Call it a lesson in spin.
Zulu-Tek issued its fourth press release in eight days today, announcing that its Softbank Interactive Marketing unit was "curtailing" its European operation to focus on North America. An unidentified company spokesman was quoted in the release as saying the market west of the Atlantic is a more "robust" market for the company's online advertising sales.
It sounds like a savvy, strategic refocusing.
Until you learn that four days before the press release was issued, all of Softbank Interactive Marketing's employees in five European offices resigned to start a new company. InterAd Holdings Ltd. will be based in London, employ all 14 of the former Softbank Interactive salespeople, and be led by Gordon Simpson, the former director of European operations for Softbank Interactive.
The new firm is unabashedly going after Softbank Interactive's European clients. Simpson said today he has already signed one, AltaVista's Northern European mirror site, run by the Swedish company Telia. He predicted that, by the end of the week, InterAd will have signed up three more Softbank Interactive clients.
"We've been in discussion with all the (Softbank Interactive) Web sites to advise them of our plans, and we believe we will sign some of them, if not all," said Simpson, who helped company founder Andy Batkin launch Softbank Interactive's European operation in 1996. Batkin left the company immediately after it was purchased by Zulu-Tek in January.
Telia's AltaVista mirror had been Softbank Interactive's biggest European client, representing more than half its revenue, according to sources. But on Friday, Telia told Softbank it was terminating its contract. According to Telia and Simpson, Softbank Interactive hadn't sent Telia any money since last year.
"SIM-Zulu-Tek has defaulted on their contractual payments and we had to send them a notice of termination, and we are about to take legal action," said a Telia executive who asked not to be identified.
Zulu-Tek and Softbank Interactive representatives in Los Angeles, San Francisco, and Newport, Rhode Island, did not respond to repeated phone calls seeking comment. In its press release, however, Zulu-Tek said the European shutdown was a calculated move.
"The European online market continues to lag behind the robust online market in the US and we decided to focus our management and financial resources on this market," said the unnamed representative quoted in Zulu-Tek's statement. "We have every intention of re-entering the European market when the market there shows more stability and growth and after we have completed our expansion in the US. We will continue to keep in close contact with the Web sites and the advertisers in Europe to decide when that re-entry might be."
David Moore, the chief of 24/7 Media, a Softbank Interactive competitor based in New York, said he couldn't comprehend that strategy.
"I think the European marketplace is probably where the US marketplace was in 1996," he said. "While I don't think there are millions of dollars to be made tomorrow, if I had a European presence today, I certainly wouldn't be backing off it."
Analysts were also baffled by the Zulu-Tek company line. Jupiter Communications predicts that online advertising sales in Europe's biggest countries will jump from just $6 million in 1996 to $1.2 billion by 2002.
"Europe is a growing market," said Evan Neufeld, a Jupiter analyst. "It's not nearly as big as the US, but DoubleClick's red herring is all about international markets. They've got five people in Spain, for God's sake. For Zulu to say [Europe] isn't a big market is just insane."
DoubleClick maintains offices in Spain, Great Britain, Portugal, Italy, and Sweden. InterAd will have representatives in the same countries that were home to Softbank Interactive in Europe: the United Kingdom, France, Germany, and Spain (with offices in Barcelona and Madrid). Simpson, who will assume the role of CEO at InterAd, said his firm will focus exclusively on selling ads into European sites, whereas DoubleClick mostly places European advertisers into North American sites.
"We are the only company that will have a network of big and small European sites," Simpson said.
The idea for InterAd had been in the works at least since late December, when the InterAd.com domain was registered with the InterNIC. (The new company has not yet set up a site.) That was less than two weeks before Zulu-Tek announced it was acquiring Softbank Interactive.
Why were the blueprints for InterAd begun so early? Late last year, according to Simpson, Softbank Interactive executives in the United States and Europe were trying to engineer a management buyout of the company from Softbank Holdings, its parent at the time. The plan was to have the European operation morph into InterAd, an independent company that would be owned by those who ran it.
That plan fell through, though Simpson won't say why.
When Zulu-Tek bought Softbank Interactive in January, Simpson said, he had conversations with the Australian financier who engineered the sale, Pattinson Hayton, and his associate, Neil Miller. Simpson says that the pair, who in 1987 were partners in a British investment venture placed in receivership for allegedly failing to safeguard investor funds, are "absolutely running" Zulu-Tek.
Soon after Zulu-Tek assumed control of Softbank Interactive, Simpson said, he became aware that the company was no longer remitting ad-sales payments to some of its European partners - including Telia's AltaVista.
"For my own legal protection, I didn't want to be associated with the management of the company in Europe," Simpson said.
Since all the elements for launching InterAd were already in place, he decided to bring the company to life. Last Friday, he faxed a copy of his resignation to Zulu-Tek's Rhode Island offices. The rest of the European staff gave its notice soon after. Telia terminated its contract with Softbank Interactive. On Saturday, Simpson moved into a new office in London.
According to Simpson, he has heard nothing from Zulu-Tek since he tendered his resignation, though he said Miller did call the old phone number on Monday to leave a message asking "why there was no one in the offices."
The answering machine at SIM's old office on 7 Poland Street says, in Simpson's voice, that no one is available to answer the phone, but that "we'll respond to you as soon as the office opens again."
