The advertising business has always been a place for self-invented characters. So was the Internet business in 1994, when I moved to San Francisco. That’s when I met Jonathan Nelson, now CEO of digital for Omnicom, a holding company that earned more than 18 percent of its revenue from digital in 2010. I was there to help create HotWired, a website spin-off of Wired magazine, which itself was only 18 months old; Nelson was inventing himself as one of the first Internet advertising guys in the same building where Wired and HotWired had their offices. We had lunch together occasionally, sharing gossip and stories about the craziness that quickly enveloped everyone in those early Web years.
Today Nelson lives in a large, white Victorian mansion, sparsely furnished, with a sweeping view of downtown San Francisco, which he’s been slowly if meticulously renovating since he bought it in 2002 (the folk singer Tracy Chapman was a previous owner). While we talked in the kitchen a few weeks ago, he fielded a series of work-related phone calls, cooked dinner for his two sons—divorced, Nelson doesn’t like to discuss his personal life beyond the barest details—and planned a school camping trip with his oldest son, 11 (a tent was airing out in the small backyard). We listened to music, including the new Death Cab for Cutie album, released that day on iTunes, on an iMac sitting on the prep island in the middle of the room.
A 1989 graduate of Allegheny College, a small liberal arts school near Pittsburgh, Nelson spent his first year post-graduation working at groundbreaking music venue The Knitting Factory, then on Houston Street in New York. (Michael Dorf, its owner, had graduated a couple years ahead of Nelson from the same suburban Milwaukee high school.)
Nelson landed in San Francisco in 1990, moving in and out of small jobs in the music and multimedia worlds. He even worked at Wired (everyone in those days worked there), where he built the first subscriber database for the magazine before it launched.
Eventually, he entered into vague plans with another high-school pal (who himself ended up working briefly at HotWired); they and a small circle of other collaborators were going to develop an odd amalgam of nightclub and online world, which would have both profit and nonprofit arms. None of it made much sense, no doubt because some of the inspiration, as well as some of the circle, came out of the Bay Area rave scene where there was plenty of weed, whippets and Ecstasy, among other intoxicants, which unsurprisingly led to aimless drift in the project. Nelson wanted to get serious. Soon enough he was off doing his own, more focused thing.
In late ’93 he co-founded Organic Online with three partners (including his brother, Matthew), intending to build websites. For whom, they weren’t quite sure; their first two clients ended up being an independent record label and a small publisher.
The Internet had only recently been opened to commercial activity, and the first graphical Web browser, Mosaic, was little more than a year old. The Netscape browser was still in development and wouldn’t appear until a month after HotWired launched in October 1994 as the first website to carry a blue-chip roster of national advertisers, several of them clients of the Euro RSCG agency Messner Vetere Berger McNamee Schmetterer. Messner needed someone to build its clients’ websites for them. Enter Nelson and Organic Online.
Nelson certainly fit the profile of the wave of entrepreneurs who would soon follow him into the new online ad business (a business which really didn’t yet exist)—young (only 26 when he founded his company), a little arrogant, and whip smart, although at times completely ignorant about what they were doing. “We had no idea even what industry we were in,” Nelson remembers, laughing.
He was able to present himself, however, as a viable partner to agencies and their clients because of the two sites Organic had created for the indie record label and publisher. And his relationship with Wired paid off—Nelson tutored the HotWired ad sales staff on the basics of the Web months before it launched. In return, the ad sales staff directed new customer referrals to him, and business took off.
In early 1995, he was browsing Internet technical guides in a bookstore and had a revelation. “I looked at the magazine rack, and there was Adweek and AdAge, and I thought, ‘Oh, I really should read these, because this is the business.’”
Before long, Organic had established itself, along with other pioneers like Modem Media, CKS, and Site Specific, as an Internet ad service firm. “You sort of stumble backwards into what you do,” Nelson says.
While it was building its profile in the ad industry, Organic was incubating a series of other projects, including Big Book, an Internet version of the Yellow Pages (eventually sold); the website analytics company Accrue (which eventually split off from Organic); and the open-source Apache Web server, now used by nearly two-thirds of all websites.
Within five years of picking up his copies of Adweek and Advertising Age, Accrue and Organic had both gone public, and Nelson was a multibillionaire—for two months or so on paper, anyway.
It was the height of the ’90s bubble. As founder, chairman, and CEO of Organic, Nelson held more than 51 million shares of the company’s stock when it went public in February 2000; when it closed that day at over $40 per share, his holdings in that company alone were worth more than $2 billion. At the same time he was also chairman of, and held a significant stake in, Accrue Software, which had gone public the previous year.
“It was a little freaky,” Nelson recalls. He was living in a one-bedroom walk-up rental apartment in San Francisco, a billionaire without even a parking space. Rich people he knew—people who had liquidity already—were asking him whether he was going to install bulletproof glass in his car, take evasive driving courses, hire bodyguards. “Weird stuff that was really hard to contemplate,” he says.
Those questions turned out to be mostly pointless. Just a month later, the Nasdaq peaked. By early April, the great Internet deflation was well under way, as Nelson prepared for the birth of his first child at the end of that month. By December, Organic’s shares had fallen into penny stock range, and Nelson was firing 50 percent of his staff in a single day and laying himself off at the end as CEO (he remained chairman, however).
“That just killed me, because you have to understand—I hand built that company,” he says. “I mean, many of those employees I hired personally. And I laid off 600 or 700 of them in one day.”