Jason Xenopoulos has been ingrained in the making of South African internet from day one. In the dot com boom and bust he lead a band of young (now familiar) internet executives in building Metropolis Interactive. In true Silicon Valley type fashion they raised (and burned) over a R100m trying to build a company in a very under developed internet sector (watch the interview to find out what happened).
Many years on he came back and convinced the same guys he was working with before at Metropolis and VWV Interactive to merge their growing companies and start a new mega agency – enter Native. I sat down with Jason as he gave me insight into how Native came about and how they are overcoming some of their biggest challenges. Full transcript below.
Charl: Jason Xenopoulos, welcome to Bandwidth Blog video.
Jason Xenopoulos: Hi Charl, thank you.
C: Before we get into the making of Native, I want to talk a little bit about your history. I’ve always been quite fascinated about the dot com boom and bust in South Africa and you were right in the middle of the trenches with your Metropolis Transactive business. Tell us about you know what the landscape was like back then and you know listing the entity on the stock exchange etc…
JX: K, It was a, It was, It was kind of…I’ve often sort of described it as the wild west. I mean it was, there was, there was an incredible sense of possibility in South Africa at the time as there was everywhere in the world. I think you know in retrospect when I look back, what we experienced in South Africa toward the end of the 90’s and the kind of dot com boom and bust is very much a microcosm of what was happening in Silicon Valley and the rest of the world. So at the time M-Web had just listed on the stock exchange and had raised a whole lot of money and iAfrica.com as a portal was very much the main competitor to M-Web at the time and Primedia were paranoid that M-Web having listed and raised all of this money would be able to out gun them in the consumer portal space so they, they asked me if I would take iAfrica.com and a number of other Primedia internet assets and list them seperately so we could raise money and give iAfrica.com the same kind of boost that M-Web, M-Web had. And so I was given 90 days to form the company, develop the strategy and list it on the stock exchange which we did in, in December 1998, we raised a hundred million Rand for Metropolis and then over the next 18 months we proceeded to spend all of it.
C: Crazy story. Okay, making of Native. Whose idea was it and you know who approached which of the companies and like what was, what was sort of the feeling from you know the shareholders of the other businesses to sort of not give up their business but merge into the new entity.
JX: So Native was very much a sort of a personal, personal vision and dream of mine. It’s one that emerged really over a 10 or 15 year period so after Metropolis I got out of the digital space and went back to making movies which is what I originally trained to do. I studied film at New York University and I went back to making movies and in the process of making movies I actually got drawn into mainstream above the line advertising and I ended up as the executive creative director at Y&R handling the MTN account and I also relaunched the Pick ‘n Pay brand across South Africa for them. And during that time I continued to watch what was happening in the digital space and what was very evident to me was that traditional ad agencies in South Africa were, although they were the custodians of the brand and they understood what they needed to do in order to grow their brands they didn’t understand digital and they weren’t moving into the digital space quickly enough. But what I watched from the kind of outside of the digital industry was just as much reticence to move and change and evolve among digital agencies so while people said oh the traditional agencies aren’t becoming digital quickly enough, I found digital agencies in South Africa to be incredibly myopic. They were in most cases glorified web development companies, they’d all grown up out of the web development industry and none of them understood what it meant to build a brand either in the digital space or in, in you know the media space as a whole. And what became clear to me was that as we were, as we moved forward in South Africa there would be an opportunity for a new kind of agency what RGA, a digital digitally born company in New York that I look to often for, for reference, what they described as an agency for the digital age so it was clear to me that in South Africa there was an opportunity to create just that. So I sort of looked around and and tried to get a handle on who the digital players were in South Africa and began talking to them and I spoke to a whole host of, of digital specialists about the possibility of creating an integrated digital agency group so my intention originally was that I would go out and raise a bunch of money and then I would acquire a stake, a smallish stake, lets say 30 to 50 percent of an, of a number of digital specialists and we’d build this integrated digital agency group. Not dissimilar in many ways to what WPP or Omnicom have done in the traditional communications space. But as I started those conversations the three companies that bubbled to the top very quickly were Cambrient, the shareholders at Cambrient were my partners back in the 90’s and a company called VWV Interactive that we started together as well as Brandish. Brandish was a mobile specialist that was owned and run by Angus Robinson who worked with me at Metropolis so I knew him well and then Stonewall was a company I, I had no history with but got a long with very well when I met them. And those three companies very quickly bubbled to the top of the pile principally because they were all great at what they did so Stonewall was a very designed oriented, very good at that. Cambrient was very technology oriented, very good at that and then Brandish was a mobile and, and social media specialist and it was kind of what I sometimes call though in many ways you know the holy trinity because not only were these three brands at the top of their own piles but they all did different things so there was very little overlap in fact. What Cambrient was good at Stonewall was not good at. What Stonewall was good at Brandish was not good at and vice versa and so it became clear very quickly that actually if we put those three companies together rather than the six or seven companies I have been speaking to, actually the power would be in those three companies. But as soon as we started talking what we realised was that a kind of consortium model like a WPP or an Omnicom model where we bought a stake in the companies but let them operate independently would not allow us to create this agency for the digital age that we had in mind. It would simply give us you know a collective of, of skills but it wouldn’t really allow us to offer a new service. So we decided quite quickly to actually roll 100% of all three companies into a single entity called Native and Native would be a completely new kind of digital agency, a digital agency that was not simply about web development or banner ads or mobi sites but a digital agency that could develop brand strategy, could build brand strategy and could ultimately grow from being a digital agency into an agency for the digital age.
C: Stonewall, Cambrient and Brandish all had their own company cultures. You know when the merger was complete, did a new company culture emerge automatically or was it something you guys had to work hard on?
JX: A new company culture emerged but it certainly wasn’t automatic. Culture is something we’ve worked incredibly hard to build in Native so you know what was very clear to me in the beginning and it’s one of the reasons we combined these three companies is that from my previous experience at Metropolis what I know is that success in a merger doesn’t actually come from strategy and structure, it comes from culture and chemistry and while there was a similarity of culture, certainly a similarity of world view in the minds of the leaders of those three companies, they were culturally very different when you got down to the granular specifics of each and so we had a, a very clear idea of what kind of company we wanted to Native to be and we’ve gone about doing a lot of work, putting a lot of money, a lot of time and bringing in some really great organisational development consultants to help us to build and define the Native identity – What is Native? What does it mean to be a Native? What does working in, in Native give you that you don’t get anywhere else? And I think that’s, I think that we’ve managed to build very quickly, a very defined and, and increasingly robust culture but it certainly hasn’t been automatic, it’s taken a lot of hard work.
C: Now all three businesses were in different stages of their company history like different sizes in terms of turnover, staff, you know maturity of their technology. How did you guys work out the shareholding you know in terms of the different founders and was it a good deal for all of the shareholders?
JX: So, that was obviously the biggest, the biggest hurdle when we did the merger itself was to come up with relative values so because we weren’t bringing in any big outside investors which was initially as I said, my intention was to go out and raise a whole lot of money to, to make this happen. Actually when we decided to fully merge the three companies, no one really wanted to give up any equity. Everyone was so excited about the new model that we decided not to bring in any outside shareholders and to rather fund the business from within so I was the only person who actually bought into the company outside of those three merging entities so the absolute value that we ascribe to each company wasn’t that important, what was as you say of vital importance was the relative values of all three. So we had a great corporate finance consultant, a man by the name of Steven Chapman who worked very closely with me right from the beginning. As soon as I started speaking to the three companies we brought him in and he helped us to developer that valuation methodology that we could apply to each of the three companies that would give us a set of relative values and that formed the basis from which we then negotiated to get to, to an agreement. It actually was incredibly quick process so we held it off for quite long. We spend most of the initial conversations and discussions talking about strategy, talking about goals and intentions so that we were aligned and we were excited about what we were trying to develop and only when we knew we were all on the same page did we sit down and say okay let’s figure out the relative values and that did happen quite quickly. Ultimately I think that it was a good deal for everybody. I think that there are, you know, there’s give and take so I think in some instances some shareholders got more and in other instances other shareholders got more for different things but at the end of the day Cambrient could not have become Native without Stonewall and Brandish, Brandish could not have become Native without Cambrient and Stonewall and so forth. So at the end of the day I think everyone got a good deal because the company we have ended up with is, is, has so much more potential.
C: How did you handle you know senior staff or senior executives for example someone that was the lead creative or lead developer in one of the businesses. How did you maintain their position in the new business, the new co. and keep them motivated and you know has there been lots of staff churn?
JX: So I think that there has been a fairly high degree of staff turnover but I don’t think it’s necessarily related to the first part of your question so you know just on the, on the turn over or staff churn topic you know any merger has a high degree of, of fall out in it and principally in our case I think the thing that was most difficult for staff to adapt to is that they were coming from regardless of which of the three businesses they were in a small business mentally, 20 or 30 people in a team to a company that now has 160 people in it and that kind of environment is quite different and requires a different mind set and that’s been difficult for people, you know quite frankly for some people it’s been a great opportunity for other people you know they would rather have remained part of a small team. As far as the, you know figuring out where people fitted within the combined Native entity that you know I don’t think we’ve really lost many people because they felt like they weren’t able to enjoy the same kind of opportunity in Native that they had in the previous company. We have a vast structure now that includes everything from strategy and concept through to UX, social media, media, front end development, back end development, project management, account management so within Native there are a number of areas where people who had a growth plan in the previous underlying companies now have growth opportunity in Native so I think we’ve managed to do that really well. I think we’ve martialled our resources well and focussed them in the right areas.
C: Now Brandish was you know really strong mobile, social media company. Stonewall you know brilliant designers. Cambrient had a great you know software CMS licensing business and build various platforms. Are those qualities still evident today as the like the strong characters that Native has?
JX: I think they, I think they are. I think it is an area that we have to, that we have to focus on not to lose so as you move from being a niche specialist to being a broad full media, full spectrum or full service offering you do tend, you do tend to potentially dilute some of that specialisation. We still have a very very keen focus on design and on technology and I think a lot more depth in our social media team than any of our competitors but as we move forward we have to make sure that, you know, that we don’t lose that specialisation because obviously as you become full service that can happen.
C: Speaking of competitors who do you see as your competitors locally?
JX: It’s a difficult question because I think that the agency that we’ve built in Native and are continuing to build is really very different from anything else in the industry. On the obvious level, the, you know Quirk, Aqua, Gloo, Hello Computer are you know considered the, the sort of leading digital agencies. I think we’re quite different from, from all of those companies. I think that we have some things in common with them as we do have some things in common with traditional agencies as well. So I, you know, I think that you know, they would be considered our competitors, I think that we’re building something quite different.
C: In terms of your end game, I mean, what’s the end game for Native? Are you guys going to list this thing? Are you going to get acquired? I mean you’re one of a few, or handful or big agencies that haven’t been acquired yet. Obviously you’ve got quite a unique start with the merger but the likes of yourself and Quirk sort of still operating independently. Aqua Online, Gloo, Jupiter etc…have all been acquired. You guys, do you have an end game in mind or are you in this for the long run building a massive proper business.
JX: I definitely don’t think we’re going to list. I’ve done that once and I don’t, I wouldn’t want to go there again. I, you know, I think the jury is out. Obviously when you build a brand like Native that is digital in an emerging market like South Africa you end up being quartered by a lot of global players so, so, we’ve you know had advances from almost every major communications group in the world and obviously we remain to those conversations. At this point in time we are an independent company and that independence allows us to do things that we think are important so you know for now there is no plan. Our end game is to move from being a digital agency to being an agency for the digital age whether we do that on our own or with a partner remains to be seen.
C: A conference call. This a…this interview is, it’s been one year since right?
JX: Sorry dude.
C: The interview has been one year since the merger right. What’s been a massive highlight for you?
JX: A massive highlight for me I think is that we’re all still here. I think in all seriousness I think that I think we’ve had a great year. There’ve been ups there’ve been downs. We’ve won more awards than I expected. We’ve done well from a revenue point of view. I think that, I think where we are as a business today is the highlight. The fact that we have such a strong basis off which to build this agency for the digital age. I think personally the highlights are ahead. So you know for me it was always the first year was about consolidation. It was about keeping this thing on the road, bedding it down, years two and three are about our extension phase, starting to extend into new areas, building conceptual creative abilities that you’ve never seen in a digital agency before, strategic brand strategy that you’ve never seen in a digital agency before. And then beyond that is the differentiation phase, the phase where we take this thing that we’ve built that no one else has and really start to exploit it and leverage it in order to create market leadership.
C: Winning awards like Loeries and Bookmarks you know entering, gunning for those. Is that part of agency life and agency business?
JX: It definitely is. We haven’t been at all fixated on awards this year and that’s principally because we didn’t want to focus on creating one or two great pieces of work. We wanted to focus on creating a business that could create great pieces of work over and over again. So this year was not about, you know a short end goal. It was about building the platform for the future. But awards are really important for a number of reasons. The first reason is that it attracts talent. If you win awards great people wanna work for you and we wanna attract the best talent in the industry. Two, it retains and inspires the existing talent so people that work in the company wanna win awards, it gives them new inspiration and motivation so it’s important for us for that reason. And finally, you know it, it creates awareness of the agency among clients and the best way to market an agency is to win awards, is with the work itself so it is part of agency life and going into this year it will become a big priority for us.
C: Jason X thank you so much for your time. We really appreciate it. Congrats. What you’ve done with Native – you and your team of course – and good luck in your mission in making Native what you want it to be and keep reading Bandwidth Blog.
JX: Thanks Charl.