Network: New Media - It's a jungle over at Amazon
Talented people in new media now have so much clout they pose a threat to their fledgling industry
Monday 13 September 1999
It's a vicious circle. Once a person realises that only a small number of people are actually capable of doing their job, the bargaining power and clout can often become very destructive for the industry. The danger, of course, is that when such an invaluable person leaves, the inevitable questions about the future of the company are asked. Granted, this is true for most industries but, for a sector which is barely out of its infancy, yet another key departure to a start-up elsewhere is rough news. Why? Because it further weakens the pool of available talent.
With Amazon UK preparing to extend its product range to mirror that of its US site and battle against fierce competition from Bertlesmann Online, Murdoch's resignation can only have hit the company hard.
So what's Murdoch going to do? Take a break, find a market gap and then start his own business? Yup. Sources suggest that Murdoch already has plenty of funding for his next venture, given that he has recently relieved himself of the pounds 2m of Amazon stock which he gained when he sold Bookpages (which he set up in December 1996) to Amazon at the end of last year.
Amazon is hoping to lessen the blow by the appointment of caretaker manager Colleen Byrum, Amazon's head of customer services in the US, until it manages to find a "suitable replacement". Faced with the recruitment crisis and the unappealing Slough location, Byrum could end up running Amazon UK for quite a while. Part of the problem at Amazon UK, as with most UK extensions of US operations, is that the American influence in the company makes for difficult working conditions when dealing with a different local market.
A growing number of UK-based companies are now run by Americans lured by the charms of working in "cool" London, and the chance to succeed in what is, comparatively, still a burgeoning market. The old adage that the US is a year or so ahead of the UK, and so the American talent pool is much bigger, has a lot to do with this invasion, although the recent abundance of European venture capital, big salaries and company equity are also huge attractions.
News has it that BT, that bastion of all things corporate about the Internet, is looking to change the way it is perceived by young Net users and is drafting in young media managers from various fields. One of the first appointments was... guess? An American with years of experience of Internet marketing, of putting content on the web and in e-commerce. Taking the reigns as head of content and advertising, John Racza faces the task of making BT appeal to young Internet users through a funky advertising campaign and by aping the formula of music, sport and film on the content side.
Clearly, there is a market for these types of content sites, but it is a very crowded one, driven mainly by fan-based loyalty to a certain magazine or club. BT is aware that it needs to do something innovative and clever and, of course, it has the available cash. But whether it will create fantastic sites that blow the competition away has to be seen. Perhaps it should give something away for free. Internet calls might be a start, but as long as BT's main strategy is to make as much money as possible from Internet calls, that seems as likely as teaching a border collie to play backgammon.
A curious trend has emerged over the past few months in medialand, particularly at Murdoch-owned companies. Key personnel from traditional media, Sky's Mark Booth and the The Times's Toby Constantine, for example, have defected to new media. OK, they may just fancy a change, but many suspect the attraction is the price of Internet stocks. Internet IPOs are big news at the moment. The interest generated by Freeserve's flotation in the national press has been interesting to see, and stories that the Freeserve chiefs have become paper millionaires are attention grabbers. In the last week both QXL and Agency.com have confirmed their IPO plans and the anticipation of over-inflated share prices has been stirred again. QXL's IPO is expected to be the second-biggest Internet flotation in the UK, behind Freeserve.
With Freeserve now worth a fluctuating pounds 1.5bn, it will also be interesting to see how much value QXL's flotation can add to the two-year-old, loss- making online auction house. Analysts have tipped it to float at around pounds 400m, which would see its founder, former journalist Tim Jackson, being added to the growing list of Internet millionaires. But while QXL undoubtedly has thousands of companies and people trading via its site, it is baffling that is should be worth so much when its 1998 revenues were only pounds 2.5m.
Compare this to the $75m (pounds 46m) IPO of global interactive giant Agency.com, which took revenues of $70m (pounds 43.2m) in 1998 and is far more established with a 750-strong global workforce. It seems the only way to make a killing these days is to develop an intangible online brand and spend lots of money on offline advertising prior to flotation. I'd better finalise that business plan.
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