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In the lobby of Red Sky Interactive's two-story loft office near San Francisco's waterfront, you wonder for a few moments whether you've walked onto the set of Pee-Wee's Playhouse or gotten in line for a ride at an Old West theme park. The rusted-out carcass of a 1933 Ford V-8 truck peers out from a corner as if it had broken down there decades ago and been abandoned. The receptionist's desk seems to be an old ticket-taker's kiosk. All the colorful bric-a-brac in this high-ceilinged office space has the semifunctional lure of museum pieces: up a flight of wooden stairs to a loft with leather saloon couches, wooden banquet tables, wagon wheels, a pool table, flickering candle lanterns in alcoves. Everything but a cigar-store Indian. You wonder: People work here?

By the time you land in 39-year-old CEO Tim Smith's office, though, you start to get it: Whoever arranged all this frontier-themed decor (Smith, as it turns out) wasn't trying to make a fashion statement against cubicles or corporate office design. You couldn't even call this interior design. It's brand. And in Smith's mind, the brand behind this 5-year-old Internet design consultancy would be defined by pure blue sky, not red.

It's clearly a frontier spirit with which Smith delights in infusing himself, his 42 employees, his clients, products, reputation, and, finally, the look of the office. Red Sky is an influential member of the fast-growing breed of interactive "agencies" that create online advertising, strategic consulting, and "branding" for high-priced Net clients. Behind this kitschy Western facade, the Internet is quite obviously the new frontier here, as it is at so many other new businesses around the country.

Many would argue that the tried-and-true models and basic MO of the age-old advertising industry haven't changed a whole lot since the dawn of the Nielsen family in the 1950s. But for those forging ahead the Internet has spawned a new challenge: How do you take all the fuzzy components of a strong brand, the slippery attributes that marketing brains have conveyed so powerfully through radio and television — quality, loyalty, awareness, stature, strength, style, sex appeal — and make them pop on the global mass medium of the next century? How do you effectively build brand image, solidify brand reputation, and foster brand loyalty on the Internet?

Answer: It ain't easy.

"The powers that be in advertising are very traditional. All the models are settled. All the technology is settled," says the ponytailed and professionally untraditional Smith, sitting cross-legged, arms waving to make his points, on a sofa in his Red Sky office. It's a space packed wall-to-wall with toys, books, magazines, and other knickknacks, so that he has to nudge some of it out of the way to make room for a coffee cup. "If you have a storyboard for a commercial and a million-dollar budget and an ad agency, you know exactly what you're going to get. But in this [online] world, we need to invent those models."

For such online brand-building successes as Yahoo!, the "simple" answer to the branding question, so far, is to have millions of people use your service every day, and to improve and expand that service so that it keeps getting better. For Cisco Systems, the answer is to create the infrastructure for $3.8 billion in annual online sales around the world.

"[Online], the brand is experience, not the name or slogan," says Regis McKenna, one of the most congratulated brand strategists and the one who helped launch the Apple brand in the late 1970s (see "Debate, p130).

That's easier said than done for the multitudes of conventional brands — packaged goods, for example — staring down a new mass medium that might, in the next few years, scoot past television in terms of global reach. How do you "soft-sell" and position dishwashing soap on the Internet?

For these companies, the online branding question is a touchy one, given how fast the Internet is growing, how relatively unacquainted the ad industry still seems with the Net, and how heavily advertisers have come to rely on television to deliver that all-important conventional "brand equity." Brand advertising is, without a doubt, the most complicated and expensive of all the advertising disciplines. Trouble is, you won't find much of it done well anywhere online.