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When the going gets tough, the tough get going.
The going got tough from 10 March 2000. For many
professionals in their late twenties or early thirties, they're only
in their first economic cycle and have never managed in a recession
before. So when the Nasdaq rose to its height on 10 March 2000, that
was the beginning of time, of real life, of business reality. Those
individuals who set up their businesses once it became crystal clear
that the market was correcting itself have demonstrated real courage.
Recessions are about performance and metrics. What
you measure you can improve. No one pays headhunter fees. Salaries are
back to normal. No one overspends on IT in a market downturn. Even in
online advertising, performance-based search came to the fore. And
here a short case study brings home the point.
Espotting launched in September 2000 with Europe's
first pay-per-click search service. In doing so, it has driven the
revival of the online ad industry, which had been prematurely written
off as dead. Espotting has captured the lion's share of the European
market, which Piper Jaffray estimates to be worth $2.1bn (£1.3bn) in
the US alone. Salomon calls it the leader in its sector in Europe. In
shorthand, it's the future of advertising. But it's unfair advantage
is its focus on media services rather than technology.
Its emergence as an Internet powerhouse in Europe
has been one of the most impressive landgrabs in the history of the
Internet. I can't think of any other Internet company, other than
Lastminute.com, that has successfully extended itself across Europe,
creating a pan-European platform that works without overspending.
Revenue models can be transferred from territory to territory, but the
business plan must be adopted. Local captains of industry must be
attached, and the SME/corporate mix will drive different kinds of
penetration.
No one overspends on IT in a market downturn. While
US-based companies operate on a one-country, one-language basis,
Espotting understood that it needed a system which would cater for
multiple territories and languages. And this is how it built its
technical platform. Based on Microsoft software, it can scale quickly.
Espotting can roll out a new territory footprint in six to eight
weeks. It's one of the reasons why it's grown more quickly than its
competitors. It now services 10 territories.
European companies aren't known on a global basis
for their customer service. What Espotting does, though, by focusing
on service not technology, is to do an exceptional job of owning its
customer. Those customers - 15,000 advertisers - want to spend across
geographies and channels.
In addition to moving from one country to 10 in
calendar year 2002, the Espotting group became EBITDA positive. And
that's in the worst slump in the history of advertising.
One much-repeated statement by venture capitalists
is that the most important thing to do is to get the founder out of
the business fast and get professional management in. It's actually
very risky and dangerous to replace the founder with a CEO too early
in the game. And certainly in a market downturn, no hired hand will
ever care about the business as much as the parent who brought it to
life.
Daniel Ishag of Espotting is precisely the kind of
founder who has grown into his role as CEO well. He's part of a class
of entrepreneurs turned CEOs who will drive the building of
Europe.net.
The real opportunities and those seizing them are
in the market now. If you wait until the markets are back, the best
opportunities will be gone. You must build counter-cyclically. The
premiums are accruing now for those who are covering significant
ground in the downturn.
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