Chicago Firms Say 'Surf's Up' In the Heartland

Chicago is joining a host of other cities across the country looking to get a piece of the burgeoning Internet industry to bolster its economy.

The fledgling "new media" industry, as it is called, first took off on the East and West Coasts and includes companies involved in creating everything from computer games and multimedia software to sites on the Internet's World Wide Web.

New media is a $7.2 billion industry and will nearly double in size by 1999, surpassing both cable and broadcast TV in total revenues, according industry estimates.

While the group of some 36 Chicago-area companies involved in the new media is just a shadow of the industry hubs in New York and California, they are in the hunt for clients and eagerly tout the perceived advantages of operating in the Windy City.

New media companies in heartland cities, for example, are capitalizing on their propinquity to both Middle American consumers and traditional retailers and manufacturers.

"We have a big advantage in Chicago, being close to a range of economic elites, including banking, heavy industry, light industry, and retailing," says W. Patrick Campbell, executive vice president of corporate strategy at Ameritech Corp.

"Chicago will be a major player in content development" on the Internet, Mr. Campbell said at a recent conference here on rapid changes in communications.

Chicago new media firms are tapping a reservoir of talent in the area, recruiting the young, locally educated computer wizards overlooked by companies on both coasts.

"We go unchallenged in recruitment" at nearby universities like Northwestern, Loyola, Chicago, and Illinois, says Alex Zoghlin, president of Neoglyphics Media Corp., which creates sites on the Web. "Out in California I would pay double for the same talent," he adds.

Neoglyphics has landed contracts with regional heavyweights like Caterpillar Inc., Chrysler Corp., John Deere & Co., and Motorola Inc.

Heartland companies also enjoy lower overhead costs than their coastal rivals. We have "very low cost structures, easy-to-get employees, and a critical mass of industries that are into the Internet," says John Damschroder, director of special projects for the Ohio Department of Development.

But Midwest boosters often exaggerate the challenge their firms pose to established players. The heartland cannot compete head to head with the coasts in advertising, entertainment, and general media talent, says John Robb, Internet analyst at the Forrester Group, a consultancy in Cambridge, Mass.

"Where do you get television and television advertising from? New York and California is where the talent is," says Mr. Robb. "In certain areas there is a critical mass for new media talent and it's hard for places like Chicago to go up against them," he adds. He classifies Chicago as a second-tier media center, along with Los Angeles, Miami, Seattle, and the Washington D.C., area.