Value Added: A Pioneer in Consumer Communication

Here's Tom Heath's latest column on Washington's entrepreneurial set:

One of my favorite business bromides is "Pioneering doesn't pay." You don't want to be the first person to build railroads or airlines or power plants, as the thinking goes. The real money is in the steel that the railroads buy. Or the jets that the airlines purchase. Or the fancy electric appliances people buy for their homes. You get the drift.


Pete Snyder (Photos by Thomas Heath - The Washington Post)

Pete Snyder is 35 and worth tens of millions of dollars. Home in McLean. Vacation place in Nantucket. The former political junkie thinks of himself as an online pioneer, but I see him as more akin to the steelmaker or the appliance salesman. He is mining a lucrative niche in an industry created by others.

In 1997, the Republican strategist and one-time campaign adviser to New York Mayor Rudy Giuliani was doing market research for Wired Magazine . He looked at what the "Wired Nation" was thinking. How did they behave and what did it mean for marketing and communications going forward?

He realized communications were rapidly changing into a two-way dialogue that was empowering millions of consumers who had hitherto been passive consumers.

"I had my eureka moment back then," said the graduate of William & Mary, where he studied government and Russian. "I saw the Internet as the world's largest focus group."

He envisioned a zillion business opportunities.

"I realized the wall of communications had been broken down. Now, it not only matters what people were saying about companies and candidates, but now you had to respond directly to them in real time," he said.

It led him to create New Media Strategies.

NMS has 87 employees filling two upper floors of the old USA Today headquarters in Rosslyn. It will gross around $17 million this year and turn a $5 million or so profit. Snyder sold his interest last year for $30 million to Meredith Corp., a publicly traded media company.

Snyder, NMS's chief executive, wouldn't comment on the deal, but the sale price could climb to $60 million if he grows revenue in the next few years.

What does New Media Strategies do? Some call it PR. Creating buzz. Or damage control.

"It's influencing the influencers," he said. "If you are a cable channel and the success or failure of a show that you have invested tens of millions of dollars in hinges on 100,000 viewers, you are going to want to identify the 100 tastemakers who are going to impact hundreds of thousands more who can make or break your show."


New Media Strategies employees work the blogosphere.

There are three arms to NMS: entertainment, corporate and the fast-growing public affairs division.

Example: NMS workers troll blogs that are talking about its clients, including SciFi Channel to the Walt Disney Co. to Pepsi -- and sometimes knocking them. When Burger King recalled 25 million Pokemon toys because they were dangerous, NMS employees dug into chat rooms and blogs to tell the Burger King story. They identify themselves as working for their clients.

Example: When the SciFi Channel desperately wanted to energize the hardcore audience base for its "Battlestar Gallactica," NMS found the blogs the audience inhabited and started dishing. Influential bloggers were invited to attend backstage visits where they were able to meet actors and writers.

Example: When Fred Thompson (remember him?) was gearing up to run for the Republican nomination for president, NMS laid the groundwork online.

"We have bloggers who specialize in the enlistment of online intelligence," said Snyder, sitting in his 14th-floor office overlooking the Potomac. A framed poster of late singer Johnny Cash sits on a wall. Outside are posters of "The Dark Knight" and "Step Brothers," both current film projects that NMS helped create buzz for. There's a hockey shirt from the work NMS did trying to gin up viewers for last year's NHL playoffs.

Snyder was doing political work back in the late 1990s and earning well into the six figures as a consultant to senators, governors and members of Congress. "I had a great life. But how many times can you cut a political ad saying, so and so is a liberal?"

Some buddies were already starting companies, and they encouraged him to jump in with his new idea for online intelligence. He started in his Capitol Hill apartment in 1999. He cobbled together half a million dollars in his own and investors' money and kept around 75 percent of the equity for himself. He named it New Media Strategies and compiled a list of companies that might need his online expertise.

One of his first hires was Aaron Earls, who designed a sales plan that called for bypassing advertising and public relations firms and calling companies directly. Snyder hit up his political contacts. One was a lobbyist for Burger King. The restaurant chain became an early blue-chip client.

Snyder thought big from the beginning. He envisioned a company with $20 million in revenue, so he incorporated in Delaware, which has favorable corporate laws. Revenue grew fast. NMS charged annual retainers of $250,000 to $1 million. The growing popularity of blogging and the blogosphere around 2002 "put NMS on steroids," Snyder said.

By 2006, the company was grossing $10 million and had 55 employees, according to published reports. Big clients rolled in. ABC, Merck, SciFi Channel, Paramount Pictures and Pepsi, among others. Snyder had a line of bank credit but no debt, so the company didn't get dragged down by interest payments.

"The hard part was managing growth," Snyder said. "We spend a lot of time hiring and training. You can get college graduates now who understand the power of social media because they have been using Facebook for years. It wasn't true five years ago."

Employees earn from $40,000 to more than $200,000. The biggest rewards go to people who bring in new business. "I want to hire people with an entrepreneurial feel. And the only way you can do that is by giving them a piece of the action," Snyder said.

His payroll is his biggest cost, followed by rent and then equipment/technology. Meredith approached in 2006 looking to expand beyond ink on paper. Snyder cut a deal in January of 2007. The $30 million sales price includes a pool of several million for employees who were not shareholders in NMS.

Snyder paid off his mother's mortgage and he bought the Nantucket home. He hired a top financial adviser. He owns stocks including Google and Apple and has a host of mutual funds, bonds, some real estate and private equity. Though he gets a small salary, his real reward is the approximately $30 million windfall if he can dramatically increase revenue. He sees the online political world as his ticket.

"This town is just beginning to grasp Web 2.0," he said.

By Terri Rupar  |  August 5, 2008; 10:09 AM ET  | Category:  Value Added
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Comments

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WOW - I wish I was him! what great forward thinking.

Posted by: ALD | August 7, 2008 11:27 AM

Congratulations to Pete Synder for finding a way to make money – big money – from the new media.

Posted by: Polly Elmore | August 8, 2008 11:30 AM

The ability to communicate instantly and anonymously through the protection of the internet, while susceptible to abuse also no doubt provides more honesty of opinion since the poster does not have to say what is expected of him or her, but rather can say what he or she really believes. Pete Snyder was ahead of the curve in recognizing a way to monetize that honesty in providing valuable marketing and opinion data. Another interesting profile.

Posted by: Cooper | August 8, 2008 11:13 PM

Pete has great foresight. In fact, it is this ability over everything else that makes great business leaders in all fields. We had the opportunity to listen to him recently, thanks to Professor Adam Segal who had invited him to address our graduate class. He is amazing.

Posted by: Shreesh | August 11, 2008 1:35 PM

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