A new gold rush is underway as top managers, marketers and commercial bosses ride out of long-established companies and head for new posts in fledgling Internet businesses.
Instead of gold nuggets, these executives will make their wealth from e-commerce and Internet advertising. But the risks are high. Some suggest that Internet companies are wildly over-valued by investors, and rumours abound that the e-bubble is about to burst. Many marketers, however, have decided the potential rewards make it a risk worth taking.
The most recent departure is BT UK Markets’ managing director Afshin Mohebbi, who is now president of Qwest Communications, a US-based Internet voice and data communications company (MW May 6). In the same week QXL, the largest online auction retailer in Europe, has recruited NOP boss Jim Rose as its chief executive.
They follow in the footsteps of Mark Booth, the former BSkyB chief executive who quit after less than two years to launch a new media company called e-partners; Ellis Watson, The Sun newspaper’s marketing director who set up the popular ISP currantbun.com; and Chris Townsend, commercial director at Prime Media and previously marketing director of digital TV at BSkyB.
David Johnson, software and Internet analyst with investment research firm Beeson Gregory, says the attraction of the Internet to most marketers is easily explained.
“No one has yet worked out the most effective way of marketing on the Net. It is virgin territory. Most people on the Internet have an IT background and are not used to providing a service for customers.
“There is also little evidence that advertising is effective on the Internet. It does not appear to have targeted its intended audiences and the revenue for advertisers has been cut. So, from a marketing perspective, there are many opportunities,” he says.
Johnson gives the example of Internet vendors which supply goods at or below cost because the information they collect about the purchasers through the Internet is worth a great deal to advertisers.
He says executives will be offered good salaries and valuable share options early on in a fluid market that is open to exploitation.
“That has to be a big attraction,” adds Johnson. “To say these marketers are pioneers may be pushing it a bit. I think this is the land rush behind the pioneers.”
The online auction company QXL (formerly Quixell) was set up by journalist Tim Jackson in 1997. It has just hired Jim Rose, former boss of United News & Media’s information business, to bring professional management to the company and take it to a stock market flotation.
He believes it is a pioneer spirit that drives marketers to the Internet.
Rose says: “It’s a new frontier, it’s the Wild West. It’s not just a fad, it’s like the industrial revolution. The forecasts of three years ago have been achieved. Now 63 million people in Europe have Internet access, but lack of free access is holding back development.
“I’ve been in the trade for 20 years in professional management. Internet companies start with people with big ideas, but they need management disciplines. I can apply my trade to this new type of business, for example financial reporting and reward recognition skills.”
He says the investment community likes to see executives with the right image before ploughing money into their companies. “If you are going public it is important to have a legitimate management to give credibility,” he adds.
Rose readily admits that making huge sums of money is appealing, but says most people are in for the long-haul it’s just a question of picking the right companies.
Chris Townsend is commercial director at Prime Media, with equity in the company, which specialises in Web design, new media, and operates call centres. It has bought eight companies in the UK in the past 12 months and employs 2,000 people.
Townsend joined Prime Media in May 1998, after leaving BSkyB, where he was marketing director of digital TV. At BSkyB he worked on setting up the digital interactive service BIB, now called Open, between January 1996 and December 1997.
According to Townsend: “There are a few companies that are overvalued in this sector. But there are a lot more companies that are undervalued and will not realise their value until later. It’s still a very young sector and a lot of companies will not realise their potential for ten or 20 years.
“In the UK we are six to 12 months ahead of the world in terms of digital and interactive TV. However, the UK is 18 months behind the US in the PC market.”
Townsend does not accept that marketers are coming into this sector to turn a quick buck and get out. People are coming to the Internet, he claims, because it is a new and exciting area. Even so, it is likely that Townsend will retire a wealthy man in the not too distant future.
Sun newspaper marketing director Ellis Watson recently became general manager of the company’s new Internet service provider, currantbun.com.
The service provides Sun readers with Internet access, e-mail functions, online sections of the paper and Internet shopping facilities. Clearly a marketer’s skills are needed to establish such a venture.
Watson says he left behind a 40m marketing budget and one of the best marketing teams in the business to join Currantbun. “I’ve walked into complete disorder, where I don’t know or understand a thing,” he says. “But these people have a glint in their eyes. They have a vision.
“There are three types of marketers who get into the Internet business. The first two will keep their jobs and the third won’t.
“The first person harnesses the Internet and recognises how to market brands. The second type is like me, no longer a marketer, who realises it’s time to be a grown-up.
“The third type of marketer just pretends to use the Internet and the clock is ticking against them.”
Watson denies money was a motivating factor in joining Currantbun. He would, he says, have made more in his previous position. “It’s an exciting opportunity to make a difference. Currantbun will be a very big brand over a short period of time.”
Alex Dale, sales and marketing director with Virgin Net, who set up the company in November 1996, believes marketers’ motives are not so innocent.
He thinks the golden handshakes offered by companies are not enough for the high flyers of the marketing world.
Dale says: “I think Internet start-ups are people-oriented. And with a lot of people doing start-ups, for example Microsoft, about 30 per cent of the equity is held by people who work there.
“It’s an entrepreneurial environment, and that attracts people who want to make a mark. Marketers are very much in demand, especially for their brand-building skills.”
Dale says Internet start-ups do not make money for a long time. But there is the chance to shape a company in an unprecedented way.
Anyone can launch a business on the Internet relatively quickly and there are no distribution problems. So companies need to build a service which attracts people.
“Long term, it is just another form of marketing in that you are trying to make people part with their cash, and make a lot of money,” Dale adds.
Virgin Net PR manager Lisa Hulme says marketers who have crossed the great Internet divide “seem to be quite passionate about it. They have insight and can see how important it will be, and how it can help companies”.
He adds: “But it’s still an area people are unsure about. People feel a lot happier buying from well-known brands on the Web. So perhaps marketers are attracted by the idea that they can use their expertise in a field which is crying out for their knowledge.”
Internet headhunters confirm there is an increasing tendency for marketers to join Internet companies.
IT recruitment company Top Jobs on the Net recently advertised for a marketing and communications manager on the Web and received over 40 applications, which all met the criteria. Many were from marketers.
It seems the sheer variety of the Internet appeals to managers who are in jobs which seem formulaic by comparison. The ability to measure progress instantly, as well as the potential for huge earnings, is an attractive combination.
Michael Page Recruitment consultant Mike Best confirms that “the main reason for the migration [from non-Internet to Internet companies] is the share deals available. There is a lot of value in the share prices of these companies”.
While the marketing entrepreneurs who have made the transition to Internet companies say they will provide much needed expertise and respectability, the headhunters’ perspective reveals a more cynical motivation.
There is no doubt that lucre filthy or otherwise is a driving factor behind many of these moves, even though the people involved would be loathe to admit it. Internet companies also provide an ideal rest-home for washed-up executives who have reached the end of their marketing shelf-life.
Some will no doubt become rich beyond their wildest dreams, but there are grave pitfalls, should the e-bubble burst. Turning a quick buck will then start looking like a long, hard slog. A few of these restless executives have surely struck
24-carat fool’s gold.