According to a 1999 Jupiter Communications study, U.S. kids and teens are the fastest-growing demographic on the Web, with numbers expected to increase to 21.9 million users ages two to 11 by the year 2002. Factor in the strong influence kids have on their parents’ pocketbooks and it comes as no surprise that the licensing industry is grazing around the edges of the Netscape.

The potential benefits of licensing on-line kids properties are alluring-cheaper launches, the opportunity to show and sell on the same platform, and the potential for breakaway success in an industry full of promise all hint at an inherent mother lode-but it’s no road to easymoney.com. Most original characters are many portals away from attaining the high level of consumer awareness required for a successful licensing program. As many experienced licensing agents and licensees will attest, TV still rules as the launch platform for kids products. But since the Internet doesn’t appear to be going away any time soon, we took a look at what some of the pioneers of on-line licensing are doing as they strive for success.

Consultant Gail Munn of Los Angeles/New York-based GM Licensing Group, a licensing consultancy to manufacturers, sums up her approach at this stage in the industry’s growth: ‘When it comes to Internet brands, this is a new medium. A licensee would have to work out an inexpensive deal with a licensor because there is no track record.’

While many licensing agents are taking calls from Internet content providers, many others are taking a wait-and-see attitude. Of the handful of original on-line properties that have launched licensing programs thus far, the action has been limited to heavy-hitters with strong brand identities or to sites that have the potential to leverage their visibility through cross-branding.

Marc Rosenberg, VP of marketing at Tiger Electronics, describes an industry where the search for The Next Big Thing has turned into a feeding frenzy: ‘There are a lot of companies out there grabbing names. We’re more secure in our own identity-we feel there has to be a match.’ The match happened to be Tiger Electronics and Yahoo.com. Rosenberg explains: ‘Yahoo is a very entrepreneurial company-very promotionally-minded-as are we.’ A company that hit radar with its successful Furby merchandise, Tiger licenses 30% of its properties from television, 30% from video games, 30% from film and 10% from the Internet. Expressing confidence in the potential for a wide consumer base, Rosenberg explains the move toward Internet properties: ‘Tiger Electronics’ goal has always been to bring high-quality electronics to the mass market, and with this Yahoo deal, our goal is to bring the Internet to the mass market.’

Not content to market Yahoo snow globes, Rosenberg emphasizes the need to fit the product to the property: ‘It’s very critical that anything we do with the license is relevant to the Yahoo brand, so we asked ourselves: What is topical with the brand? We decided it would be products that let kids connect to their computers.’ Two products under the Yahoo banner due to hit shelves this August are the Yahoo!Cam digital camera and the HitClips mini boombox, with recordable microchips, both retailing for under US$60.

Tiger has also signed a license deal with the free Web service provider Net Zero. The first product from the deal is Lightning Mail, a handheld e-mail device retailing for US$60. With no monthly charge (each e-mail costs the price of a local call) and no dial-up needed, the product is positioned as a sophisticated but cheap way for kids to stay in touch with their parents and friends while at school and on the run.

In an industry where days equal years and a theory is almost as good as reality, a cool head must prevail when potential licensors come knocking. Joy Tashjian, president and CEO of Moraga, California-based American Champion Marketing Group (a division of American Champion Entertainment), recounts being approached by an Internet content provider with an inflated estimate of the value of its proposed content. ‘They were looking for a license partner when they hadn’t even launched the site’s characters! I told them no,’ she says. Regarding ACE’s recent deal with funschool.com, an educational and gaming destination site for kids ages two to 11, Tashjian cites the strong track record of the company’s execs-funschool CEO Sashi Boinapalli worked on operating systems and networking at Sun Microsystems-and the site’s ‘sticky’ factor as reasons ACE agreed to represent the venture.

Licensing agent in hand, last month, funschool turned to brand-building and signed L.A.-based Equity Marketing to develop a marketing strategy that will include events, advertising, sweeps and cooperative partnerships.

Stan Lee Media company co-founder Peter Paul predicts that such marketing partnerships will become more and more important as Internet audiences retreat to familiar brands in the wake of millions of new content providers. While not denying that talent lurks in many of the startups, Paul avers: ‘The bottom line isn’t content, it’s branded content, and there’s a dearth of branded content on the Web. People are attracted to us because of the brand recognition.’

On the heels of a May IPO launching the company on the Nasdaq exchange (symbol: LEE), Encino, California-based Stan Lee Media is looking to step up that brand recognition by tying in to boys and burgers. In partnership with The Backstreet Boys, the company will create Webisodes starring the boys’ superhero alter egos, each armed with powers surpassing the ability to attract thousands of screaming girls. The August 26 launch of the first four- to six-minute Web program in The Backstreet Project-a brainchild of BSB Nick Carter-will feature a live Backstreet Boys Webcast, and marks the first major QSR tie-in for Stan Lee Media.

Burger King will distribute about 40 million action figure premiums based on the BSB fictional characters with Kids Meals, each one sporting the www.stanlee.net Web address. National TV, radio and Web advertising for the promo will be incorporated into Burger King’s US$13-million U.S. back-to-school campaign, which kicks off a couple of weeks earlier, and the usual in-store signage will support. Paul hopes the cross-promotion will help the dot.com expand beyond its male-skewed audience to the female fan base of the boy band.

Branding, cross-promotion and combining markets-sounds like… a licensed property from TV. Rebecca Randall, executive VP of marketing and brand development at MaMaMedia, an activity site that promotes technological fluency for kids, concurs: ‘There is a misconception that because a property is on the Net, everything is different, but as with other licensing programs, it’s about taking a long-term, global approach.’ New York-based MaMaMedia has plans to begin licensing its on-line properties in the next few months.

One advantage beyond the intangible ‘world’s wide open’ aspect of Internet properties is offered by Joe Taritero, executive VP of creative affairs at ALFY.com: ‘The Internet has the opportunity to target specific age groups such as the three- to five-year-old or five- to seven-year-old demographic’-demos too narrow for TV, even in an age of niche specialty channels. This type of narrowcasting, coupled with on-site e-mail and sales, gives licensors the opportunity to receive instant market feedback. Says Taritero, ‘at ALFY, we are the broadcaster and the licensing agent; we have the flexibility to adjust to demand.’

Jane Thompson sees similarities between the licensing industry’s caution towards on-line properties and the reserve it once held for video game properties. Thompson, director of licensing and character development at Sega of America, remembers that before Sonic the Hedgehog and Pokémon, there was a time when video games weren’t taken seriously as new property launchpads. Eventually though, they proved themselves as worthy birthing places for properties able to jump to TV and licensing stardom.

Undoubtedly Web properties will grow in numbers as we see more brands strengthen themselves, but for the man who owns the hottest licensed property in North America, TV is still king. Al Kahn, chairman and CEO of New York-based 4Kids Entertainment, whose licensing division Leisure Concepts Incorporated holds world broadcast and merchandising rights to the Pokémon property outside Japan, stresses that getting a revamped, reedited version of the Japanese animation series into a spot on Saturday morning television was fundamental to the property’s widespread success in North America. Explains Kahn: ‘In the case of Pokémon, TV brought the concept down to a younger age than the video game was skewing towards. Whereas the video game requires reading skills of eight and up, TV brought it down to the age appropriate three- to eight-year-old group, the group that is the lynchpin of merchandised product.’

While acknowledging that the Internet is a force to be reckoned with, Kahn is not about to start changing the way LCI does business: ‘We’re in a business of awareness. The Internet by itself doesn’t deliver enough to three- to eight-year-olds. It may in the future but we’re not there yet. I don’t think it’s a good birthing place for merchandised product. I still think television is the best medium for launching product.’