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June 22, 1999
Web posted at: 9:37 a.m. EDT (1337 GMT)

by Lessley Anderson

(IDG) -- Last year, Web marketers discovered the buying power of women online, and companies like iVillage (IVIL) and Women.com earned street cred by association.

This year's trendy market is teenagers. The numbers are staggering. The teen population has doubled since 1988, and teens spent $141 billion last year on things like clothing, accessories and entertainment. (Teenage girls saw Titanic an average of 2.5 times each, for example. Hollywood hasn't been the same since.)

Today's teens are growing up using the Internet as a vehicle for entertainment and communication.

What this behavior means for Net marketers is that there's finally a demographic that seems to go for the content-and-commerce model the Web can deliver. Kids want to interact, play and buy glitter lip gloss – all at the same time. Not surprisingly, some funky business models are emerging to meet their needs.

New York-based Alloy Online is a company that targets teens using a print catalog, which drives readers online to buy products. Alloy's Web site offers interactive content to keep teens stimulated, involved and in a shopping mood. Launched in August 1996, Alloy sends out 20 million copies of its catalog. Its URL is displayed prominently so kids will visit the site and then buy the T-shirts, makeup and other gear in the catalog. Once at the site, teens can read horoscopes, chat with each other and offer opinions on everything from pop culture to Alloy products. The company encourages customer feedback, which it sees as crucial to its survival.

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"The beauty of the teen market is they tell you what they want," says Matt Diamond, Alloy's CEO. "At first we had a what's hot and what's not column, and they reamed us for telling them what was hot. Now we let them tell us."

Gen Y's fickle buying habits are both an online retailer's dream and nightmare. Alloy, which raised $55.5 million in a modest public offering last month, even listed in its prospectus that failing to "keep current with Generation Y Fashion and Lifestyle Trends" was a potential "risk." Because teens have little loyalty to big brand names and instead gravitate toward niche labels, sites like Alloy can compete with traditional retailers like J. Crew or the Gap.

Teens can find surfer or raver-style product lines by obscure brands like Stationwagon and Free People on such sites as Alloy.com. But lack of loyalty is a double-edged sword, which is why Alloy listens to its customers and sends its buyers, several of whom are former Seventeen magazine editors, out to teen hangouts in NYC to keep tabs on what's in style.

"We had 'coolhunters' before that word was even invented," jokes Neil Vogel, Alloy's director of corporate development.

Manhattan Beach, Calif.-based MXG (formerly MoxieGirl) competes with Alloy Online and also uses the hybrid print-online model to sell to teens. MXG has taken the catalog idea further, however, by publishing what looks like a print magazine, complete with paparazzi photos of teen stars, interviews, recipes and the ever-present horoscope.

The only difference is that MXG tells you exactly where to go to buy the fashion items featured in its pages – MXG Online. Individual copies of the magazine sell for $2.95 on newsstands, but buying something online saves you the subscription fee. MXG's CEO, Hunter Heany, says there's no doubt content helps sell product, which is why MXG is putting out an entire magazine to support its main retail business.

For now, MXG has no competition from the magazines that inspired it; popular magazines, after all, have to worry about issues like editorial integrity. The American Society of Magazine Editors requires magazines to clearly delineate between editorial and content if they want to stay in its good graces or be considered for the prestigious National Magazine Awards.

Katherine Raymond, online editor of Seventeen magazine, says the company is exploring how to come up with an e-commerce solution that will work with ASME's guidelines.

"If we had a deal with a company that is selling the stuff we wrote about, we would have a stake in it," points out Raymond.

Heany says MXG is interested in working with ASME to establish a new set of guidelines for "commerce-enabled" publications like his. "The Internet is creating expectations for commerce, content and community functionality to be combined as opposed to having content exist in a vacuum," says Heany, noting that MXG doesn't let advertisers determine what to feature. "In the end, the viewers will know who's trying to push them into buying certain products."

MXG's new-world editorial stance doesn't seem to phase its customers. With a 500,000-circulation magazine, MXG has created a hip brand that readers seem to identify with; their feelings are reflected in the gushing, hand-decorated fan mail featured in the letters-to-the-editor section. Perhaps readers like the content because MXG employs about a dozen teenage girls, at $7 an hour, to test-market products and cool-check the editorial.

MXG has attracted the attention of Yahoo (YHOO), which will produce a series of summer-concert Webcasts for teens. MXG will sponsor the tour, which will feature acts like Gus Gus that are big with Gen Y.

Yahoo can't help but tune into the power of the teen market. Yahoo's teen-geared chats remain some of the most popular on the site. Teen wonder band Hanson has chatted five times since July 1998 and was the subject of Yahoo's first official club.

"It's unbelievable," says Lisa Mogul, senior producer of Yahoo Chat. "When we have a teen star on we say, 'OK, batten down the hatches.' Every one is more successful than the one that preceded [it]."

Columbia Tristar (TSAR) Interactive has had similar success with Dawson's Desktop – an original Net property created as a fan vehicle for Dawson's Creek, the studio's popular teen TV series. Fans can access a fictional representation of heartthrob Dawson Leary's computer desktop, complete with an e-mail inbox and online journal, authored by the show's writers.

CTI's director of marketing, Andrew Schneider, says his company has been blown away with the success of the project, which he reports pulls in 1.5 million visitors a week.

"Just recently we saw a couple fan sites dedicated just to the Desktop," says Schneider. "That's the ultimate tribute to what we're trying to do."

In a remarkable coup for CTI, the studio has given its online wing the go-ahead to push on with Dawson's Desktop during the summer, while the show is on hiatus. Venturing into uncharted waters, the Desktop product and a weekly e-mail written as if from Dawson himself will continue the plot of the show where the season finale left off: with Dawson interning at his mom's TV station in Philadelphia.

"We're hoping that some of the characters introduced in it, from CTI's perspective, will be introduced in the show," says Schneider.

CTI, MXG and Alloy have won the approval of teen audiences almost in secret, while all the grown-ups were marketing portals and e-commerce sites to each other.

However, entrepreneurs should proceed with caution. Just as the online medium presented a new crop of marketing problems, tackling Gen Y on the Net will prove tricky. No amount of marketing muscle can help you if you just aren't cool.