It is said that no man is an island. But in 1991, it
would have been hard to convince Rich Masterson that the saying was always
accurate. Back in 1991, Masterson was a fledgling entrepreneur with a radical
idea for an interactive advertising business. At that time, however, the
Internet was still underground, and finding support for Web-based business
propositions was rare.
Masterson, who was working as a business-to-business
marketing consultant for the online service Prodigy, couldn't find an ear that
would listen to his idea until the day he met Larry Smith, a vice-president of
a New York City ad agency, in the Prodigy cafeteria. Smith was handling an
account for one of Prodigy's strategic partners when the two men sat down for
lunch. They found that they shared a passion for an emerging technology, called
videotext, and similar visions for what it could do. They decided to become
partners, and US Interactive was begun, over lunch that day, as a two-person
operation.
What makes the story unique is that US Interactive was a
company devoted to a fulfilling a need that no one at that time even knew they
had, and few understood its direction. US Interactive was to become a new-age
technology company that was even fresher in concept than the online services
that ruled the commercial networking computer world before the World Wide Web
became popular. If you look for a starting point as to when the Web evolved
from a marketing opportunity into a proactive business landscape, look no
further — this may be your answer.
"At first I was thinking that working through computers
was a new marketing tool," Masterson, now 37, reflects. "It turned
out to be a whole new way of doing business."
Using the combined knowledge they gleaned from Prodigy,
Masterson and Smith were quick to identify an emerging trend, and they were
determined to jump on it, even when no one else seemed interested. Their vision
was to provide consulting for companies marketing their products and services
through computer networks. From management to technology to marketing, the pair
did all of the work themselves. It was not until two years later that they
added a third person.
The duo's big break was delivered by United Parcel Service
(UPS), which skyrocketed US Interactive into the limelight of the new Internet
scene as pioneers. Under the young company's direction, UPS expanded its online
presence to include its renowned package-tracking and pick-up scheduling
systems in what proved to be the first true example of the Internet's
interactive business power.
"Up until that time, there were software companies
offering to download software," Masterson recalls. "But that was the
first time that a non-technology company leveraged the Internet for customer
service."
Shortly thereafter, Mosaic was introduced, allowing
advertising to move from the online services to individual sites, and opening
up a world of new business to US Interactive, including site design, marketing
and advertising. Before long, Masterson and Smith were creating revolutionary
interactive sites and advertising programs for Ragu spaghetti sauce, AT&T,
Microsoft, The Associated Press and American Express. The business world on the
Web was shifting into high gear, and Masterson and Smith suddenly found
themselves in the driver's seat.
US Interactive had gained enough profits at that point to
grow organically, at a slow and steady pace, but Masterson explains the company
felt it had a market opportunity that required more than the two men could have
addressed on their own. In effect, the Web had grown faster than anyone could
have imagined.
In 1996, the market was exploding so rapidly that the pair
could barely keep up. To give them the boost they needed, the entrepreneurs
sought a capital infusion from Internet Capital Group, a consortium of
technology companies that includes Compaq Computers, Comcast and Safeguard
Scientific, to name a few. In retrospect, Masterson says, there were two key
reasons why they attracted the growth capital they so desperately needed.
"One, we had a management team (Smith is the CEO, Masterson is the
COO)," he says. "The other is that we had clients that included Netscape
and Microsoft."
Masterson says he hasn't minded that obtaining outside
capital has led to lessened control of his company. "It wasn't really
traumatic," he says. "I think if somebody is running a business with
100 percent control by themselves, then it might be a little different. For me,
it was just another day at the office — a meaningful event, to be sure, but not
traumatic."
To the contrary, Masterson believes the ability to tap into
investors' advice and gain different perspectives on business decisions has
been invaluable. "I'd already surrounded myself with partners to help grow
the business," he explains. "I view outside investors as just more
partners."
In today's world of high-tech business — one that features a
plethora of upstarts and merging giants — staying in the thick of the industry
is like trying to carve out a space for yourself on the crowded Web. Often,
successful, small, Lone-Ranger companies find themselves being gobbled up by
larger companies once they prove their worth.
US Interactive is in a position of being both suitor and
suited, when it comes to the game of corporate mergers, acquisitions and
purchases. That position is due to the company's small stature, but large
profits, while it provides services in a rapidly growing field. Deciding when
to "get married" and when to "stay single" are decisions
that Masterson will not take lightly. But he isn't losing any sleep over them
either.
"The marketplace will give you signals," he says.
"In our market, there are companies doing rollouts. We are not. We're
operators. We can experience a great deal of growth organically. What happens,
though, is that as you grow, the marketplace will encourage you to grow more
than you are capable of on your own. It will then dictate whether it is more
viable to pursue a strategic alliance, asset purchase or merger. Or you'll get
lucky and someone will identify you as the perfect mate; then through a
combination of resources and energies, the marriage should proceed."
Working within that philosophy, only technology companies
that are committed to their employees and customers and can offer added
capability and growth potential attract Masterson's and Smith's attention. One
organization that fit the bill was Malvern, Pa.-based Web Access, founded by
Daniel Endy, with whom US Interactive merged in August 1996. Web Access is now
a wholly owned subsidiary that has added substantial technological expertise
and a solid client list, and Endy is now a principal at US Interactive.
In June 1998, US Interactive merged again with Los
Angeles-based Digital Evolution, whose clients include Disney Online, Arthur
Andersen and Auto-by-Tel. In 1998, the Malvern, Pa.-based US Interactive
projected revenues of over $20 million and employed 200 workers in five
U.S. cities: Los Angeles, New York, Philadelphia, Seattle and Washington, D.C.
One deal the aggressive US Interactive is not seeking,
however, is a merger with a traditional ad agency, preferring instead to keep
the advertising function among the in-house staff. Masterson says he's also not
interested in buying "problem children" or businesses that other
companies are looking to unload. "If you're the owner/operator of a
business and you're looking to cash out, then we're not the right people,"
Masterson says staunchly. "I mean, it's either successful or
unsuccessful."
But Masterson knows that such decisions are often not
black-and-white, but rather shades of gray. And he does consider partnering
with companies that may have untapped talents lurking below their surfaces.
"I've learned from experience that there are great companies that
have struggled, not because they don't do certain things right, but because
they don't do everything right," he says. "There are companies that
have great technical skills, but never had the appropriate capital structure or
the appropriate administrative support. That's a situation where a financial
buyer might look at the balance sheet and say, 'This is a disaster'," he
continues. "But there's actually value in there. It just needs to be
extracted."
Running a growing business, especially one that's in a hot
industry that wasn't expected to become as big as it is, can be difficult, to
say the least. And the kind of rapid growth US Interactive has experienced has
led to workplace structure and balancing concerns. In fact, Masterson spends a
great deal of his time struggling to maintain a comfortable work environment
amidst changing strategies, partners and mergers. Dealing with individual
personalities at five locations is difficult, but the young COO tries his best
to maintain a thread of consistency in each office that identifies it as a US
Interactive location.
"We don't want to have 'The Stepford Wives' as our
corporate culture," he muses.
"We want to bring out the creativity in the
individuals. The problem is that the offices are populated with people with
very different interpersonal lives. For example, the New York office tends to
have single, younger people, while the Philadelphia office is full of married,
suburban people. And L.A. is different still. So the biggest challenge in the
workplace is providing consistency while allowing for personal style."
In his own life as a husband and father, Masterson finds the
same balance issues. Masterson's had originally planned to run the company from
his home — an idea that quickly disappeared, taking along with it the ample
family time he used to enjoy. His partnerships and employees, however, have
permitted him to work fewer weekends and enjoy more leisure time.
Masterson cites the early death of a close friend as an
awakening in his approach to balancing his personal and professional lives.
"It reminds you how short life is," he says. "Now, it's not the
Rich and Larry show anymore. In truth, there are people around here that can
handle things without me, something even better than I would if left to my own
devices."
Henry Ford said, "You can't hold a reputation on what you're going to do." Masterson agrees.
In a competitive industry, he believes that his company's experience will be the factor that contributes most to its future growth, reasoning that there can't be many competitors who have more experience, since US Interactive has been in the business from the beginning. The company has recently added a few more notches to its belt by landing upper-echelon clients like Martha Stewart Living, the National Football League, Columbia House and Comedy Central.
"We've been involved in every distribution
method," he boasts. "So we have a body of work to draw from that our
competitors don't. That's the differentiating factor."
Masterson says that US Interactive will continue to build strategic
alliances when the opportunity presents itself. The company has already launched
a multi-cultural brand-management firm and is forging alliances overseas. He
says the next two locations will likely open in Japan and London. But US
Interactive's main location will always remain on the Internet, where the
company has built a reputation and revolutionized the way business is done.
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