Rethinking the Model
Cliff Conneighton: Chief Marketing Officer, ATG
by Tom Zoellner
Vultures once circled above Art Technology Group (ATG), a software startup whose huge growth in the Internet’s early days had sputtered out by 2002. The dot-com collapse hit the company hard, and its core product, an e-commerce tool called an application server, was something competitors were selling cheaper. In 2001, ATG’s stock was trading for $125 a share; within a year, it was under a dollar.
Six years ago, ATG executives made a radical decision: They would use technology to reinvent themselves.
Specifically, ATG, led by Bob Burke, thought past its flagship product, which was developed by two graduates of MIT’s Media Lab in the days before the World Wide Web.
E-commerce had grown quickly in the mid- to late 1990s, and ATG had thrived on licensing fees, even as competitors mimicked its product.
Then came the tech meltdown — and the brainstorm that saved ATG. “We decided that a really good e-commerce experience depended on bringing that experience beyond the Web site,” says ATG chief marketing officer Cliff Conneighton from the company’s Cambridge, Massachusetts, headquarters.
So ATG executives chucked their model. Luckily, because of their early sales success and IPO, they had a lot of cash on hand. In order to ensure long-term financial health and bring their stock price back up, however, they challenged their engineers to develop versions of the basic platform that recognized customers’ buying patterns and tastes, enabling clients to be more strategic about offering sales and discounts. ATG’s software was able to determine, for example, how much time a customer spent on a particular page and guess the types of products he was looking for. It also used cookies to help track customers’ surfing habits. “In essence, our software makes it possible for a Web merchant to deliver the same kind of customer service that echoes having a personal shopper,” says Barry Coleman, ATG’s vice president of product strategy.
The upgrade gave ATG’s sales force the leverage to pursue a top-tier customer base; soon, the company was signing up such clients as Nike and Best Buy. “What saved the day was that [ATG] had good technology — and even as parts of the business went away, they were able to hold onto a core piece of the revenue mix,” says Nathan Schneiderman, a senior research analyst with Roth Capital Partners in Newport Beach, California.
This was fueled by ATG’s 2004 all-stock acquisition of Primus, a Virginia company that focused on customer-service technology. Primus offered several things ATG needed, such as incoming e-mail service and better search tools. ATG then rolled up eStara, a firm that had developed pop-up boxes giving customers the opportunity to enter their phone number and receive an immediate call from an eStara representative who could instantly access the customer’s search and purchase habits, and thus offer incentives as he guided the customer through the sale. This supercharged e-commerce back room allowed ATG to position itself as a company looking to the future. The still-public firm now has more than 800 clients, and in 2007 posted revenues of $137 million — up 33 percent from 2006. It’s had several years of positive cash flow, and its stock hit a five-year high this January, closing at $4.84.
For Conneighton, the salvation of an old Internet brand was its willingness to embrace technology to save an existing product. “The key,” he says, “is to find what you’re good at and then be willing to leave yesterday behind.”
Executive Summary:
• Poised for Glory: Once the belle of the Internet ball, e-commerce company ATG had essentially collapsed by 2002.
• Heavy Decision: Six years ago, ATG execs decided to use new technology to reinvent the company. They chucked their initial model and acquired two new companies whose software complemented theirs.
• Value Added: By using technology to reinvent its value proposition, ATG has quintupled its share price since the depths of the dot-com bust.