By Rebecca Flass Photography By Jason GrowAfter HookMedia received $15 million in second-round venture-capital funding last March, the firm celebrated with the flamboyance typical of most startups at the time. The company rented Boston's Institute of Contemporary Art, and roughly 200-250 employees, friends and family filled the museum to celebrate and enjoy hors d'oeuvres, cocktails and art exhibits.
That was right before the stock market "went to hell," recalls HookMedia president and founder Don Epperson. But arriving just as the dot-com bubble burst doesn't seem to have impeded the success of the interactive media firm, which Epperson started with just $50, the minimum amount the bank required to open an account.
With funding from DoubleClick investor Bain Capital, Audax Ventures (which focuses on Internet plays), Advanta Partners (which invests in information-services companies) and the Still River Fund II, Epperson set out to create a company that could provide measurable online marketing services and deliver quantifiable results.
"I knew the Internet was going to change the world," says Epperson, 33. "I didn't know how it was going to change the world, but I knew I wanted to be part of it."
The onetime investment banker had dabbled in selling online advertising through what he describes as a "rudimentary" Web site, but he learned the media-buying business from Pro Media chief executive Nancy Ryan before forming HookMedia.
Ryan describes Epperson as "an incredibly bright, brilliant person" who "had a total grasp of the Internet and what it was capable of at that time." However, she says his lack of knowledge regarding traditional media made him better-suited to work in the online world.
"We would have local on-air talent in the office, and he would say hello and think they were a salesperson," Ryan recalls.
HookMedia's client roster now includes PricewaterhouseCoopers, EMC, Blue Cross/Blue Shield of Massachusetts, T.J. Maxx and Marshalls, among others. Within the past year, it has grown from a local Boston shop to an East Coast agency player, with outposts in New York and Atlanta, and has exploded from 15 employees to more than 100. Expansion into Chicago and Los Angeles is also planned within the next two quarters.
While HookMedia has yet to turn a profit as an organization, in part because of its investment in marketing, Epperson claims the company is profitable at an operating level and is beating projections. And while the shop has lost its share of dot-com clients, it is averaging three new clients a month and has an even split between traditional and dot-com clients, he says.
Epperson attributes the shop's ability to win business, even as dot-com deaths litter the media landscape, to its partnership with DoubleClick. The union with the ad-serving behemoth enables the agency to receive raw-level data. Fueled by VC funding, HookMedia also invested at least $8 million in building technology, such as a data warehouse, which Epperson believes will help it compete with publicly held online shops, such as Avenue A and Mediaplex.
Avenue A and Mediaplex, however, disagree with that assessment, arguing that building an ad server provides greater flexibility in terms of collecting, using and outputting data to a message delivery system.
"We're in the first inning of a 14-inning game," says Avenue A co-founder and chief strategy officer Mike Galgon. "It's easy to integrate with one partner, but with no standards, communicating with several partners is very difficult."
"We're in a much stronger position than someone who chose to partner with someone else," says Mediaplex senior vice president of marketing Andrew Hyett. "The technology we have permits us to do things that aren't available from other folks," he adds, although declining to discuss specifics.
Galgon and Hyett say they don't often come up against HookMedia in pitches, but Hyett believes the company's presence is something that should be welcomed rather than feared. "Any developing business category can only benefit from having several strong players," says Hyett. While he describes HookMedia as "a player," he says it's not on the same level as companies such as Avenue A, Mediaplex or DoubleClick.
That hasn't stopped HookMedia from amassing roughly 20 agency partners, including New England shops Mullen and TFA/Leo Burnett. "When we made up our minds to get into online media, it was a little late in the game. The best and most senior talent was already absorbed by pure-play agencies and integrated agencies that had Internet capabilities," says Rich Person, Mullen's executive vice president for direct and interactive marketing. "They've got good people, good methodology, they do what they say they're going to do and they're always looking to develop new products, new ideas and new methods for measurement and analysis."
Clients benefiting from the relationship between the two companies include Oxygen Media, Northern Light Technology and Genuity.
Person, however, was initially hesitant to take a chance on a startup; instead, he tried a couple of interactive shops in San Francisco, with "disastrous results." In particular, Person cites "canned, off-the-shelf solutions" and media plans that were put together without much thought.
"We've tried to focus on what it takes to manage digital media," says HookMedia senior vice president Evan Grossman. "We've looked at every aspect of the process, from strategy and research, planning, buying, trafficking, analysis and reporting, and tried not to understand how we can adapt a print buying model or broadcast buying model to this, but what's the best way for our clients?"
The firm has attracted employees from more established interactive firms, such as senior vice president and director of media services Michael Comins, who joined in June from Digitas.
Still, in a landscape dominated by global giants, Epperson admits that HookMedia is at a disadvantage because it only has operations in the U.S.
"If one of our clients wanted to do a business-to-consumer campaign in Europe, there's no way we could do it," he says. Because clients such as PricewaterhouseCoopers and EMC are asking for international campaigns, the firm is looking for overseas partners and is planning to expand beyond the U.S. in the first or second quarter of 2001. "We intend to be a global company," says Epperson.
The shop also remains a relatively unknown startup in an environment where clients may be more likely to rely on their tried-and-true traditional agencies for interactive media.
"We don't have the relationships that McCann or those kinds of companies have," says Epperson. "It's a lot more difficult for me to go in front of a P&G [Procter & Gamble], which has a relationship with whomever for the last 30 years, and say, 'You should give me a half-hour of your time so I can tell you about something that's different.' "
As the market matures, HookMedia is preparing to work with new channels, such as digital television, magazines, books and wireless devices. "Not a lot of people have signed up to get ads downloaded onto their wireless handhelds or PDAs or cell phones," says Epperson. "We clearly expect that population to grow immensely over time, but it's still very new. While a lot is actually said in the press about digital media, digital TV, digital cell phones and wireless advertising, it's just in its infancy."
That seems obvious, given the absence of a standard rating system. "It's incumbent upon the industry players to come up with sets and standards and definitions," says Epperson. "Whether it's industry-led regulation or government-led regulation, I think the industry would do itself a favor by clearly defining what's acceptable out there. Only then do you get the consumer and the advertisers comfortable about the media."
While buyers for television were placed in a separate division in the early days before joining the media department, Epperson says digital and traditional media should not be lumped together.
"Because you have the ability to target, the ability to measure, the ability to react and because you have lots of data associated with it, it's just a very different type of campaign. There's much more analysis to it, and there are more things you need to consider," he says. SABA (3)