While AOL’s announced acquisition of Time Warner tended to eclipse all other deals as the ultimate corporate merger, the close of the century saw studios announcing on-line news almost daily. A lot of the activity centered on on-line streaming animation. As the millennium came to a close, it seemed like nobody wanted to be left out of the Internet animation game.

One glitzy new animation offering was the launch of Time Warner’s Entertaindom, arguably the most comprehensive entertainment site on the Web thus far, with reams of vault Looney Toons episodes, as well as completely new stuff.

But how will the market sustain burgeoning new toon sites and alliances? Recent entries include the likes of Film Roman’s Level13.net, Wild Brain’s launch of a toon site on Yahoo, and POP.com from the combined efforts of DreamWorks and Imagine Entertainment.

Studies by Internet research companies like Jupiter Communications estimate that by 2004, Internet TV will help to generate US$10 billion in revenue. According to the IAB (Internet Advertising Bureau) Ad Revenue Report from 1998, on-line advertising has definitely increased from about US$266.9 million in 1996 to US$1.9 billion in 1998.

Basically, there are several models for turning these sites into money-makers, including click-through banner ads, programming advertising, content sponsorship, direct e-mail campaigns or membership/subscription fees.

But according to ad agencies, the response to the splashy on-line toon deals has been underwhelming thus far. It seems ironic that although the Web is becoming more and more like TV (with mergers making sites into ‘supersites’), kid companies are still cagey about the amount of resources they’re putting into on-line advertising, using unfavorable comparisons to TV as a major sticking point. However, that may change in the next few months.

Dana Kovacic, director of new media development for Pearl River, New York-based Active Media Services, says part of the problem is the animation sites in particular are still very new and adds, so far, none of her clients have asked about advertising on the animation-based Web sites. Kid clients want to align themselves with the likes of well-known, well-developed kid sites like Nickelodeon, Cartoon Network or even parenting Web sites, where they are more comfortable.

‘It’s still kind of iffy to the general population,’ she says. And although more and more of her clients are choosing to advertise on-line, Kovacic says that on the whole, it’s still either a nonexistent or very small portion of the marketing budget.

However, she says kidcos are recognizing the value of using on-line ad presence-to help build a brand. Or, for aligning with networks both on- and off-line, like Nickelodeon, Cartoon Network or MTV. Debbie Solomon, group research director for J. Walter Thompson, feels this model will become especially important when television and the Internet finally converge. ‘Most [methods] are supplemental. They’re not the primary [advertising] thing they do.’

To Matt Maginley, VP media director for Towne Silverstein & Rotter, branding on the Web isn’t as important as e-commerce. He says the key for companies deciding to advertise on-line is the return on investment model.

Lisa Donohue, senior VP media director for Starcom, a division of Chicago’s Leo Burnett, adds that advertisers are also looking to see how much time individual users are spending at the site and if users are ‘clicking through’-that is, going to a site, seeing an ad, and then visiting the advertiser’s site. Agencies can maximize the success of ads by making agreements with sites to track how the ads are doing and move them around accordingly so that if an ad isn’t generating a lot of interest on one area of a site, it can be moved to another section. ‘It’s very much a real-time media buying and planning issue,’ says Donohue.

Most agency gurus say all of their clients are advertising on-line to varying degrees, but that it still doesn’t come close to TV in terms of budget or effort.

‘I don’t think people are going to dramatically cut television budgets to go on the Internet,’ says Solomon. ‘TV is the most important medium for reaching kids right now. I don’t see that changing.’

Garry Carr, senior VP and group director of New York agency Western Initiative, agrees. He sees the future advertising success on toon sites lies in ad agencies developing separate sales forces that concentrate only on lassoing on-line-specific advertising.

But the entertainment giants themselves think they’ve got something special and advertisers will be attracted, especially to the unique features of their sites.

Richard Sutton, VP of sales and client marketing for Warner Bros. and Entertaindom.com, says one of the things advertisers will find fascinating is Entertaindom’s cache of new, exclusive-to-the-Web episodes. He says this gives Entertaindom an advertising edge because it focuses on a wider niche than other sites. While in his opinion, there is room for both independent toon sites and larger studio sites to co-exist, he adds that the indies will now have more trouble getting noticed if they don’t have the cross-promotional power to advertise on TV or Web portals, leading to their being swallowed up by the big guys. Now, it seems, even the big guys are getting swallowed up.

Increasingly, Internet animation will become less about the mouse lying idle on the mouse pad and more about using it to interact with advertising. Sutton suggests two different interactive advertising models that will allow consumers to feel they’re more in control of what they’re viewing. One is the e-commerce area on Entertaindom (he calls it the ‘smartest mall on the Web’), which tracks the consumer’s areas of interest and reacts by guiding the consumer accordingly. He also says TV-style commercials like a seven-second full-page spot will be Web-ready soon, which will be programmed to come up while the viewer is waiting for another screen. So far, there are no plans for subscription fees to Entertaindom. Revenue will come mainly from e-commerce and advertising.

Sutton says the time was right to launch the Net giant because users themselves have changed. The Web isn’t for geeks anymore.

‘With prices of PCs falling, there’s a big bubble of new consumers coming on. The key word is consumers.’ He says this new breed is made up of the ordinary guy, or ‘folks who go to movies.’

For the networks themselves, figuring out how to get noticed is a bit of a free-for-all. ‘It’s the wild west right now,’ says Sam Register, VP of creative for Cartoon Network Online-one of the frontiersmen, you might say, in the world of Internet cartooning. Since its inception in spring 1998, the site has generated advertising gigs from the likes of McDonald’s, Reebok and Gap Kids.

Although most studios seem to be trying to get on-line as fast as they can, some, like DIC, are laying low, doubting that going onto the Web will be a real money-making venture.

‘We’ve been approached by a lot of people, but it’s such a feeding frenzy. Our strategy was to sit back and come up with a real strategy,’ says Robby London, executive VP creative affairs at DIC. While DIC has some on-line plans brewing, London says: ‘It seems easier to avoid the commercials on the Web.’ In London’s opinion, the reason so many people are jumping on-line with their animation is because it’s a cheap way to get air-time for programming in an era when the TV landscape has been increasingly fragmented and difficult to enter for independent animators.

The newest of the newbies is probably the DreamWorks and Imagine Entertainment announcement of joining forces to launch POP.com in April. The site’s most unique feature, according to chairman and CEO Ken Wong, is its call for program submissions from which the best will be offered development deals at DreamWorks and Imagine. He says this grassroots technique will hopefully give the site word-of-mouth advertising along with curiosity that will get sponsors interested in the site. Revenue will be mainly based on e-commerce and advertising. It’s a hot time to launch a site, he says, because the first wave of commercially-based applications set out a good blueprint for how to improve them the second time around.

Another hot Net toon prodco, San Francisco-based Spunky Productions, announced its latest deal last month with Harvey Entertainment to produce and distribute Richie Rich Internet toons on both the Harvey and Spunky sites. Plans are also in the works for more of the Harvey library to go on-line this year.

CEO Karl Kronenburger says Spunky is moving away from banner advertising as a revenue source into more interactive, ‘rich media’ pieces within programming. Spunky also plans on crossing its characters over to TV which, in turn, will hopefully bring people to the site.

One company that has e-commerce and education wrapped into its on-line animation is Eurpsville, U.S.A., based in Port Washington, New York. It recently formed a strategic alliance with eCommercial.com to create and broadcast an animated series for kids called The Eurps e-Story Cartoon Club. The difference here is, rather than have parents and kids find the sites, the toons find them via a media-rich e-mail (an e-commercial, which is a compressed e-mail attachment featuring interactive video, audio, etc. created by eCommercial.com) sent weekly to a list of subscribers who sign up at the Eurpsville site. The unique feature of the e-commercial is no special browsers or high-speed modems are required-they run with the click of the attachment. Plans are in the works to place ads on associates’ Web sites as well, with e-commercials in turn sent to members on the associates’ subscriber lists. Michael Kohn, president and CEO of Eurpsville, U.S.A., says e-commerce is a big part of the plan as well, with plush characters made available on-site.

Kovacic of Active Media Services expects the Internet market to shake down in the next year or so and when it does, companies will be looking to align themselves with sites that have come out as the big players. Those will be either highly targeted specialty sites with cool content, or large, well-known sites like Entertaindom. She predicts the larger animation sites will do well because ‘the sites themselves can integrate some very creative ad opportunities.’

Maginley of TSR sees the market settling out in terms of which on-line advertisers are best able to cater their advertising to the consumers of these toon sites. But he says the future commercial success of these toon sites will really come down to their actual content. ‘There will be a shakeout, but not in the way people perceive companies swallowing each other.’ He says there will be room for niche sites and ‘as these niche sites become more popular, they get dispersed within the community and become marketing tools.’