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May 16, 2000

George Garrick On The Big Web Shakeout and Angara

SUMMARY: George Garrick, former chairman, CEO and president of Flycast Communications, left the firm he carried to great heights soon after CMGI sold the company in January to Engage Technologies. Under Garrick’s leadership, the Internet direct-response advertising services firm wentpublic and fetched $2.4 billion from CMGI. But following the sale to Engage, Garrick had little inclination to give up command of the ship.
“Once you’re a CEO, you like being a CEO,” he told us. “I don’t want to be reporting to anybody. I want to be executing my own vision.” Sitting on “six or seven” boards, and looking for a new company to drive, Garrick took time out of a recent morning to talk to us about what he sees in the imploding Web world.

Q: What do you see as important trends developing formarketers who sell to Web marketers?

A: Reality and the first level of maturity are setting in. A year ago, nobody had a lot of data. Now, a lot of people are disappointed in the results they’re getting. The margins at e-commerce sites are getting squeezed. Affiliate deals with the portals are being re-evaluated. [Dot.coms] will destruct. There’ll be a big shaking out. It’s been a honeymoon, but nobody’s had to pay the piper.

Q: So what does that mean to firms offering marketing services to online companies?

A: I think it’s going to require that service offerings produce measurable results. Angara is a marketing services company [Garrick sits on the board]. We’re not focusing on a lot of glitz. We’re focusing on hard, bottom-line results and hard metrics. You can’t just ignore the legacy world, the offline world. It’s a real crowded space. There are still new companies coming out. There’s like four or five of these new companies.

Q: They’re going after a diminishing pie. What are some specific things marketers to Web marketers must do to be successful?

A: They can look at delivering 500 million ads a month, but delivering 5 billion requires a lot more. When you want to get up to big numbers, you can’t just use word of mouth. You have to go to trade shows, spend more money on your marketing budget. You reach a choke point. They all are saying they’ve got something unique, but they’re knock-offs of each other. That whole space will see a shaking out. And the off-line research companies haven’t come in yet.

(Garrick then said he sees room for three independent companies to dominate this space, but “the distance from third to fourth will be a huge drop-off.”)

Q: So what do the companies need to do to make the leap up in ad sales?

A: I always smile when a company comes along and says they’ve got a million consumers signed up. Anyone can do that. [To make a big leap] you need a big sales force, business development groups, conference and trade shows and a big marketing and PR budget. You can’t look at how much you spend on marketing as a percentage of revenues when they’re very small, and expect to hold that when they get 10 times bigger. At some point, you have to spend huge advertising budgets. You also have to start putting in multiple servers (because volume degrades performance). You have an industry emerging because of technology. They start a company to offer a solution to that industry, but what do they know about that industry? That’s the risk-–not knowing what’s coming.
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