Linkshare Shuffle
By: Lisa Picarille
The executive changes at the affiliate network signal the end of an era and a move toward global expansion.
In early February, just six months after LinkShare agreed to be acquired by Japan-based e-commerce portal giant Rakuten for $425 million, the founders of the affiliate network have decided to step aside.
The resignations of Chairman and CEO Stephen Messer and President and COO Heidi Messer, who founded LinkShare in 1996, were not surprising according to industry watchers, but definitely signaled changing times in the performance marketing and affiliate marketing space.
Beth Kirsch, a long-time affiliate manager, who is now group manager of affiliate programs at LowerMyBills.com, called it "the end of an era."
LinkShare was one of the last big affiliate and performance marketing networks to finally be swallowed up by a big conglomerate. LinkShare rival Commission Junction was bought for $58 million in cash and stock by ValueClick in October 2003; ValueClick previously purchased affiliate network BeFree in March 2002 for $128 million in stock. Performics was acquired by DoubleClick in a cash deal estimated at $58 million (plus an earn-out of up to $7 million) in May 2004; DoubleClick was acquired in July 2005 by Click Holding Corp. in a deal valued at $1.1 billion. The new era of performance marketing will feature Steve Denton, most recently LinkShare's senior vice president of client development and distribution services, who has been tapped to head LinkShare. As president, Denton, a six-year LinkShare veteran, will lead all day-to-day operations. As part of those duties he will continue to oversee all sales efforts, as well as affiliate services and support. His new duties will include responsibility for account services, the search team, marketing and technical sales consultants.
Denton will report to John J-H Kim, CEO of Rakuten USA and executive vice president of international business headquarters, who will handle LinkShare's legal, technical and finance functions.
"It's very much like how Heidi and Steve split up their duties within the organization," Denton says.
With the departure of the company's founders, LinkShare faces some new challenges. The biggest, according to Denton, is to "move from an organization that was a privately-held New York-based affiliate network into a global role that it was intended to play, while still being the leader in affiliate and performance marketing."
Rakuten, a public company with a market capitalization of $10 billion, bought LinkShare because it was looking to break into the U.S. market and wanted to establish an immediate presence. Founded in 1997, Rakuten has several divisions and is involved in e-commerce, media, travel and financial services, and owns a baseball team in Japan (the Tohoku Rakuten Golden Eagles).
"Heidi and I have taken LinkShare to a great place, but now it needs to become a Rakuten company. This is the best timing - the fourth quarter is over; Valentine's is almost over and now LinkShare has all summer to beat Google and Yahoo," Steve Messer says.
Timing is everything. Denton says that by putting all the pieces in place during the spring time frame gives LinkShare "a runway to get on track with new initiatives, new leadership teams and the company's continued global expansion efforts, in time for the critical back-toschool period and the hectic fourth quarter" - a time when LinkShare historically generates a hefty chunk of its revenue.
LinkShare is on track, according to Denton, to expand into the U.K. and China sometime in 2006. However, he declined to disclose specifics.
LinkShare and Rakuten also have an integration team of executives, including Denton and Kim, to deal with the merger of the two companies, which includes establishing best practices, as well as streamlining financial reporting and human resource services such as employee benefits.
Denton is vehement that integration is not a euphemism for "consolidation," which is then often translated to "elimination" as in downsizing when a smaller company is acquired by a huge conglomerate. "Rakuten bought LinkShare for its leadership in technology and the affiliate marketing space, not to rip the company apart," Denton says.
But there is plenty of change happening. Steve Messer says that he and Heidi needed to move on in order to facilitate that growth. Consultant Shawn Collins says the transition should be smooth.
"It might affect the culture. Denton has a different personality, but it's not like bringing in a stranger. Everyone is familiar and comfortable with him. And people are really excited." Messer called his departure a continuation of the global expansion plan that he and Heidi had envisioned when they sold the company to Rakuten.
Messer says that during his tenure, he increasingly saw LinkShare's main competitors less as the other affiliate networks (Commission Junction and Performics) and more like the major search and portal players such as Google and Yahoo.
"We think that Rakuten is doing a whole lot more to be competitive in the U.S. and we can help them go head-to-head with Google and Yahoo, while the partnership with Rakuten is going to help LinkShare's presence in markets outside the U.S," Messer says. "Rakuten has a huge appetite going forward. I think in a few years people will be talking about how they own the whole market. The strategy we put in place will prove itself out."
Still, Messer says leaving is not easy. "I imagine it's like the bittersweet feeling a parent has when their children go to college. You're proud you've given them the skills to survive and do well, but you're sort of sad that they no longer need you to get along."
He claims his first taste of this occurred when he and Heidi spent most of 2005 in Japan negotiating a deal with Rakuten and he realized that "we had built such a great company and we were gone for nearly a year and the company did phenomenally well. They really didn't need us."
As for what's next for Messer, he says that after 10 years in the bustling performance marketing space, he's looking forward to a little "breather" and anticipates being "back in the game in the summer." He declined to disclose any specific plans, noting he's "still thinking about what I want to do."
However, during his time off, he says he plans to more fully formulate some new business ideas - all while sitting at the beach and doing some kite boarding. And of course, any new venture will include LinkShare co-founder Heidi Messer. "We are a team," he says.
Sources close to LinkShare claim it's no surprise that Steve and Heidi are leaving the company after each received a hefty payout from the September 2005 all-cash sale to Rakuten. Although LinkShare had investors at the time of the sale (including Mitsui & Co, Ltd., Mitsui & Co. (U.S.A); Internet Capital Group; and Comcast Interactive Capital, an affiliate of Comcast Corp.), Steve Messer reportedly owned 20 percent of LinkShare, while Heidi owned 11 percent. Steve's proceeds from the sale were said to be approximately $100 million, while Heidi got over $51 million, according to sources close to the company.
"I think it's obviously a good transaction for Heidi and I and the team," Messer says.
"Steve and Heidi should be proud of the wonderful company they built, the leadership position they established and the vision they had," Denton says. "All of us feel fortunate to have worked with them and we look forward to all the new challenges."
Tags:
linkshare, performance marketing, lowermybills, affiliate marketing, befree, rakuten, marketing networks, performics, doubleclick, valueclick, affiliate network, acquired, affiliate programs, messer, vice president, ceo, stock, portal giant, time affiliate, commerce portal,
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