In the late 90’s and early 2000’s hundreds of internet companies were sprouting up weekly; entrepreneurs and investors saw the value of the nascent medium and wanted to get in early. One of the major flaws of internet businesses at this time was the way they were measuring success. Instead of using revenue or profit as an indicator of success, they were measuring growth via an increase in users or visitors. Entrepreneurs and investors justified using new metrics because it was a new medium. This led to unsustainable business practices and the dotcom bubble bursting.
When the cost of capital is low, it is easier for businesses. When cash becomes scarce, only companies who have built a sustainable business will be left standing when the dominos fall. There will always be ups and downs in the market and focusing on building a sustainable business when times are good will enable a company to continue operations when times are difficult.
We recently caught up with Jamie Hill, CEO and Founder of adMarketplace, a search advertising company which launched two months before the dotcom bubble burst in May of 2000. The challenges that adMarketplace faced were bad timing, capital was difficult to obtain, and their business was based on a new unproven medium. Jamie said “I learned the hard way that the company had to be nimble to stay alive.”
Launching a self funded internet business in 2000 has defined the core of the organization for adMarketplace. “It was important to me that we build a business that limits dependency on others,” says Jamie. Because they focused on being self sufficient, adMarketplace opted to build everything in house and invest heavily in talent. They also own their own data (which is an asset in their industry). Being self sufficient saved adMarketplace in 2006 when an exclusive agreement with eBay ended. They had to reinvent themselves, and had built the company in a way that allowed them to so. They had the data and client relationships to continue because of the decisions that they had made in the beginning.
According to Jamie, they were able to build a sustainable business over the years because they were realistic. “You have to be able to ask the tough questions and make the hard choices. We weren’t afraid to walk away from sunk costs to survive. Every step of the way we’ve outworked everyone else and prioritized knowledge wealth. We focused on building a transparent, healthy network and as it turns out, that’s great for building a successful business”
How would you build a sustainable business?