31 January, 2000, international edition
Richard Branson is no techie, but he loves the web
How he's retooling his empire for the Internet
Sitting at one end of the salon of his elegant London townhouse, Richard Branson reluctantly admits he is no fan of technology. He doesn't even have a corporate office, preferring to work out of one of his four homes using little more than a phone and a red-bound ledger. Branson hasn't bothered to open the box containing a handheld computer that British tech company Psion PLC sent him as a present. ''Any time I try and use computers, they crash on me,'' he says.
That's Branson the technophobe. Branson the hard-charging tycoon of Virgin Group PLC is somebody else again. Flush from the December sale of a 49% share of Virgin Atlantic Airways to Singapore Airlines Ltd., Branson has found his Next Big Thing. Surprise: It's cell phone franchises and electronic commerce. On Jan. 12, Branson and an all-star team of investors assembled to bid for one of Britain's five next-generation mobile licenses, which promise to bring high-speed Internet and multimedia to cell phones. The expected price tag, when a winner is announced this spring: upwards of $800 million.
SELL EVERYTHING. Branson's vision is to expand Virgin into the cutting-edge technologies that will earn his 30-year-old brand a dominant place in digital Britain. He's pouring money into Virgin Group's Web site, Virgin.com, hoping to create one of the world's top 10 portals. Once established on the Web, he intends to sell consumers everything from cars and CDs to electricity, beginning in Britain and then rolling out worldwide. To expand from Virgin's existing offerings--which include financial services, air and rail travel, and mobile phones--Branson is gearing up to launch two or three stand-alone Net businesses every three weeks.
Branson contends his biggest advantage is his all-embracing brand. Virgin's red-and-white logo already adorns everything from wedding dresses to vodka. His sprawling empire, which extends to 340 businesses and joint ventures, might look to some like a motley collection. But Branson says it's perfect for e-commerce--a ready-made cyber-conglomerate waiting to be linked. ''Suddenly the Internet comes along, and I am able to say the last 30 years was all a carefully crafted plan,'' the 48-year-old jokes.
Indeed, Branson thinks the Virgin marque can be stamped on just about anything. ''We're lucky to have a brand that works with almost any business,'' he says. The only exceptions, he quips, are a modeling agency and a condom manufacturer--and he has majority stakes in both. Branson-watchers are impressed with the strategy. Most give Britain's best-known entrepreneur a good chance of succeeding.
Also working in Branson's favor are his flair for marketing and the shy charm that has helped him bring influential players to his projects. When gathering investors for his cell-phone license, Branson says, he personally landed Paul Allen, the Microsoft Corp. co-founder, at the last minute. Others backing Branson's bid include venture capitalists George Soros and J.P. Morgan International. Sonera Group, the Finnish telecom operator, and Britain's Marconi were recruited for technical knowhow. Other players include music giant EMI Group and Tesco, the British supermarket chain. ''Being a celebrity,'' observes Branson, ''means that it's easy to get through to just about anyone.''
Branson admits that he's late in seeing the power of e-commerce. By 2002, Europe's e-commerce revenues are expected to exceed $223 billion. And Branson is betting he can use mobile telephony to catch up with the likes of America Online Inc. in reaping some of the profits. He plans to deliver his Web offerings not only through PCs but also through his cell-phone ventures. Branson put his toe in that pond on Nov. 18, when he started selling mobile phones and services in a joint venture with One-2-One, a British mobile operator. He also plans to offer cellular services on the Continent. His ultimate goal is Bransonesque to the core: He wants to run his own network in Britain, with a view to possible expansion abroad. Virgin says now that it plans to bid for other licenses in Europe.
Making Virgin an Internet powerhouse will take some doing. Branson faces tough competition from global Net players such as Yahoo! Inc. and mobile wizards such as Vodafone AirTouch PLC, which are going to move increasingly into the service and content fields. He'll also run into some formidable local players, including Britain's No. 1 service provider, Freeserve PLC. ''There are a lot of people chasing that market,'' says Mikael Arnbjerg, analyst at International Data Corp. Arnbjerg thinks Branson has strong products but is weak on the kind of interesting content that draws traffic to most portals.
Branson's late start means it's important that he get Virgin.com going soon, says Adam Daum, e-business analyst at Gartner Group in Egham, England. Still, Virgin's bid for a piece of the online game is more than credible. As a brand, Virgin is unchallenged on its home turf. It is Britain's biggest advertiser, spending $250 million a year. ''Virgin is a very modern brand,'' says Daum. ''It's almost unique, particularly in Europe.''
Not least, Branson already has millions of customers used to visiting Virgin Web sites to book tickets, buy phones, or manage their finances. And in the next few months, Virgin.com will create a link that lets them bargain shop among Virgin's competitors before they buy. Branson's ISP, Virgin Net, with 800,000 subscribers, is already among the top three in Britain. Virgin Mobile, which sells phones, is on target to sign up the same number of customers by yearend. ''I would expect Virgin to become a major e-commerce player over the next few years,'' says Jay Marathe, head of consulting at Internet investment bank Durlacher Research Ltd. in London.
CASE IN POINT. Will Branson follow the big e-players into the stock market? The cyber-conglomerate he is assembling could be worth as much as $8 billion if Branson listed it, by some estimates. Branson admits he's attracted to such huge market valuations, and he doesn't rule out an initial public offering--of either the airline or his Net businesses--in five years' time. But an IPO isn't a priority. He prefers keeping his companies private, selling off chunks when he needs cash. The Singapore Airlines deal is a case in point. That netted Branson $979 million, money he'll now plow into his Internet ventures.
After more than 30 years of starting businesses, Branson is still firing on all eight cylinders. Internet ambitions aside, for instance, he recently announced plans for a low-cost carrier in Australia. But he is making more room for key aides, such as Will Whitehorn, the Virgin director who first suggested that Virgin go after a mobile-phone license.
Nonetheless, his team can still count on his trademark flamboyance. Branson kicked off his new mobile phone service by driving around central London on a flatbed truck with 20 nude female models holding mobiles under the slogan, ''What You See Is What You Get.'' A few months before, Branson went to New Delhi and rode a white elephant to Parliament to persuade the government to open India to Virgin Atlantic.
The elephant stunt worked: Virgin begins flying to India this spring. But Branson will get there first. With two friends, he left on Jan. 19 to ''be a hippie and bum around India for a week.'' He flew on British Airways.
By Kerry Capell, with Stanley Reed and Heidi Dawley in London
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