Life in the Fast Lane
Lycos leader Robert J. Davis
cruises down the information superhighway
By David T. Gordon
When you sit across from Robert J. Davis, BA'79, H'00, move to the edge
of your chair and listen real close. It's the only way you'll catch everything
he's saying.
The words stream out of him like they're moving across a broadband connection.
He's coiled in his chair, hands clasped together. Every so often, the coil
springs. Davis's hands shoot through the air as he makes a point, then
recoil just as quickly, locked and loaded. He's talking about his company,
Lycos, and how in just five years he's taken it from a one-man show with
a proprietary Web-search technology to a big global media firm, sparring
with the likes of AOL, Yahoo!, and MSN.
On the wall just outside his office, a sign reads, "You let up,
you lose!" You ask what that means to him and brace for the answer,
which comes at top speed with a natural-born salesman's conviction: "It
means every day is a challenge. It means it's easy to let adversity get
you down, easy to let it slow your success. What drives the success of
this company is the intestinal fortitude of a thousand employees. We are
here to capture new users of the Lycos network each and every day of each
and every year."
Whew.
Davis smiles. At forty-three, the Lycos president and CEO has still
got a boyish grin and an iron-and-velvet manner that is at once charming
and no-nonsense. And if he talks and acts like a man who's trying to squeeze
thirty-six hours of work into twenty-four-hour days, who can blame him?
Steering a company like Lycos in this e-conomy is like driving a dark,
country road-in the rain, with weak headlights.
The rules of the road
In a business where change is measured not in years or even quarters
but in weeks and days and hours, look in the rearview mirror too long or
try to look too far up the road, and you're liable to find yourself in
a ditch while your competitors-not to mention investors-zoom ahead.
That's especially true lately. The Internet economy has lost some of
its luster this year, with a wave of dot-com failures, postponements of
high-profile IPOs, and mergers and acquisitions that promise to reshape
the industry-but as what? "No analyst on Wall Street wants to talk
about the growth of Lycos over the past year," Davis points out. "They
want to know what we did last quarter, what we did last week."
So in his Waltham office west of Boston, as he gobbles down a healthy,
late-afternoon lunch of salad and seltzer, Davis brushes off questions
about where Lycos has been and where it will be in five years. His focus
is not What Was or What's Coming, but What's Now. Ask about the past, and
his answers get clipped. The future he'll leave to soothsayers. What's
Now looks pretty good.
In May, Davis swung a deal to sell Lycos to the Internet access provider
Terra Networks, a subsidiary of Spanish telecommunications giant Telefónica,
for $12.5 billion in stock. As part of the deal, which Lycos shareholders
were scheduled to vote on this month, Davis would become the new chief
executive of Terra Lycos and manage its operations from Waltham. If approved,
the Terra Lycos merger would instantly create an on-line network extending
to thirty-seven countries and sixty million customers, including the potentially
enormous Latin American market.
Balanced, broad strength
The company would have some big backers, too. Telefónica
would provide telephone, cable, wireless, and satellite access to distribute
Terra Lycos content. In addition, German media conglomerate Bertelsmann
agreed to invest $1 billion in the new company over the next five years
for advertising and other services. That would give Terra Lycos privileged
access to Bertelsmann's extensive properties, including books from Random
House, music from BMG, television, movies, and other media. The four-headed
Hydra of Lycos, Terra, Telefónica, and Bertelsmann would challenge
Time Warner and other on-line media giants for shares of an expanding global
Internet market.
Given the size of the Terra deal, it should come as no surprise that
Davis is confident. Yes, he's operating in a cutthroat market, one that
seems to change almost daily. But every market is cutthroat, he points
out, and in that respect the "new" Web-centered economy is no
different from the old. In fact, to the Chicken Little set-those who greet
every dot-com failure with a tsk tsk and contend the Web is overhyped-Davis
offers a bold riposte: The Internet, he says, is actually underhyped.
"I don't think we can imagine what impact the Internet will have
on our lives ten years from now," he says. "There's never been
a technology that has had such a profound impact on so many people in such
a short period of time. It's happened faster than the most passionate Internet
proponent could have guessed."
Just one example, says Davis, is "how the Net has fundamentally
changed social interaction, the way people rely on it for communication.
Look at the way e-mail has replaced the spoken word, the telephone. Look
at how message boards and home pages have replaced dialogue." He pauses,
pulls back his hands, and lets them fly again, slapping at the air to punctuate
points. "'Replace' is maybe not the right word. 'Supplement' is the
right word. But the result is a whole different experience. We communicate
differently now. It's revolutionary."
E-politics and other shifts
Davis points to commerce and politics as areas where the Internet is
driving similarly revolutionary changes now under way. The Cambridge consultancy
Forrester Research estimates that on-line business-to-business transactions
alone will reach $40 billion this year; that doesn't include consumer "e-tailing"
at sites like Amazon.com. In politics, meanwhile, the first presidential
election in which much of America has on-line access is a couple of months
away.
Many hope the Internet will foster more participation in the democratic
process, by offering voters more information and, perhaps in the near future,
by bringing the ballot box to the desktop. In other words, as extensive
as the changes brought about by the Internet are, there's room for plenty
more revolution.
Ultimately, Davis is a salesman, a guy who works the numbers, not a
computer geek who stumbled into Web wealth while fooling around on the
computer at three a.m. as a college student. So it's not surprising that
when he explains his bullishness on the future of the Internet, he doesn't
rely on theory to make his case. He bases his assertions on What's Now.
He tabulates the numbers of potential customers he sees across the globe.
Right now, in mid-2000, he estimates there are ninety million Internet
users worldwide (about sixty million of them in the United States). He
expects that number to double every year for each of the next four. If
his prediction is true, the number of Web users will grow fifteenfold,
to 1.44 billion-one quarter of the earth's population-by 2004. Even if
he's only half right, that's an enormous pie to divide, one that the black
Labrador that has become Lycos's trademark can sink its teeth into.
Gorillas in the mist
That's assuming Terra Lycos can beat out its competitors, not just the
ones Davis can see, like AOL Time Warner, but any unknown, unnamed gorillas
that will join the feast. "There are some behemoths out there, some
twenty-first-century juggernauts that are being created that I can't even
name now-I'd be buying their stock if I could-but they're out there, and
they will emerge as the leaders in this next century."
If anyone knows how quickly things can change in four years and how
fast behemoths rise, it's Davis. You ask him if he ever thought he'd see
the words "Robert J. Davis" and "$12.5 billion" in
the same sentence, and he blushes. "Well, it's not me that's getting
the $12.5 billion. It's the company," he says.
Okay, let's try that again.
"Did I ever think Lycos would? Probably not."
Probably?
"Look, it's been more successful than I ever expected. It's exceeded
my most optimistic dreams."
That's better, though it still may sound like understatement coming
from someone who admits that as late as 1995 he "didn't know that
much about the Internet" and had never used e-mail.
Davis was directing sales and marketing for a small computer start-up
after sharpening his business skills at Wang Laboratories and General Electric.
One day, he got a call from a friend who used to work for him in sales
at Wang. The friend was now with the Internet investing firm CMGI. They
had $2 million to market a new search-engine technology developed at Carnegie
Mellon University and nobody to do the job. Did Davis know anyone who'd
be interested? Davis recommended himself and became Lycos's first employee.
Answering the call
He rented a cubicle and a phone, and got busy building an audience and
selling ads. Lycos quickly outgrew its role as a mere navigational tool,
evolving into a Web "portal," or gateway, to the entire commercial
Internet. By adding e-mail, news, weather, street maps, bulletin boards,
games, hyperlinks to other sites on topics such as "relationships"
and "religion," and eventually audio and video entertainment,
Lycos, like other portals such as Yahoo! and MSN, was able to lure more
visitors to stay on site for longer-all a top-notch salesman like Davis
needed to sell millions of dollars in ads.
As interest in the Web took off in early 1996, Lycos rode the wave to
huge ad revenue and a successful public stock offering. Davis then turned
his attention to gobbling up other dot-coms with attractive brand names
and diverse audiences, companies like Angelfire, Webmonkey, Gamesville,
MailCity, Quote.com, Tripod, Wired News, and WhoWhere.
With this multibrand model in place, Lycos has evolved from a search
engine, to a portal, to what is now a global network of media properties.
The only major bump in the road: a failed merger with Barry Diller's USA
Networks in early 1998, vetoed by a major shareholder. To complete its
evolution, Lycos in June decided to outsource its original Net-search business
to a Norwegian firm.
One entity, many options
To hear Davis tell it, each move-from the cubicle with a paltry $2 million
in start-up funds, to a 1,000-person company that just sold for $12.5 billion-was
part of a seamless plan. "I don't think we've changed at all from
our roots. We've expanded, but essentially we are a media company that
succeeds based on our ability to build a large audience and to sell that
audience to someone in the same way NBC or ESPN attempts to do that.
"When you look at what we've become, we've been able to add multiple
channels, or sources of content, to what we offer. When we began, we might
have been the equivalent of, say, NBC with only a news department. Now
we're NBC with news, sports, entertainment, weather, games, finance. But
our basic mission hasn't really changed at all."
In many respects, the comparison to the big TV networks makes sense.
As major portals like Lycos offer more on-line content and services, such
as banking, and as wireless Web technology develops, they may indeed eclipse
the networks. Just as television offered what radio did (sound) plus more
(video), the Net trumps TV because it's interactive. Viewers become participants.
That's not to say Davis expects new media to replace more traditional
media. He calls talk of an old economynew economy dichotomy "hogwash."
You ask if the Web will mean the death of publishing, and he lurches forward
in his chair and chops at the air with his hand: "Nah! I've never
viewed it that way. The Web is an extension of publishing and all forms
of media. It's another vehicle to access information. The difference with
the Web is that it is essentially interactive. Other media aren't."
R-E-S-P-E-C-T
The comparison with mainstream media and network TV serves another purpose.
For Davis to liken Lycos to NBC is a way of saying, "We're here to
stay. We belong." As the Net industry shakes out its bad apples and
investors-especially those contributing to the estimated $100 billion of
venture capital for e-businesses this year-hold their collective breath,
Lycos and other big new-media players are staking claim to a place of respect
in the global market. These are not upstarts. When you read about fly-by-night
dot-coms with phantom stock value that take a three-month dance as the
Next Big Thing, don't think Lycos, says Davis.
Davis is sympathetic to government efforts to crack down on new media
companies that lie about their financial health to draw capital. "My
suggestion that the Web is underhyped is not to suggest that there are
not a large number of entities in the marketplace that are lacking in business
models and earnings and all the other things that keep a company operational,"
he says. "There always have been, and there always will be.
"There are so many Internet companies right now, probably four
hundredodd companies, and when you have that volume, you'll have some
people who act appropriately and some who will try to bend or break a rule.
When that happens, the government is right to step in and try to maintain
order.
"No company has a right to survive without earnings," he adds.
"I've always believed that, and it's the way we run Lycos. We put
ourselves on a path of profitability and generate earnings for our shareholders.
Without that, we can't survive. But old economynew economy? Look,
if I earn a dollar publishing a magazine or earn a dollar publishing a
Web site, that dollar has the same worth regardless of what I'm spending
it on. In the end, it's still about earnings."
Web challenges ahead
Still, there are particular issues unique to the Internet. Davis points
to concerns about how data are collected and used as an issue that "government
regulators will want to keep an eye on." He contends, however, that
on-line identity theft and other privacy violations are "quite insignificant.
A Web site knows less about you today than American Express does,"
he says.
Other concerns include the accuracy of information and data, and how
to "protect the unprotected, our kids, from hate, violence, and pornography
on-line. There are unique challenges that need to be worked out. Of course,
with any new market or with anything that brings about such enormous changes
so quickly, that's to be expected."
You ask Davis to share some of the best business principles he knows,
and he doesn't hesitate-he rattles off a list with practiced certainty.
"Number one: People matter most. Number two: Profit is not a four-letter
word. Number three: You let up, you lose."
You repeat after him, Profit is not . . . and he springs forward in
his seat.
"A four-letter word, that's right! There was a period of time in
Web development when your value was determined in a perverse way by how
much you could lose, not how much you could make. We [at Lycos] were regarded
by some in the industry as the Antichrist, in the sense that we were out
preaching earnings and profitability and shareholder value. We were saying
things people didn't want to hear."
Age-old wisdom
Davis's emphasis on business fundamentals in a high-speed and sometimes
cavalier Internet industry can seem charmingly old-school. At forty-three,
might he be considered by a lot of brash young e-millionaires as an old
guy? "I am," he says, almost proudly. "Maybe that's why
we've done so well. When I started in this business, I already had a few
years of mistakes under my belt. I understood what not to do."
In contrast to the California cool exuded by young competitors like
Yahoo! cofounder Jerry Yang, Davis relishes his urban New England roots.
He grew up in working-class Dorchester, a kid who lost his mother when
he was thirteen and his father when he was twenty. Ask how such tragedy
shaped him, and Davis brushes off the question-saying, "I'd have to
hire a couple of therapists to tell me"-then ventures a guess anyway.
"I learned to be very independent, to make my own decisions."
The Jesuits who taught at Boston College High School get credit for teaching
him to love learning. "They created a culture where learning was good
and there was peer pressure to excel. I learned to become an excellent
student."
When Davis started thinking about college, Northeastern's co-op program
beckoned. He wanted to follow his father into law, so he started as a criminal
justice major. But none of the co-op jobs in criminal justice appealed
to him, so he transferred to business and worked three terms at IBM. After
graduating summa cum laude, Davis shunned law school, married his childhood
sweetheart (they now have three children), and went into sales in General
Electric's data communications group.
"Without education, a kid from Dorchester wouldn't be where I am
today," he reflects. "Education is the great equalizer in that
anyone who can afford it has an opportunity to succeed-and there are countless
examples of people coming out of the halls of BC High and Northeastern
who demonstrate that every day.
Launched by co-op
"Northeastern put me into the world of computers and the world
of sales. It's fair to say that without the co-op program and the opportunity
for real-world experience, I never would have ended up at Lycos."
Northeastern returned the compliment last June, granting Davis an honorary
doctorate.
The real-world lessons Davis learned on the streets of Dorchester and
in the halls of Northeastern are put to good use every day at Lycos's headquarters.
"I'm a very hands-on guy," he says. "I like to think of
myself as a benevolent dictator. I'm not afraid to make a decision and
go against the grain. I seek consensus and satisfaction. I seek to put
smiles on people's faces. But I'm not embarrassed to say, The buck stops
here."
Davis knows that, like any success story, his good fortune was a matter
of right place, right time. "But my father used to say, 'Luck is when
opportunity meets preparation.' So I don't attribute it all to luck. I
was ready to fly," he says. "But, sure, the timing is important.
The Internet explosion worked out very well for me. Ten years later, this
opportunity would not have been possible. If I had come along twenty-four
months later, this wouldn't have been possible."
He pauses ever so briefly to reflect on that happy twist of fate. Then
he adds with a sly smile, "I wouldn't suggest that anyone build a
portal on-line today. It's a fairly well-established business."
David T. Gordon, a freelance writer based in Cambridge, wrote about
health-care economics in the January issue. He is the editor of The Digital
Classroom: How Technology Is Changing the Way We Teach and Learn.
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