After hitting a landmark $1bn (£707m) in total turnover to date, Craig Gooding, founder and executive chairman of Vibrant Media reflects on the early inflection points that enabled him to scale the business and leave the incubator unscathed.
Rage Against The Machine’s Killing In The Name was playing at full volume when Doug Stevenson and I marched out of AOL UK’s offices to start Vibrant Media in 2000. Investment in dotcoms was at its peak. Venture capitalists were keen to talk to burgeoning entrepreneurs.
We fed off the buzz of other dotcom hopefuls and investors at First Tuesday networking events (somewhat like Silicon Drinkabout, but a lot less fun, if I’m honest). We had successful, industry-relevant careers where we’d learned how to be commercial and entrepreneurial, and had built up some great contacts.
Most importantly, we were frustrated at the state of digital advertising: the sector was still stuck in a print mindset and no one was truly pushing the possibilities of the internet. We had what we thought was a winning idea: a technology that shows ads within online articles rather than around them and that are actually relevant to the context of the article.
The VCs we initially spoke to were supportive, but said: "If you're really serious, you need to give up your jobs, show your commitment and go for it on the path to being entrepreneurs." So we did. We remortgaged our properties to fund building the technology and for a bit of cash flow. We felt invincible. We figured we could be brazen.
A week later, the NASDAQ collapsed. Huge tech companies like WorldCom started going into liquidation. The environment for a startup couldn’t have been worse. The leading advertising trade publication even ran a front page reading “Online advertising: RIP”.
We’d committed a lot to the change and believed in what we were doing, so we stuck solid to our convictions. We hired engineers and started building the technology. That was difficult. No one had done what we wanted to achieve before, so we were learning everything and making mistakes along the way.
We had the vision of placing ads within editorial content a bit like Post-it notes could be placed on print magazine articles, which communicate; “I’m relevant to you. Read me.”
We felt invincible. We figured we could be brazen.
Moreover there was no technology out there that could scan articles and determine whether they were contextually relevant and appropriate to carry advertising. We needed to build something that could read and understand billions of pages of content. Although that made it a lot harder to start the business, by building it from scratch we were able to develop patents and defensibility around the product which was better in the long run.
Yet the money from remortgaging would only last so long. We literally went through the A to Z of venture capitalists – about 40 or 50 of them. At the end of our pitch, each VC would say: "We really like the idea. We really like you guys. But…” They then reached for a copy of the trade magazine that pronounced the death of online advertising and asked us to leave.
The VCs had already spent billions on different startups and we're haemorrhaging cash trying to keep those going to make some sort of return. Investing in something new was just not on the cards.
One day’s runway
On the very last day that we could afford to survive on our own in the market a technology incubator gave us a small investment of €500,000.
Incubators don’t have the same gravitas as a VC and don’t commit the same amount of funds. However, they spread their risk by investing small amounts in a range of small startups to see which ones they can help to grow.
In fact, my hunch is that they didn't necessarily believe in our business idea for Vibrant Media, but they believed in us. They could see we were commercial whereas lots of the entrepreneurs at the time were a bit more ‘mad scientist’. We were brought on as more talent, guys who might be able to commercialise the other business ideas in the incubator as well as do something with our own business. Regardless, we were grateful for any support we could get at the time.
As it turned out, we were one of the two or three of the companies that made it out of the incubator. There was a pretty big bloodbath of entrepreneurs in there. Most of them spent their time building pretty business plan and trying to get the fonts on their logos right. We just created our first server farm out of PCs strung together (they weren’t even servers) and just started selling digital ads.
We were lucky to nab some well-known technology and telecoms brands for the first ad campaigns we sold, which helped a lot. They weren’t huge campaigns and were only UK-based, but we were alive and a business.
We were one of three of the companies that made it out of the incubator. There was a pretty big bloodbath of entrepreneurs in there.
We took that advertising budget called up all the relevant publishers very rapidly and said: “Hey, we’ve got some money; can we run these new type of ads on your pages?” Recruiting publisher partners was easier than we thought it would be. Counter-intuitively the tech industry – known for its innovation and creativity – can be remarkably conservative when it comes to new technologies. However, they were more willing to work with us than expected – perhaps because they were also suffering from the “Online Advertising: RIP” headline.
As the ads would display in a previously unused area of web pages we were able to assure these publishers that the ads weren’t going to affect any of the ads they were currently displaying. Nor would we be stepping on the toes of their own sales team. The ads were going to increase their yield and they weren’t going to have to do a thing for it. At the time, they really needed the cash.
That first year, we just kept plugging away. We built the first iteration of the technology, sold ads and found publishers to try out placing the new form of advertising. Then one day we got a relatively surprising phone call.
We had sold and delivered a UK-focused digital ad campaign to a large enterprise level technology company headquartered in Silicon Valley. They called us up from the US and said: "Vibrant Media’s ads are our number one performer. You guys are doing something no one else is doing. We'd like you to come to see our chief marketing officers in San Francisco."
Best laid plans
In our business plan – if you can call it that – we hadn’t anticipated going to the US until around year five. As it turned out, it looked like there was an opportunity to open in the US in year one. But we didn't have the relationships with publishers in the US or the regional venture capital background. There was no one to tell us what or how to do things.
We were surprised that no one else in the US had attempted our advertising strategy before, but on looking at the market more closely we discovered that we were very much ahead of our time in the US.
Vibrant Media was the first company to display ads natively within digital content. That raised media industry comments that Vibrant Media was trying to blur the lines between content and commerce. The high level of commercialisation within the US culture actually makes this a much bigger deal there than anywhere else in the world. Editorial teams are extremely hostile to interference from the advertising team on what they write. They're very protective over their content – and rightly so.
However, we were presented with an opportunity to fast track our growth in the US and we weren’t going to miss out. We would have to invest a lot in educating the publishers there to reassure them that we shared their editorial ethics and values: the editorial must come first, and advertising either fits with the article or it doesn’t.
The way this large technology company was communicating with us clearly demonstrated an impression that Vibrant Media was more established than it was in reality. Or perhaps they were so big that they just normally dealt with far bigger operations than Vibrant was. We had to respond in a manner that gave them reassurances that we would be big and stable enough to deal with their US business. So, we persuaded our secretary to call them to see if there was a place for us to land our private jet. (Just to be clear, we were working out of a garage in east London’s Brick Lane. We didn’t have a private jet.)
Thankfully, there wasn't a landing strip for us, as we’d have had to come up with a reason why we flew to San Francisco by United Airlines’ economy class.
We had to respond in a manner that gave them reassurance, so we persuaded our secretary to call them to see if there was a place for us to land our private jet.
We knew the advertising strategy and the technology worked. What’s more, the US client knew from looking at their own stats that it worked. However, without demonstrating some gravitas, we may not have achieved the same support or respect from this advertiser. Although cheeky, the private jet tactic did help to establish that relationship from the off. We were able to talk with appropriate confidence about delivering big US campaigns. (Our actual size subsequently became apparent, but we were already delivering on our promises by then.)
After that initial meeting, we did what kept us alive in the UK during the dotcom storm – we went down the road and simply turned up at big Silicon Valley technology companies and pitched our digital advertising products. Some sales meetings came off, others didn’t.
However, we had built something we believed in and had the confidence to get out and sell it – despite the adversity at the time. After a few small deals with significant advertisers, clients could see the performance of the product itself – and it was that which then introduced us to international markets.
The incubator’s other entrepreneurs just started imploding as they ran out of cash trading in nothing but how nice their business plan looked. The goal posts had moved by then. VCs actually wanted to see revenue from startups.
Doug and I were fortunate by being commercial. We focused on building a company that advertisers want and publishers need and then got out there and started selling our wares. That’s what took Vibrant Media out of the incubator.
Although people have been watching for an IPO or buy-out, the company is still owner managed and has 14 offices globally. It delivers native advertising to engage consumers and drive traffic to websites for brands including Sony, Nissan, Shell, Del Monte and more. And at the end of April 2016 we hit $1bn (£707m) in total turnover to date.
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