New Media

It's a jungle out there at Amazon
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The Independent Online

The unexpected departure last week of Simon Murdoch, the head ofAmazon Europe, will not only have an impact on the ever more competitiveonline book market, it will also have a significant effect on the health ofthe new media industry in the UK. Home-grown talent is a rare commodityand, given the current size the new media industry, there is hardlyenough of this to go round. Even an ounce of experience in new media is nowmuch sought after. Once someone picks up enough experience in one particulararea, he or she is either poached by another company or they realise thatthey could reap some of the benefits by starting their own business and poachingthe best talent for their start-up.

The unexpected departure last week of Simon Murdoch, the head ofAmazon Europe, will not only have an impact on the ever more competitiveonline book market, it will also have a significant effect on the health ofthe new media industry in the UK. Home-grown talent is a rare commodityand, given the current size the new media industry, there is hardlyenough of this to go round. Even an ounce of experience in new media is nowmuch sought after. Once someone picks up enough experience in one particulararea, he or she is either poached by another company or they realise thatthey could reap some of the benefits by starting their own business and poachingthe best talent for their start-up.

It's a vicious circle. Oncea person realises that only a small number of people are actually capable ofdoing their job, the bargaining power and clout can often become verydestructive for the industry. The danger, of course, is that whensuch an invaluable person leaves, the inevitable questions about the futureof the company are asked. Granted, this is true for most industriesbut, for a sector which is barely out of its infancy, yet another keydeparture to a start-up elsewhere is rough news. Why? Because itfurther weakens the pool of available talent.

With Amazon UK preparing toextend its product range to mirror that of its US site and battle against fiercecompetition from Bertlesmann Online, Murdoch's resignation can only havehit the company hard.

So what's Murdoch going to do? Take abreak, find a market gap and then start his own business? Yup.Sources suggest that Murdoch already has plenty of funding for his nextventure, given that he has recently relieved himself of the £2m ofAmazon stock which he gained when he sold Bookpages (which he set up inDecember 1996) to Amazon at the end of last year.

Amazon is hoping tolessen 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 theunappealing Slough location, Byrum could end up running Amazon UK for quite awhile. Part of the problem at Amazon UK, as with most UK extensions of USoperations, is that the American influence in the company makes for difficultworking conditions when dealing with a different local market.

Yankeeinvasion

A growing number of UK-based companies are now run by Americanslured by the charms of working in "cool" London, and the chance tosucceed in what is, comparatively, still a burgeoning market. The oldadage that the US is a year or so ahead of the UK, and so the American talentpool is much bigger, has a lot to do with this invasion, although therecent abundance of European venture capital, big salaries and company equityare also huge attractions.

News has it that BT, that bastion of allthings corporate about the Internet, is looking to change the way it isperceived by young Net users and is drafting in young media managers from variousfields. One of the first appointments was... guess? AnAmerican with years of experience of Internet marketing, of putting contenton the web and in e-commerce. Taking the reigns as head of content andadvertising, John Racza faces the task of making BT appeal to young Internetusers through a funky advertising campaign and by aping the formula of music,sport and film on the content side.

Clearly, there is a market forthese types of content sites, but it is a very crowded one, driven mainlyby fan-based loyalty to a certain magazine or club. BT is aware that itneeds to do something innovative and clever and, of course, it has theavailable cash. But whether it will create fantastic sites that blow thecompetition away has to be seen. Perhaps it should give something away forfree. Internet calls might be a start, but as long as BT's mainstrategy is to make as much money as possible from Internet calls, that seemsas likely as teaching a border collie to play backgammon.

Internetriches

A curious trend has emerged over the past few months in medialand,particularly at Murdoch-owned companies. Key personnel from traditionalmedia, Sky's Mark Booth and the The Times's Toby Constantine, forexample, have defected to new media. OK, they may just fancy achange, but many suspect the attraction is the price of Internet stocks.Internet IPOs are big news at the moment. The interest generated byFreeserve's flotation in the national press has been interesting to see,and stories that the Freeserve chiefs have become paper millionaires areattention grabbers. In the last week both QXL and Agency.com haveconfirmed their IPO plans and the anticipation of over-inflated share priceshas been stirred again. QXL's IPO is expected to be thesecond-biggest Internet flotation in the UK, behind Freeserve.

WithFreeserve now worth a fluctuating £1.5bn, it will also beinteresting to see how much value QXL's flotation can add to thetwo-year-old, loss- making online auction house. Analystshave tipped it to float at around £400m, which would see itsfounder, former journalist Tim Jackson, being added to the growing listof Internet millionaires. But while QXL undoubtedly has thousands ofcompanies and people trading via its site, it is baffling that is should beworth so much when its 1998 revenues were only £2.5m.

Comparethis to the $75m (£46m) IPO of global interactive giantAgency.com, which took revenues of $70m (£43.2m) in1998 and is far more established with a 750-strong global workforce. Itseems the only way to make a killing these days is to develop an intangibleonline brand and spend lots of money on offline advertising prior toflotation. I'd better finalise that businessplan.

amyv@qpp.co.uk

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