In an anonymous office building in New York's Silicon Alley, a team of designers is working not on a snazzy branding campaign for a dotcom start-up, but the rather more prosaic challenge of creating an online presence for Toronto Hydro, a Canadian utility.

Branding on the internet increasingly means working with established bricks-and-mortar businesses as these designers, from Darestep, the new media arm of Cap Gemini Ernst & Young, now recognise.

"Toronto Hydro wants to take its customer enquiries and move them to the web," says Sean Seaton, consulting director of Darestep.

The work may not be as exciting as a couple of years ago, when high-profile dotcoms such as Boo.com or Pets.com would lavish millions of dollars on flashy websites and big-budget advertising campaigns. But at least with conventional bricks-and-mortar clients there is a better chance of getting paid.

Boo.com and Pets.com were two early casualties of the dotcom downturn and had to file for bankruptcy protection; the two brands have since been acquired by competitors.

Even the biggest internet companies, such as Yahoo!, have had difficulty transforming their familiar names into winning brands. Yahoo! is often seen as one of the most potent internet brands as it attracts more than 185m visitors to its pages each month.

The company, however, ran into big trouble recently with the resignation of key executives and warnings that online advertising, Yahoo!'s main source of revenue, is becoming softer. Experts say Yahoo! has the added problem that it is known principally as a search engine, of which there are several on the internet.

Brand value

Most users have little reason to visit the Yahoo! site over that of a competitor, and so it is difficult to quantify value of the Yahoo! brand.

"A name and a heavy marketing budget does not a brand make," says Piers Schmidt, managing partner with the Fourth Room, a London-based brand consulting company.

Many dotcom start-ups copied Yahoo! and tried to find a distinctive URL (web address). Some spent more on this task then they did developing a viable business model.

"A lot of companies became seduced by the power of a URL," says Mr Schmidt. "But you have to marry the delivery of a proposition to the promise."

In the late 1990s, internet addresses were bought and sold at astonishing prices as companies fought to acquire the most desirable URLs. The address wine.com was sold for $3m, WallStreet.com for $1m and business.com for $7.5m.

As these generic addresses ran out, companies had to resort to made-up names and a whole new industry sprung up to advise companies on the right choice of name.

Ask any successful consumer business and they will tell you that brands are made, rather than born. It took Nike more than ten years to become established as a leading footwear company and most other consumer brands have taken longer to build. But with the advent of the new economy, such old economy rules were deemed no longer to apply.

The concept of brand, name and URL were used interchangeably, and start- ups claimed to have valuable brands simply because they had a zany name.

As the internet became more crowded, however, companies began to realise that having a distinctive URL was no guarantee of success as the chances of customers typing their URL into a web browser were vanishingly small.

"It was like the old days of the Gold Rush," says Mr Schmidt. "Once the plot had been bought, they found that there was nothing but dirt there."

Advertising

This led internet companies to turn to advertising to drive visitors to their sites. Online advertising has a bad press, but experts say it is still an effective tool if used correctly.

"Consumers are pretty willing to entertain some of the latest new media advertising models, but the more they can control the way advertisers reach them and in what context they reach them, the better they like it," says Tom Kiersted, research manager at IDC.

According to a recent IDC study, banner ads are the most tolerated form of advertising in emerging media, while consumers are at least willing to receive any kind of advertising on their wireless telephones.

Most participants said they thought web advertising was generally "a good thing" from which you can get "valuable information". Surprisingly, the majority said they would not use ad-blocking software even if it were offered to them for free.

Nevertheless, businesses that depend heavily on online advertising revenues are now receiving a tough time from investors who reason that if giants such as Yahoo! cannot stop ad rates from falling, then there is little hope for the rest of the industry.

To drive ad rates up, companies sought to encourage more visitors to a site. First, this was done by advertising on other websites, but as the online advertising market became more crowded and its effectiveness increasingly questioned, dotcom firms started to spend heavily on traditional media, including billboards and TV campaigns, as part of a marketing mix.

In January 2000, just before the markets started heading south, a dozen little-known dotcom companies spent $25m to advertise before and during Super Bowl, the most famous and, for advertisers, valuable sporting event in the US.

Once, only the largest of consumer brands could afford Super Bowl rates, but the dotcom fever caused start-ups flush with venture funding to believe that they too could become famous brands by buying air time. Some spent a fair proportion of their entire annual marketing budget on a single 30-second ad costing $2m to $3m.

A year later, it is easy to see such excesses as a tell-tale signal that the dotcom economy was about to come crashing down. But the dotcom meltdown has left some things of lasting value in its path. One is the realisation that the internet does have a useful role to play in helping build brands. Ironically, it is the established offline brands that seem best-placed to benefit from the lessons learned by the internet start-ups.

"The dotcoms have performed a massive innovation service to the legacy companies," says Mr Schmidt. "These companies know what they want to do on the web. Even though they have may have started 18 months later than the dotcoms, they can get it right as they have resources, such as customer databases and marketing skills. A semblance of normality has now returned."