming language designed especially for children. Harel observed elementary school students as they used it to create their own instructional programs, then wrote a book, Children Designers, that reported the encouraging results.
"This is an example of a very basic constructionist activity," she says now, gesturing at an eye-popping grid composed of animated body parts that she's called up on the big monitor on her desk. "You come into the DigSig Zapper and you're being introduced to heads, bodies and legs of different shapes and kinds . . . and the kids just like to pick and choose."
The last time she created her own MaMaMedia DigSig, or digital signature, she couldn't have been in too good a mood; her online icon came out as a vicious-looking bat-winged alien. "But I can maybe be more of a ballerina today," she says, and -- click! click! click! -- she replaces the alien with a smiling figure in a tutu. It feels a little like Mattel's "My Design," though the DigSig constructions don't come with accessories yet.
As she moves around the orange Zap Area, the blue Romp Area, the red Surprise Area and the green Buzz Area, Harel shows how kids can make and send digital postcards, post their artwork in the MaMaMedia gallery for others to see, cruise some carefully selected Web sites and use story-weaving tools to create cartoon narratives -- all while utilizing "the three X's," the survival skills she believes they will need in the 21st century. There's exploring, or learning how to discover things on your own; expressing, or figuring out how to build things on your own; and exchanging -- Harel and her fellow constructionists take the idea of community very seriously, because they think children learn best when they can share ideas and work with others.
Tour complete, she starts to talk business. The animation of her delivery doesn't diminish a bit.
She had the idea for MaMaMedia four years ago. "Spring, summer '95, I realized that there are enough people using the Internet, and browsers are out there, and Netscape is out there, and Yahoo is out there, and AOL was then little and struggling . . . but it was enough of a beginning to say, `Oh, that's it! Now we can take everything we did and package it and create an Internet place for kids!' "
She got some people together, did some prototypes and took them to investors and Wall Street types. The Shopping Gods didn't get it at first.
"They said, `Kids? Internet? Nah. Advertising on the Internet for kids? Nah. Kids will not have credit cards! How can you even build a profitable business?' And I said, `Well, we'll have something better than credit cards: All the advertisers will want to talk to kids because they will do shopping, and kids will actually share a lot of shopping time with the parents online. And there will be a lot of interactivity that will be just completely empowering the whole household with this kid!'"
She laughs. "This is it! That's the Clickerati Generation! That's what it's all about!"
"Clickerati" is MaMaMedia's pet term for children born after 1990, who've never known a world without computers. The Internet would become so central to these kids' lives, Harel believed, that advertisers who wanted to reach them would soon see the value of her company's expertise.
E-commerce was part of her plan from the beginning. By 2003, Harel expects half of MaMaMedia's income to come from selling digital products as well as "hard" goods like music, magazines, stickers, key chains, blocks and Legos. Many of the products sold on the site will carry the MaMaMedia brand; others will be selected from kid-friendly e-commerce companies. Harel also plans to sell "experiences that are about the new technology" -- digital tour guides through which kids can learn to build Web sites, program in Java, create their own animated cartoons and so on. But the technology and the deals that will make all this happen aren't done yet, and visitors to the site are still greeted with a flashing message that promises "store -- coming soon."
In the meantime, MaMaMedia has been leveraging its understanding of the clickerati in other ways. Harel and her staff can help advertisers design better banner ads, she says, "because kids love to click, and there's a way to make them click . . . There is a way to engineer it so that it will actually be exciting for kids." They can suggest a range of sponsorship opportunities, creating contests with prizes or perhaps planting an advertiser's logo on one of the most engaging parts of the site.
Harel takes particular pride in a "multi-tiered promotional alliance" with General Mills that -- among other things -- puts MaMaMedia ads on boxes of Betty Crocker Fruit Snacks ("Check out DigSigs -- wacky creatures YOU design on the Internet!"). When kids type in the URL on the side of their Fruit Roll-Ups or Fruit Gushers box, it takes them straight to the DigSig Zapper "and for 15 minutes -- we have a lot of data about this -- they actually are exposed to the brand icon."
"For advertisers and agencies -- there is a lot to learn," she says. "And if they are not going to learn now, when companies like us are willing to learn with them . . . they're going to miss the boat."
`A Much More Influential Kid'
Once upon a time, most American marketers and advertisers didn't think they needed to advertise to children. This was as recently as 15 years ago, Paul Kurnit says.
Kurnit is the president of Griffin Bacal, a New York agency with a Madison Avenue address and a specialty in advertising to kids and families. Tall, trim and vigorous-looking at 51, despite an age-appropriate shortage of hair, he dismisses much of the current Internet frenzy as hype. "Don't get digitally drunk," he warned the true believers at the Digital Kids conference. "Banner ads versus TV? TV wins every time." But it's also true, he said, that the hottest topic in the ad business right now is: Who's going to invent the online version of the 30-second spot?
An adman since 1974, Kurnit has lived through the whole modern history of advertising to kids. His perspective makes it easier to understand what's happening today.
"Fifteen years ago, it was a two-horse town," he says. "Breakfast cereals and toys." Kids were advertised to directly on the Saturday-morning cartoon shows, which had been invented for that purpose, but that was about it. Then, "coming off a relatively sluggish economy into the go-go '80s," some crucial demo-graphic changes began to manifest themselves. More single-parent households, more dual-income households, smaller families and a baby-boomer generation with new ideas about parental authority produced "a much more self-sufficient kid, a much more influential kid."
These changes, plus an extended economic boom, increased kids' purchasing power exponentially. In the United States alone, Kurnit says, citing the work of Texas A&M marketing professor James McNeal, kids under 12 spent $24 billion of their own money in 1997, directly influenced the spending of $188 billion more, and exerted an indirect influence over an additional $300 billion or so.
It's been "a bit of a chicken-and-egg thing," he acknowledges, with marketers observing and reinforcing the kid-power trend. But "the point is, it's big dollars. And the point is also that where once upon a time it was a breakfast cereal/toy world, today -- in terms of the indirect influence -- it goes right up through high-ticket items like cars, vacations, computers, stuff like that. So there's some real radical change."
Fifteen years ago, Kurnit recalls, there simply weren't any industry conferences about advertising to kids. "Now you go to these conferences and the car guys are there . . . They all realize that if they don't update the imagery of vans, the van in America is going to die, because kids don't think they're cool."
Today's children are "getting older younger," he says. Toymakers used to be able to target kids "all the way up to 12, 13, 14 years old. They were buying Barbies and G.I. Joes. Today, there's no self-respecting 12-13-14-year-old buying traditional toy product." On the other end of the age spectrum, Griffin Bacal recently surveyed the mothers of preschoolers to find out how old their children were when they first demanded brands by name. The answer: 2 or earlier. "As soon as kids are able to speak, they're speaking brands."
The chicken-and-egg thing applies here too. Kurnit and his agency have contributed to the trend.
About 12 years ago, he says, he and his colleagues "had an idea for a couple of different businesses in which we thought we could address 3-year-olds. Nobody had done that before." One was a sneaker brand for Stride Rite, and they decided to go after the preschool crowd because Nike and Reebok had the older kids sewed up ("the kind of peer pressure that sets in once you get to school becomes pretty sophisticated"). The other was a scooter for Playskool, which they'd normally have marketed to parents as My First Scooter, but "we had the sense that it might have more heat if it got kid demand." So they called it Scoots and targeted the children directly.
Kurnit came back from the Digital Kids conference convinced that the emergence of companies like iCanBuy, doughNET and RocketCash -- he calls it "the e-allowance thing" -- was big, big news. "It's very interesting," he says, because even the most obviously kid-oriented e-commerce sites have so far claimed to be addressing parents only. On a panel packed with top e-commerce CEOs, Kurnit points out, "not one of them stood up and said, `Yeah, we market to kids.' Not one of them said, `Yeah, we're going to be marketing to kids.' "
So will they?
"There's no question in my mind," he says.
One of Griffin Bacal's main competitors is a division of Saatchi & Saatchi called Kid Connection. Its founder, Anne Adriance, an executive vice president at Saatchi, sounds a lot like Kurnit when she talks about the forces that have shaped what she calls Generation Y -- kids born between 1977 and today. She, too, says that children today are more independent, that they're "growing older younger."
Then she adds a twist to the argument.
Part of what makes Gen Y kids different, she says, is the fact that "they're one of the first generations to have been embraced at this young age as a marketing target." This "validates" them, she explains. "These kids are growing up feeling like, you know, `I can make choices!' They're marketed to, they're being given reasons to think they're important, they get a say in decisions in the home."
Throw in their experience with computer technology, "technology which allows them to pretty much do anything they can think of," and you get a generation "with a sense of power and optimism and capability that's quite magnificent." Which makes its members "a different kind of consumer than we've seen before."
Not long ago, looking to find out how these confident young consumers were bonding with the digital media and what the implications for marketers might be, Saatchi & Saatchi employed a couple of its proprietary research techniques: the Psychological Probe and the Anthropological Search. "We used child psychologists to interview kids around the country," Adriance says, with the idea of getting at "the psychological underpinnings of kids' relationship with digital technology, not just what they'll tell you on the surface." That done, "we then worked with cultural anthropologists and did a little over 500 hours of observational research in homes."
The resulting study was called "The Connexity Generation: America's New Digital Prosumers," and its key findings are suggested by the newly minted jargon in that title. "Connexity," Adriance explains, means "the importance of being connected in order to grow"; the study found that the increase in digital connection appears to have increased the value kids place on connection in general. "Connexity Kids require connexity brands which take the brand-consumer relation beyond product function," the study's executive summary exhorts. Brands can do this "by facilitating connections, providing memorable experiences and acting as community builders."
As for "prosumers": Today's kids "are accustomed to creating what they want," Adriance says. "Not being given, `Here are your choices, do you want A, B or C?' but saying, `You know, I would really like D, G and F somehow combined, and here's what it would look like.' So that's what prosumer really means -- it's producer and consumer. The idea that they act as a consumer but in a way that they produce something wholly new that they want."
If Adriance is starting to sound a bit like Idit Harel, with her talk of constructionism and the clickerati, it's not a coincidence. The two women are old friends. Harel recruited Adriance to be on MaMaMedia's advisory board. Adriance, in turn, hooked MaMaMedia up with Betty Crocker Fruit Snacks. "She inspired us on how to introduce ourselves to advertisers," Harel says, "and she got inspired in the way that we think about today's kids."
You can see the results in the constructionist language of the Connexity Kids report. "Don't build a brand for them," it suggests, "build a brand with them."
`I Hope It Does Become the Headline'
Back at the Digital Kids conference, an ominous headline appears on the screen. "Parental Concerns About Marketing and Advertising Have Risen Dramatically," it says.
Citing research done last year and this, Jupiter analyst Anya Sacharow notes a sharp rise (55 percent to 68 percent) in parents saying they were concerned about direct marketing and privacy issues, and an even more dramatic increase -- from 18 percent to 45 percent -- in those expressing concern about advertising aimed at kids online. Sacharow suggests a couple of reasons for the trend. In the first place, parents simply know more about the Internet now, in part because it has been getting so much press. "But I think it's also due to this advertising-marketing-commerce relationship, where parents are starting to understand what advertising and marketing online means for their kids, and understand that their kids are going to be involved in a direct relationship to purchasing."
A panelist from Disney is asked about this. "You keep throwing me all the hardballs," he jokes. "I'm not seeing a big pushback on us to pull advertising off the site."
A man from Nickelodeon stands up. "I have a little bit of concern with your research on advertising," he says. "Before that headline goes out there that parents fight advertising online . . ."
"I hope it does become the headline," Alan Rothenberg says.
It's a couple of hours later when he says this, and Rothenberg is skipping the Disney-sponsored free lunch in the Garden Room to talk up his latest venture, JuniorNet, a Boston-based start-up that turns the standard kidspace business plan on its head. "What we are is a virtual private network designed specifically for kids," he says, with "no advertising, no soliciting of the child." JuniorNet makes its money selling subscriptions to its service.
Rothenberg, who's 36, is a serial entrepreneur who's been launching successful companies since his high school days in the Bronx (his parents wouldn't buy him a car, so he started a car pool service). Three years ago, when he had the idea for this one, everybody told him he needed to do focus groups. "I've never believed in any of that stuff," he says, but he did them anyway, and they confirmed what his gut feelings as a father of young children had already told him: Parents want safe environments for their kids. And they don't like advertising.
What kind of kids' ads bother him personally? "To be specific, Disney," he says. "Buying a Disney video and having to sit through half an hour of advertisements and promotions when I've just spent 19 bucks on the video is really frustrating."
He tells a story about when his younger daughter was 3. Every day, as soon as the sun came up, "she would come into our bedroom -- 5:30 summers, 6:30 winters -- and she'd actually peel my eyelids back and say, you know, `Time to play!' And one morning she didn't come in and I was in a panic, I wake up at 7:30, and I'm going, `Oh my God, what's happened?' and I go downstairs and she's actually hit the power button on the television and there's cartoons on TV. And a couple of weeks later she started coming back in after half an hour of cartoons saying, `I've gotta have the such-and-such Barbie.' This is a kid that just started speaking, and I would say, `You don't even know what you're asking for!' "
For $9.95 a month, a JuniorNet subscriber gets digital adaptations of a number of well-known children's publications, among them Highlights for Children, Ranger Rick, Weekly Reader, Sports Illustrated for Kids (without the ads) and Zillions, a kids' version of Consumer Reports. As for safety:
JuniorNet looks and feels like the Internet -- though it's a lot faster -- but in fact it's a combination of a CD-ROM and a limited online connection designed to communicate only within JuniorNet's own network. Which means that children using it don't have access to the Internet at large.
In April, JuniorNet announced that it had secured $70 million in new financing. That's an extremely large number for a kid-oriented start-up, and people were still buzzing about it at Digital Kids, when they weren't too busy criticizing Rothenberg's creation as an elitist "gated community" or expressing doubts that its subscription model could possibly succeed.
But $70 million is chump change to the biggest players in the kidspace, the Disneys and the Cartoon Networks and the Nickelodeons, with their deep pockets and their well-established brands. Nickelodeon in particular has had its smaller competitors looking nervously over their shoulders. Everyone at the conference had heard that Nick's parent company, MTV Networks -- itself a subsidiary of the ever-expanding media conglomerate Viacom -- was planning to launch a mega-site for kids sometime soon.
Which it would spend more than $100 million just to promote.
`What's Nickelodeon Up To?'
The man in charge of the new site is 48-year-old Fred Seibert, president of MTV Networks' online division. Seibert didn't make it to Digital Kids, but he heard the buzz. "From what I understand," he says, "one of the headlines was, `What's Nickelodeon up to?' "
It's a question the television industry has been asking since 1984.
When you're trying to make sense of the often bewildering evolution of the Internet, it can be helpful to recall the early days of another new medium: cable television. Seibert is a veteran of the cable wars. In 1981, he helped invent MTV; a few years later, as an outside consultant, he played a key role in the relaunch of Nickelodeon after it decided to start accepting ads.
That's right: One of the most powerful kids' marketing vehicles in the known universe started out with what you might call a JuniorNet strategy. Over the first five years of its existence, Nick carried no advertising; cable operators bought its largely educational programming to use as a selling point in their pursuit of lucrative local franchises. This phase of its past goes almost unmentioned today: In an eight-page "History of Nickelodeon" handed out last spring on the occasion of Nick's 20th anniversary, the 1984 decision to go commercial didn't make a list of 39 key events said to have shaped the company ("Nickelodeon Studios Opens in Orlando, Florida" . . . " `Rugrats' Begin Weeknight Airings"). But it was crucial all the same.
"We couldn't afford to lose the money," Seibert recalls. "It was close or do that." But Nick was the lowest-rated basic cable network at the time -- not the best story to tell potential advertisers -- so "once we had made the decision for advertising, we had to have performance." Which they got, Seibert explains, by changing the way they related to their audience. They decided to be "for kids, not adults," and they never looked back.
The new, commercial, kid-focused Nickelodeon moved into the wide-open territory between the Saturday-morning cartoons and "Sesame Street." It dropped its eat-your-vegetables approach in favor of lively entertainment programming that -- while designed to make parents feel comfortable -- was based on a religiously maintained feedback loop between Nick and its young viewers, who were constantly asked what they liked and why. Before long, it had gone from last to first among its cable competitors and was raking in the advertising dollars.
Nickelodeon's success had a ripple effect on Madison Avenue. In "a very sort of emotional sense," says Anne Adriance, it "gave validation to the child consumer, the child target, the child as independent valued person." The message was: "Hold your horses -- this is a big, powerful and important group that deserves to be respected and given what they want." And who could argue? Nick's kid-centric vision had turned it into one of the strongest entertainment brands in the world.
Four years ago, Nick started to think about how to transfer that brand to the Net.
"We put our foot in the water," says Nickelodeon president Herb Scannell. "We wanted to be in it, but we didn't know what it was and where it was going to go." The first independent site it launched was Nick.com, which basically plays off Nickelodeon's TV programming. A number of related sites followed, including Nickjr.com (for preschoolers) and Nickgas.com (about games and sports). But the giant new one -- known so far as Project Nozzle -- is still in development.
Nobody's talking details yet. Scannell says the idea is to "create a destination for kids where kids could go and they could find all things kids." Nozzle will offer both home-grown content and content developed by others, he says, and might well do deals with smaller companies like Headbone or MaMaMedia.
"There's a hole in the Web -- a hole that Nickelodeon was meant to fill," Seibert says. The new site will feature "everything from chat to games to cartoons, humor, you name it, whatever you think a kid would be interested in," and will use interactive tools, streaming media, live content and multiplayer activities as it works to "enable communication of kids among themselves."
Nozzle's launch will take place in stages, with the first applications scheduled for rollout later this year. The new business will be advertising-based, at least for now, though Nick already owns an online toy company ("Powered by Nickelodeon, Red Rocket is your one-stop shop for the best stuff for kids"), and Seibert can envision Nozzle generating "very valuable information" -- through product-oriented chat, perhaps, or online surveys -- about what kind of stuff Nozzle users really want.
As for the digital allowance companies: "Everyone's called," he says. "They are knocking on our door every day." But he won't sell directly to children until "kids and their parents" tell him it's okay.
`That's What It's All About'
And will parents do this? Say it's okay, that is?
Will they give their active or passive blessing as their children are marketed to -- with ever-increasing intensity, at younger and younger ages -- through what Paul Kurnit calls "the most powerful medium ever"? Will they agree that kids should be "empowered" as online shoppers as soon as they're old enough to click a mouse and read an advertising blurb for themselves?
It's an open question. But the people doing business in the kidspace seem to have few doubts.
Paul Herman has gotten used to parrying complaints from iCanBuy skeptics. "The worst is, `You're turning my kids into little consumers!' " he says. "The answer is: Kids are consumers today anyway." It's the parents' job to teach fiscal responsibility, "and we give you the tools."
"We live in America. We live in a consumer culture," Anne Adriance says. "And I believe the way to handle it is to be responsible in our communication with our children and to make sure that what we say to them and how we say it is respectful, is responsible, is considerate, brings them pleasure and enjoyment. And that's what it's about, you know, learning to be an American consumer."
"We all go to Disney with joy, right?" says Idit Harel. "And it's all about targeting and branding as well as learning and a family vacation, having fun!" When the necessary technology becomes available, Harel hopes to develop a subscription option for people who don't like MaMaMedia's ads. But for now, "we are in the business of building a profitable business here."
"We're not going to become communists," Douglas Rushkoff agrees. "We live in a capitalist society! That's okay!"
But the Virtual Culture professor sees trouble in paradise just the same.
Rushkoff started exploring the Internet in the early '80s, because the emerging online culture puzzled him: "I wanted to know why Deadheads found computers interesting." His first book got delayed when his publisher decided that the Net was a fad, "like CB radio." But when Cyberia finally came out, in 1994, its bemused author found himself in demand as a consultant. Over the next few years, as he earned sizable fees demystifying the online universe for corporations, he published more books and articles "celebrating our liberation through the tools of new media."
Then he found, to his chagrin, that his optimistic vision had been overtaken by events.
A couple of months ago, Rushkoff published a book called Coercion, a comprehensive tour of the techniques of commercial persuasion, in which he confesses his naivete. "I really believed the Internet could put an end to coercion," he writes, since "people would finally have a medium for communicating freely with one another, instead of merely absorbing the messages of the advertisers." But the Net has turned into "a direct feeding tube for advertisements and a self-contained environment for automated commerce."
Children are a prime target. "Marketers need to create a new consumption class out of kids, and the way they're getting to them is through technology." The interactivity of the Internet makes it an incredibly powerful sales tool, because a marketer can instantly adjust his message to incorporate feedback from the targeted individual. The positive spin on this, Rushkoff says, is: "Great! They're going to give us what we want!" But not really. "It is not a system that's truly open to reflecting the child's desires. It's open to reflecting a child's desires in a particular context." And it rewards the child for desiring what a marketer can provide.
"I mean, if all these sites are going to do is help people be who they are, then why do they have to be `sticky'?" he asks rhetorically. "It's like saying, `Oh, the bait that we're using on this flypaper is exactly what flies love.' "
Since Rushkoff's book came out, the Net has continued its irresistible surge into the American mainstream. "E-Life: How the
Internet Is Changing America," shouted the cover of the September 20 Newsweek. "GetRich.com," blared the cover of the following week's Time. Nickelodeon's ultimate parent, Viacom, announced plans to buy CBS; if and when the deal goes through, Fred Seibert says, "the opportunities seem fantastic." MaMaMedia raised an additional $50 million in equity funding, forged a strategic alliance with AOL and expanded its marketing agreement with General Mills. Paul Herman signed up teen icon Britney Spears to do a "celebrity wish list" on iCanBuy. When he talks about his competition now, he still mentions doughNET and RocketCash, but the names of big banks and credit card companies come up as potential players too.
Tori Clifford's mother thinks that iCanBuy is teaching her daughter -- who is growing up so fast, who might as well be a teenager already -- to make smart shopping choices. Kids are "barraged by marketing, in every possible way," she says, so the important thing is for them to learn how to deal with it.
As for Tori herself, she's back in school and "having a really awesome year." She likes all her teachers, has made some new friends and got a part in the school play. Since that sweater she bought last spring, she's ordered a Red Hot Chili Peppers CD and a pair of black sailor pants online. She didn't get anything from her wish list for her birthday, she says.
But she hasn't given up.
ICanBuy has a contest, she explains, in which you can win thousands of dollars' worth of items from your wish list "if your name gets drawn out of a virtual hat." So she's been adding more CDs and "lots of skirts from Alloy; I'm kind of short of them now" -- just in case.
Bob Thompson is a staff writer for the Magazine. He'll be fielding questions and comments about this article Monday at 1 p.m. at www.washingtonpost.com/liveonline.
Surfing the Kidspace
Here are the Internet addresses for some of the kid-oriented Web sites mentioned in this story:
www.barbie.com: Where you can
design your own Friend of Barbie.
www.doughnet.com: One of the
new digital allowance sites.
www.headbone.com: A popular
community site for kids 8 to 14.
www.icanbuy.com: Paul Herman's
www.juniornet.com: A sampling
of the commercial-free content
a JuniorNet subscriber gets.
www.mamamedia.com: Idit Harel's
www.nick.com: Nickelodeon's main
site, at least until its new mega-
site is launched. Other Nick sites include www.nickjr.com, for
preschoolers; www.gas.nick.com, about games and sports; and
www.noggin.com, an ad-free educational site produced in
partnership with the Children's Television Workshop.
www.rocketcash.com: Another place to get and spend a digital
www.zeeks.com: Another community site, for kids 6 to 13.
Children and Privacy:`A Key Battleground'
The year was 1995 or 1996, Kathryn Montgomery recalls, and she was just beginning to educate herself about the new commercial culture of the Internet. So she decided to attend an industry conference. "I went to Digital Kids," she says, "and they started talking about how they were going to create a personal relationship between product spokescharacters and the children, and they talked about how when a kid goes online it creates a `flow state' that's a perfect environment for advertising . . . and I was sitting there thinking, `Am I the only person who feels like screaming here?' "
Montgomery is the president of the Center for Media Education, a Washington-based nonprofit that describes itself as "dedicated to improving the quality of electronic media, especially on the behalf of children and families." Since she and her husband, executive director Jeffrey Chester, launched it on a $5,000 shoestring in 1991, CME has been active on a number of fronts, including the push for better children's television programming. But for the past few years, it has paid particular attention to what a 1996 CME report called two "disturbing" online threats: the "invasion of children's privacy through solicitation of personal information and tracking of online computer use" and the "exploitation of vulnerable, young computer users through new unfair and deceptive forms of advertising."
The Internet is a direct marketer's dream -- the most powerful tool ever invented for assembling data on the tastes and preferences of potential buyers, then massaging that data into personalized advertising pitches. "Technology is being put into place," Chester says, that can "instantaneously collect, observe and analyze" your online behavior "with the goal of delivering to you the kind of irresistible digital content that [marketers] know you will be interested in."
This kind of supercharged salesmanship isn't necessarily bad for adults, says Jason Catlett, who runs a Web site called Junkbusters that helps consumers get the pitches they want while avoiding the ones they don't. But it's highly problematic when it's directed at children, who have no understanding of online privacy and don't know that "Mickey Mouse is not Mickey Mouse, but a corporation wearing a mask that's trying to sell them something."
Catlett and other privacy advocates credit CME's report with sending a wake-up call to the Federal Trade Commission, which subsequently conducted its own study of online privacy and found that while 89 percent of the 212 sites it surveyed collected personal information from kids, only 1 percent got permission from parents first. The FTC reported its findings to Congress, and the result was the Children's Online Privacy Protection Act of 1998, passed with bipartisan support, which requires Web sites to make a "reasonable effort" to get "verifiable parental consent" before collecting personal information from children under 13.
But what, precisely, do those words "reasonable" and "verifiable" mean?
This question was addressed at great length in July at an FTC workshop that was part of the COPPA rule-making process. Representatives from iCanBuy, MaMaMedia and Nickelodeon, along with many other kidspace players, gathered to debate the definitions at the FTC's Pennsylvania Avenue headquarters. For the most part, the arguments were predictable: Lobbyists from organizations like the Direct Marketing Association tended to favor the simplest and least expensive methods of obtaining a parent's permission -- the simplest being an e-mail sent to the parent's address, as provided by the child. Their counterparts from groups like CME and the Consumer Federation of America maintained that a system relying exclusively on e-mail (as opposed to snail mail, fax or 800 numbers) does not truly verify that it's the parent who's providing the consent.
The details of the debate may be less important than the fact that the children's sites are extremely nervous about the privacy issue. They're not so foolish as to think it will go away, Catlett believes, but they don't want any more legislative attention paid. At the workshop, Kathryn Montgomery talked about a recent, random CME survey of kids' Web sites -- conducted well after COPPA was passed, but before its rules went into effect -- showing that "95 percent are collecting personally identifiable information from children" while "less than 6 percent make any attempt to notify or get permission from the parents." John Kamp of the American Association of Advertising Agencies promptly questioned the study's validity. "These numbers don't look right," he said.
"It's a key battleground," Jeffrey Chester maintains. "They want to set up a seamless link to the child."
CME has focused on data collection and privacy "for strategic reasons," Chester says, because most people understand the issue instinctively and link it to concerns about Internet safety. But he wants to raise broad questions about marketing to kids as well.
He talks about a market research study called the Nag Factor -- "an advertising agency study, a big study, and they basically said, `Here's several ways you can get a kid to more effectively nag,' and they have it all figured out . . . how to design the ad to reach the kid so the kid will come back and nag in the most effective way."
He talks about the "illusion of community" being peddled on kids' Web sites. "They're going around and saying, `We are really about community, and children talking to each other' . . . but in fact it's really about commercial communities, about engaging children and encouraging children to begin having relationships with brands."
"There need to be rules," Montgomery says, or "the boundaries between education and entertainment and commerce will be completely obliterated." -- B.T.