Many of the dot-com companies launched over the past two years came to rely on their public relations advisors to an unprecedented degree. Initially drawn—or, more likely, referred by venture capitalists—to PR firms for marketing counsel, many Internet companies relied on their PR partners for a much wider range of business advice. It’s not surprising, then, that many of the relationships between high-tech PR agencies and their dot-com clients ran deeper than usual.
It was not unusual for firms to accept significant amounts of stock in the dot-com clients they represented, but a handful of firms took their relationships even further, creating incubators that would provide a wide range of management services. In St. Louis, Internet marketing firm Influence—founded by former Shandwick Interactive head Craig Kaminer—was the first to announce the creation of an incubator. In Atlanta, leading independent agency Duffey Communications launched Golden Egg. And in New York, business-to-business specialist PepperCom created Partnership Central, a dot-com led by agency partner Ed Moed, as a subsidiary.
But the most successful venture into dot-com development by a public relations firm came from Santa Monica-based Murphy O’Brien, which when the Internet revolution began was known more for its consumer marketing and lifestyle communications than for its expertise in technology.
“We had spent the better part of nine years building brands for other companies before the Internet came along,” says Murphy O’Brien partner Brett O’Brien. “We recognized that there was a business opportunity for us in providing PR services to Internet companies, but we also thought it would be great to have our own product to promote. So we started brainstorming.”
What he and agency chairman Karen Murphy O’Brien came up with was Xdrive, an idea inspired by companies like GeoCities, which allowed individuals to have their own web sites. Xdrive went a step further, allowing every individual to have his or her own “hard drive” on the Internet, providing intelligent access to stored information without the use of FTP.
“Our goal was to leverage Murphy O’Brien’s contacts and resources to start a significant Internet venture,” said Murphy O’Brien.
In November of 2000, Xdrive moved out of Murphy O’Brien’s offices into its own 50,000 square foot headquarters, and in December—despite the turbulent venture capital market—secured $50 million in funding from backers including StorageNetworks, Mitsubishi Corporation, NEC, Softbank and Goldman Sachs. Its Xdrive Express product was an editor’s choice of ZDNet’s Smart Business, and its website was named one of the top 100 by PC Week.
According to Murphy O’Brien, both the PR firm and Xdrive have benefited from the incubation experience. Murphy O’Brien’s work for Xdrive has attracted a number of new high-tech clients, including TheBrain Technologies, Expertcity.com, OnAir.com, Ledgent, Unified Office and Cheap Tickets.
“It certainly helped us get more tech-based business,” says Murphy O’Brien, who estimates the agency’s client base is now split 50-50 between its traditional consumer business and technology work.
Adds O’Brien, “It was a very positive experience. It created a lot of positive energy inside the company.”
Meanwhile, the coverage the agency secured for its “client” in influential media outlets such as the Los Angeles Times, Newsweek, New York Times, Business Week, Red Herring, Forbes.com, CNN.com and the Industry Standard, helped fuel Xdrive’s growth. It now has 500 employees and has become one of the most visited sites on the Internet.
An IPO is expected later this year.
That puts Murphy O’Brien’s Internet undertaking ahead of PepperCom’s Partnership Central, which received one round of venture capital funding but has become a victim of the cautious VC climate of the past few months.
Moed describes PepperCom as “a corporate matchmaker online. If companies are looking for partners, whether they are other corporations or academic institutions or not-for-profit organizations, they typically have to go through a lengthy process of sourcing, identifying and qualifying the correct partners. We have a system that allows them to do that in a fraction of the time.”
Partnership Central has build a database of around 24,000 companies in various vertical industries and sortable by about 75 different attributes, and Moed feels confident the agency can secure another round of funding when the economy begins to revive.
While both Murphy O’Brien and PepperCom created incubators to nurture their own dot-com businesses, Duffey’s Golden Egg is focused on providing a broader range of services to clients. According to agency president Lee Duffey, “We never wanted to create our own fund. We wanted to create an incubator that would take companies on for a maximum of eight months, provide them with all the services they needed to get off the ground, and make sure their business and marketing plans make sense.
“Venture capitalists were coming to us because they were seeing potential clients whose business plans were non-existent, who needed all kinds of advice.” Golden Egg offers client companies access to three of the region’s leading law firms, the largest accounting firm in the southeast, and human resources consulting specialist William Mercer.
So far, Golden Egg has worked with four companies, one of which was recently sold to Athoria, and another of which recently secured a third round of venture funding. Says Duffey, “We’re very happy with the results.”
Influence abandoned its incubator in October, after spawning three companies: Childproofers.com, which offers information on making homes safe for children; carryeverythingon.com, which sells luggage; and drivethere.com, which dispenses directions and travel information for drivers.