Forward: Neil Hutchinson
How an affiliate marketing firm started on a £2,000 overdraft in a bedroom became a £57m web business
Neil Hutchinson tells GB how he turned the affiliate marketing firm he started on a £2,000 overdraft in his bedroom into a £57m web publishing group.
The word ‘innovative' could give ‘solutions' a run for its money as one of the terms people frequently overuse to describe companies, often to the point where it becomes meaningless. But at Forward, the internet group that began life as affiliate marketing firm TrafficBroker in 2004, innovation is not just a word that gets bandied about because it sounds good.
True, the key vision of the company is to “innovate every day”, but founder and 2008 Growing Business Top Gun Neil Hutchinson puts his money where his mouth is. A culture of innovation has led to the creation of three new businesses within the group – all ideas from employees.
After spending an hour with Hutchinson, I suspect his personality has played a major part in shaping this culture. The softy spoken entrepreneur is probably one of the most unassuming people I have ever met.
“I don't like to think of myself as people's boss,” he says. “I like to create an environment where people can challenge. If I suggest one course and people disagree with it, I'm really keen to know that and for people to feel that they can voice their opinions.”
At 31, this could be a hint of self-doubt betraying itself. He later confesses: “Quite often I look at the talent within the group and it's a bit overwhelming to know that so many people have put their trust in me to guide the company.”
Either way, a lack of pretension combined with conscious efforts to really foster innovation has led to a culture where staff ideas are welcomed and valued – and if they're good, pursued and rewarded.
The company has internal Dragons' Den-style pitches, where staff can present their ideas to senior managers, who will decide whether or not to put resources behind it; this could be two developers or £25,000 worth of marketing budget. They'll be given a strict target to hit in a timeframe of no longer than six months.
So far, this process has resulted in the launch of InvisibleHand, a plug-in which discreetly notifies consumers when the product they're browsing can be bought for a lower price elsewhere; Omio, a mobile phone comparison site, and JustShops, a collection of ecommerce sites.
InvisibleHand was the brainchild of Robin Landy, who joined Forward as an information architect. Hutchinson says he “easily achieved” his initial target of getting 10,000 people to download his plug-in within six months.
The fact that three sites have stemmed from staff ideas is now a fantastic recruitment tool, which Hutchinson insists proves his theory about staff satisfaction. It's all very well getting smart people into the business; you have to empower them too.
“People come in typically to do a specific job, but often they have the ability to contribute elsewhere. That might not even be the best job for them, just what they have done previously. People like to be given the opportunity to find their role within the business.”
By the book
Given Forward's success, it's incredible to think Hutchinson started the business after performing a Google search for ‘make money online' in December 2003. The Warwick University business studies graduate was working as a web designer and noticed clients were increasingly eager to drive traffic to their new sites.
His search produced a link to a book called Google Cash, which introduced him to affiliate marketing through Adwords – bidding for keywords on behalf of companies and getting paid for resulting sales. “You didn't need a salesforce or to communicate with the companies; you just worked via the affiliate network, driving traffic and getting paid on commission.”
He made £35 on his first day, when an ad for Lloyds TSB resulted in a current account sign-up. Although this was something of a fluke, it wasn't long before he was earning as much as his wage as a web designer.
However, cashflow – or lack of it – was a major problem. While Google took money every day, the network billed clients at the end of the month meaning an average 45-day wait for commission. “It doesn't matter if you have a great model, if you don't have money to make more money then it doesn't happen,” he says.
He approached the owner of the web design agency he had left, who, after getting a bumper return on an initial £10,000 loan, agreed to invest £125,000 along with his family in December 2004 in return for half the profits (but 0% equity) until he was paid back.
Hutchinson saw this as harsh at the time, but sees it differently now. “In retrospect it was an incredible deal. I managed to retain 100% equity in my business, and by then it was moving very quickly,” he says.
I bet they're kicking themselves now? “They got a great return on their investment,” he laughs. “In nine months, they received all of their money back, plus a further £150,000 on top.”
Hutchinson began looking for opportunities outside of search three years ago. TrafficBroker was becoming increasingly efficient at driving traffic to other people's sites, and he saw an opportunity to grab a slice of the action.
They stayed in their comfort zone with their first venture, Omio, (driving traffic to other sites and earning commission) beginning the company's blossoming consumer division.
JustShops was the first foray outside the affiliate space. The idea came from one of the firm's longest serving employees, who had acquired a firm grasp of how to drive traffic and which products converted well. Even so, Hutchinson needed a bit of convincing when he first heard his idea: selling parrot cages. However, the logic was sound. The average price for a cage is £140 and there's no major brand in the space, meaning better margins from wholesalers.
To minimise risk, they built a dummy site first, listed some cages, sent some traffic, and looked at how many people tried to purchase the product, sending a message to those who did explaining that the shopping basket was not quite ready yet. The results were extremely encouraging. Launched in July 2009, justcages.co.uk now generates more than 1,500 orders a month, which are fulfilled by drop shippers. It has been followed by similar sites for fish tanks, rabbit hutches and dog kennels.
“We've kept the housing for pets theme,” Hutchinson smiles, but adds that there are endless niche markets that could be explored. They plan to launch a further 20 stores this year, with a vision of a multimillion pound turnover in 2010.
His ambition is, and always has been, to double overall revenues year-on-year while maintaining the same margins. “People always look a bit baffled when you say that and you do get some odd looks,” he says.
To his credit though, he's managed it so far. Revenues exceeded £57m in 2009, up from £27m in 2008 and £13m in 2007. “We already have a run rate that suggests we're going to do over £100m this year,” he adds.
And in 2011? “We'll take that challenge as it comes. It sounds unrealistic now, but hopefully we'll have identified opportunities by that time in order for that to be possible, too.”
Hitting these targets may well be helped by the acquisitive strategy that began in December last year. Hutchinson was looking for a “catalyst” for the consumer division, which he found in 10-year-old price comparison and switching service uSwitch.com, now the fourth and flagship consumer brand.
While he won't disclose how much the purchase set him back, uSwitch.com was first acquired for a reported £210m by US media firm Scripps Network Interactive in March 2006. As far as first acquisitions go, it's safe to say this was pretty ambitious. It was funded through a combination of retained profits and senior bank debt.
“We did our research and it's quite clear that it's still a very well-known brand. It's difficult to recreate that from scratch and requires a massive investment,” says Hutchinson, who envisages eventually integrating Omio and InvisibleHand within the site to get maximum exposure for their technology.
With most of uSwitch's traffic generated through search, he also saw an opportunity to use their expertise to boost revenues – and learn from the brand's success. “PR's been a massive driver for the uSwitch brand, and we want some of that magic to rub off on our other propositions,” he says.
The deal has shown him the real value of having non-executives on board. He first brought them on when, having hired about 20 people, he needed support. “I realised this is only my second job out of university, and I didn't actually have any management experience beyond what I was doing at the time.”
Help was at hand in the form of the late Frank Herman, former MD of Sega Europe, who came on board as non-executive chairman. Mark Philips, a partner in the corporate practice at media firm Harbottle & Lewis, joined as a non-exec director and more recently, Mark Opzoomer, former MD and regional vice president of Yahoo! Europe. All have helped him to recruit eight senior managers. This might be Hutchinson's first acquisition, but collectively his team have been involved in more than 100.
The deal has more than doubled the headcount from 55 to more than 100, something he describes as “scary but exciting”. Integration will be no mean feat, but it's something he's spending lots of time on and he says he was initially encouraged by a number of shared cultural signifiers. Following one-on-ones with all the new team, he's arranging presentations on different areas of the group from key staff members.
“Sharing the knowledge between the two groups is really important,” he says. “This is how you foster innovation, by people seeing what the other areas of the business are doing. They might have great ideas; when something's your day-to-day role and you've got tunnel vision, you're not necessarily going to be the one who innovates in that area.”
A rebrand that hasn't even extended to the signage in the Camden offices yet will also see the TrafficBroker name ditched for good; the search division is now called Forward3D. “We wanted to show that we do more than just broker traffic; even as a search division, we deliver great technology for our clients and we do a lot of commercial work for them too. I think Forward as a name represents what we're trying to do. We don't really look over our shoulders too much.”
An innovative culture requires the ability to learn from your mistakes – his have taught him to set clear targets and metrics for new projects. If something isn't working, you have to be prepared to walk away.
“In a business you could be looking at several channels of revenue. If one isn't working out, don't flog yourself silly trying to make it work,” he says, although he concedes this can be hard to come to terms with. He learned this lesson the hard way with a project in the competitive local review space, which never launched.
“It's very difficult to get someone to switch from a site they're comfortable with. It has to be much, much better. We didn't appreciate that. We thought if we created something a little bit better, everyone would move across. We put too much money into the project before we realised that wasn't going to happen.”
While Forward 3D, which works with clients such as Hilton, ebay, Play.com and Skype, still accounts for most of the group's revenue, Hutchinson hopes to see a greater balance between search and content sites in 2010. New ideas will always be encouraged, but he is conscious of not biting off more than he can chew.
“Because none of the equity is owned by people outside of the company, we are masters of our own destiny. If we want to sell parrot cages or go off on a different channel, we have the flexibility to do that. There's a lot of opportunity out there across the group; the challenge for me in 2010 is working out which ones to prioritise to make sure we don't lose focus.”