Company puts hopes in Web kiosks

Baltimore start-up has joined race to lock up access sites


April 02, 2000|By Mark Guidera | Mark Guidera,SUN STAFF

On a typical Friday evening at Edgar's Bar in downtown Baltimore, young professionals sipping microbrews and scotch crowd around two arcade-style PCs to surf the World Wide Web for sports news and commentary, betting lines and e-mail.

If John Shin has his way, these "Internet stations" or kiosks one day will be as ubiquitous as pay telephones and automated teller machines -- and the base of a new Internet-generated industry.

The 32-year-old attorney heads up Web-On-Site Inc., one of a surge of start-ups that aim to make money by charging advertisers to get their messages in front of highly targeted demographic groups, such as well-to-do ski buffs and college-educated young workers. They do it by offering Internet access, often for free, in places with lots of foot traffic, such as bars, airports and ski resorts.

The race to lock up locations is on. Baltimore-based Web-On-Site has installed 120 of the Web-ready kiosks in sports bars, restaurants and ski resorts and is hoping to get its kiosks into doctors' offices and senior citizen communities as a way to tap drug company ads.

A competitor, Golden Screens Interactive Technologies Inc. in California, is after high-traffic areas such as malls, highway service plazas and the athletic club market. And, a Colorado-based outfit that is among the most closely watched in the industry, has staked out airports and travel plazas.

"The industry is very fragmented right now," said Generosa F. Litton, a kiosk industry analyst with Frost & Sullivan, an international market research group in Mountain View, Calif. "It's really still in the pilot or experimentation stage. The companies trying it are trying to figure out exactly how to make money from it."

The potential revenue picture for those angling for advertising revenue is significant, given the explosive growth in Web-based advertising, say experts.

Spending on Web advertising is expected to mushroom to $12.6 billion by 2002 from $5.5 billion today.

From 1 percent to 2 percent of Internet users click on banner ads for more information. That means advertisers are increasingly looking for ways to get their ads in front of Web surfers most likely to be interested in their product or service, say experts.

Shin, co-founder and chief executive officer, estimated that if Web-On-Site is successful in its goal of installing 3,000 kiosks in the United States, the company would see a $100 million income stream from advertisers and partners, such as content providers who might pay to have their icon displayed for users to click on.

For now, the company is staying alive off about $30,000 a month in income and the backing of its private investors, all the while pitching venture capitalists for a cash infusion of $10 million to $12 million. Besides a cash injection, said Shin, "The key for us right now is locking up sites. Location, location, location is what it's going to be all about. I believe larger companies will eventually be coming down the road, and they will covet these locations."

In its quest to reach its 3,000 installed kiosk goal, Web-On-Site has been providing the PC units for free to bars, ski resorts and other locations.

Hugh Bethell, president and chief operating officer for Web-On-Site, said the company decided to bypass the airport market because more often than not airports charge high rents for space in their busy terminals.

The company hasn't run into difficulty lining up content providers -- it has FoxSports, Betmaker, and to name a few, and it's worked out low- or no-cost agreements with Internet service providers for connections. Landing advertisers hasn't been the easiest sell.

The reason, said Bethell, is that most national advertisers want a large market group to make their ad dollars worthwhile.

To build its market, Web-On-Site has set an aggressive target of rolling out 300 kiosk units in Baltimore, Philadelphia and Cincinnati by September. The company is hoping to soon announce a deal with one of the major satellite television providers under which advertising and content would be beamed to Web-On-Site's servers.

Such a deal, said Bethell, would overcome bandwidth issues that prevent high-quality video imaging from moving across the Net. And, he predicted, the deal could open up enormous revenue opportunities, such as streaming movie trailers to kiosk users.

Other companies believe that the best strategy is the pay-phone model -- charge kiosk users fees based on the amount of time they're logged onto the Web. And still other competitors are experimenting with hybrid approaches.

Which will prove to be the winning strategy remains to be seen. But industry experts say one thing is for certain: Web stations will be popping up everywhere.

Banks of the kiosks can be found in several major airport terminals, in rest stops along the New Jersey Turnpike, and in the mountain-top lodges of Aspen, Colo.

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