Reading The Australian Financial Review on April 19, I had a powerful and not especially pleasant déjà vu experience. The story I read was about the wildly successful float of Seek, the online employment business, with stock trading almost immediately at 19 times earnings.
Who fails to recall the almost daily headlines of the late 1990s as the price of dotcom stocks soared, and shares were traded at 119 time earnings. People who seemed perfectly sensible on the outside still bought them.
At that time lots of executives doing not especially clever things every day became paper millionaires, and it transpired were destined to remain paper millionaires depending on the degree to which their shares and options were locked up by escrow provisions.
I played golf each week with some chums who pissed me off enormously by holding stock in a number of dotcoms. They were living for the next float which they somehow knew all about before anybody else. On occasions they were in and out with a profit before they had thrashed me at golf.
As Dirty Harry used to say, it is important to know your limitations: I am a crap investor. At that time, I couldn’t figure out why perfectly sensible people were plonking huge wedges of cash into businesses that didn’t seem to have any customers and didn’t seem to sell very much of anything.
They did however have nicely appointed offices and the staff looked as if they had stepped out of Marc’s ad.
In the end though, I just ran out of stamina and dived in anyway. It was as if stockbrokers all over Sydney had their binoculars trained on me and they were networked. “The target is moving. He appears to have written cheques. Sell now!”
I wiped off thousands in record time. I didn’t know whether to admonish myself or congratulate myself. On the one hand I had to endure the steely admonition of my wife; on the other I was delighted to receive a cheque back for anything at all. The really bad moment came when I divided the amount I had lost by the price of a reasonable bottle of Shiraz. It gives me nightmares even today.
The Seek dudes started their online employment site in 1998, boldly going where no-one had gone before, which was straight after Fairfax and News Ltd’s rivers of gold. Going after the employment revenues of Fairfax and News Ltd is about as dangerous stealing a Harley from a bikie—you’d just expect to get your head ripped off.
It’s hard to know just how loudly the alarm bells actually rang in Darling Park and Surry Hills when these dudes didn’t go broke straight away. Indeed, before very long at all and they were going gangbusters.
According to Red Sheriff, as early as 2000 Seek was smacking both Fairfax’s MyCareer and News Ltd’s CareerOne in terms of unique users and visitors. Importantly, they were making new friends all over town.
These new friends included Yahoo, AOL7 and Ninemsn, each of which delivered terrific traffic to Seek’s site and enabled it to impress advertisers.
A characteristic of Seek’s success has been sharp marketing. An example is the well-promoted Research Study which revealed that six out of 10 Australians hated their boss. It’s a moot point whether a study was actually needed to prove this, but no doubt it prompted six out of 10 employees to make Seek their home page immediately.
Another cool marketing idea was offering free shares to recruitment firms advertising on the company’s successful website. This impressed me greatly because recruitment firms spend OPM—other people’s money. Now, if my recruitment firm had been rewarded with shares in Seek for spending my money back then, I’d probably be looking for my shares about now.
So, what else did the Seek boys have going for them in this high stakes media game?
One thing was that unlike their opposite numbers, they weren’t distracted by selling used cars which is a News Ltd speciality or fancy homes which is a Fairfax speciality or indeed selling ads in newspapers. They got up every day and thought about jobs online. When they were taking a break from thinking about jobs online they probably took time out to think up new ways of making money from jobs online. Focus is a trump when your main card is having ideas before the other guy.
The Seek boys also had nothing to lose. Well, that wasn’t probably true. Initially they had their houses to lose. What I mean is that the success of Seek didn’t threaten anything they already owned. This was in stark contrast to the newspaper boys who worried relentlessly about the prospect of migrating $5 worth of newspaper classifieds online where it would be worth $1. This is the kind of outcome that gives publishers a never-ending migraine. If getting good at something threatens your livelihood you probably spend a lot of time thinking about something else, like reading the death notices to see if anyone you know is mentioned.
A worse fate awaits those who defer aggressive action though, because the old world adage also applies to the new digital order: if you don’t give yourself an uppercut, someone else will come along and do it for you.
Waking up to the news that Seek had done a hot deal to sell a 25% share to the PBL powerdome couldn’t have been a great start to the day over at News and Fairfax. It was probably a bit like finding out your neighbours pitbull was getting chewing lessons.
And I don’t know if it got up their noses that in little more than four years Seek was valued at over $500m, but it sure got up mine.
is the managing director of Adstream. : fittoprint@bandt.com.au
