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Lucy Nicholson reveals...
Meet the entrepreneur on a mission to cool down stresses execs over a hot stove at her base in Cumbria. EN reaches for the blue plasters as Lucy Nicholson reveals...
| Thwaites' Expectations |
| Tuesday, 29 August 2006 | |
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The new media entrepreneur who says traditional ad agencies are "awful" He also isn't in the mood for selling, and thinks his smart-suited band of net marketeers can conquer the world from Warrington. Stuart Anderson reports. Pics: Martin O'Neill Dylan Thwaites might have recently renamed his search engine marketing company "Latitude" but he insists he runs a tight ship. Not for him the "dude, where's my keyboard?" laxity of so many slacker-generation internet firms – he even refuses to loosen his tie for EN's photographer and is adamant that he demands the same strict sartorial standards of all his staff, from salesmen to backroom techies.  "Most of our competitors would go to see the big banks in jeans and T-shirts, but really they are just pandering to their own needs rather than looking at what a client expects," he says. He also maintains that the professional image projected by his employees is not merely cosmetic. "We're very, very hard on our staff," he says. "We expect really high standards and anybody who falls short leaves – so you know you can rely on everybody in the team." EN's New Media Entrepreneur of the Year started his career in a very different business – the brewery trade (well, with a name like his what else was he going to do?). Although he claims to have been a "maverick, rubbing up against the system a hell of a lot", he admits that his understanding of the importance of professionalism and structure came from his previous life as a manager at Bass. In the early 1990s, he was part of the team that came up with the brewery's successful All Bar One, O'Neill's and It's a Scream pub concepts before taking on responsibility for running the rather more traditional Toby restaurants brand in the North West. In 2000, Thwaites left Bass to set up in business with his then father-in-law, and the pair began looking for investments. That ex-father-in-law is David Ashton, the entrepreneur behind ARM Construction which, under the chairmanship of another of his protégés, Owen McLaughlin, has since gone on to become the £500 million-plus turnover Enterprise plc – so he wasn't short of a bob or two. "Effectively David provided the seed money and I provided the legwork," Thwaites says. Today, though, the pair have equal 40 per cent shareholdings in the business, with the remaining 20 per cent split between the other directors and the company's 65 or so staff, all of whom have access to share options. It was actually rugby union that first attracted the pair to the business that was to become the UK's biggest search engine marketing company. They were approached by the owner of the internet domain name "rugbyunion.co.uk" and, despite Thwaites being a keen player of the round ball game, he thought it was worth a closer look. "We thought there was potential in it because rugby union was starting to monetise a little bit at that stage, so we asked him to come back with a business plan – and part of that was to take us to see a company that could do internet marketing," Thwaites explains.  That company, Corporem Global, was one of 11 in a group of internet and software development businesses in which Thwaites and Ashton took a 25 per cent stake in 2000 – and bought out in its entirety a year later. Then they shut down the other ten businesses. "I thought there was a big opportunity for marketing on the internet, and that was what first attracted us to it, but then once we got into the company we saw that the real potential was not in broad internet marketing but very tightly and specifically search engine marketing," he says. Around the end of 2000, he continues, "paid search" first appeared in the UK. This is the way companies like Google make 99 per cent of their money – by auctioning keywords that return the highest ranking in the "sponsored" section at the top of the results to the highest bidder for a specific search term. The sum bid by the advertiser is then charged each time a new user clicks on the sponsored link and visits the company's website. Latitude's staff – and bespoke computer software – constantly monitor these auctions for the thousands of keywords identified as possible routes to their clients, allocating their budgets as appropriate to ensure the highest rating. "To give you an example of a typical client, if Alliance & Leicester are trying to sell a loan, you might think they would just need to buy the word 'loan' and, if you pay the most, you'll be at the top of the sponsored links. But in reality we know that there are more than 10,000 ways people who want a loan can phrase the request – terms like 'debt advice', 'debt consolidation', 'loan for car', 'loan in Birmingham'," Thwaites explains. With survey after survey showing that UK adults spend more time on the internet than watching television, he believes it can't be long before the advertising balance – currently 30 per cent of all advertising spend goes on television compared to five per cent online – corrects itself. "It's an interesting market in that, up until probably 2003 or 2004 we were having to sell the concept of search marketing rather than sell ourselves as the search marketers. But that has changed – now most big companies are well aware of search marketing because it's the fastest-growing phenomenon the marketing industry has ever seen. From literally nothing in 2000 to something like £1.5bn next year is exceptional growth," he says. Thwaites believes this growth, which he expects to continue "massively" for some years to come, will be driven by a move away from "interruption" marketing and towards "engagement". This is basically a high-tech version of product placement. "If we were engaged by Pepsi – and we're not, though it would be nice – then, when someone searched for David Beckham, who has that advertising link to the product, then providing material that connected Pepsi to Beckham would be engagement marketing," he explains. "You wouldn't be interrupting, it would be part of the Beckham thing."  Converging technology will also broaden the market for search technology, Thwaites asserts – predicting a world that, for anyone with teenage children, will be as close to TV hell as they can imagine. "We have already seen the technology that allows you to freezeframe an episode of Friends and then scroll over a pullover on which we can place search advertising saying that a similar one is available from Gap for £29.99." Last year Latitude, which has its headoffice in Warrington and another in London, turned over £21 million, generating an EBITDA margin of ten per cent and has for some time been doubling its staffing levels every ten months. The company is currently engaged in a recruitment drive in the capital – a move which is unsurprising given the Soho-based nature of the competition. Indeed, Thwaites himself plans to move down to the big smoke for six months or so to keep an eye on things. Latitude is by far the biggest dedicated search marketing company in the Europe – to such an extent that Thwaites would not even consider acquiring any of the direct competition until they get significantly bigger. However, the vast majority of search marketing spend goes not through specialists like Latitude but traditional media buyers (advertising agencies to you and me). According to Thwaites the trouble with these is that, despite the client lists and budgets they command, they just aren't very good when it comes to search: "They're damned awful at it, it's just absolutely not in their skill sets. It's very numerical, it's not glamorous, not colours and pictures – just words." All of which begs the question, how come none of the big players in the advertising world has bought Latitude yet? According to Thwaites, most have made approaches, but he isn't interested. "We don't need it," he says. "We're cash positive – literally the only value they would add would be to give me and David a big lump of cash. It wouldn't be particularly good for the business or the individuals in the business." This would appear to be a recent conclusion – in February of this year, the company was reported to have appointed investment bankers Longacre Partners to consider a £60 million sale to an undisclosed bidder. Today, though, Thwaites is not really even interested in working in partnership with any of the big six advertising agencies. "We have worked with most of them at various times in terms of white-labelling our service and covering their arses, really," he says. "But what we think now is that they're taking a lump of our profit and adding absolutely no value. There are areas like account management which you would think they would be good at but we are better than them at every point. "So it makes no sense to help them out in that way – it makes much more sense just to get the clients direct." Thwaites says that, although hooking up with a big advertising player could give Latitude global reach, the relative sophistication of the paid search market in the UK compared to the rest of the world means he would prefer to take advantage of the company's position at home, with a view to competing directly with the media buyers. At the moment, he estimates that Latitude commands somewhere between five and 15 per cent of the UK market, a slightly vague figure ("the stats are not there") that he believes the company is well-placed to build upon. "In terms of marshalling resources we would prefer to have a market dominance position in the UK: 20-25 per cent of the UK would be preferable to having ten per cent across Europe." As a journalistic experiment to test the latest search technology, we Googled Thwaites who, according to the website of the Westend amateur football club in Huddersfield for whom he is one of the leading goal-scorers, has "despite his ageing years performed like a young lad – with his constant tantrums and moaning when he doesn't get his own way". It also claims that playing football has saved him from a midlife crisis – but maybe he's never taken them for a spin in the BMW M3 with red leather seats that EN's reporter spotted in the Latitude car park. In any event, given that he predicts at least another five years of "hyper" growth for a company which, if all goes to plan, could make him a very rich man indeed, it seems very unlikely that the fresh-faced Thwaites has either the time or the inclination to give the looming onset of middle age a second thought.       |
