Sam Barnett, 27, knew that "the middle of a recession probably wasn't the best time to start a business". But he didn't want someone else to "grab his idea". He'd been working for a digital advertising exchange, where he'd realised that traditional online 'banner' advertisements "were pretty pointless. People didn't click on them and companies were starting to pay less and less to feature on them."
Barnett's idea was to create advertisements that could change depending on the viewer. Many websites upload small programs 'cookies' on to a visitor's internet browser. These monitor the other sites a user visits, gaining information about "their online habits". Barnett planned to create an algorithm that could use this information to create viewer-specific advertisements.
He only had 18 months' experience in online media, having previously worked as a legal adviser, but he was convinced his idea would work. First though, "I knew I needed a technical genius" to program the algorithm. He approached the "best developer" he knew and persuaded him to join the company. "It was difficult because I didn't have much money. But luckily he really believed in the idea."
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Get 6 issues free
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Barnett hired two more staff and, by April 2008, Struq was ready to open for business. That was when he ran into one problem of starting up in a recession. No banks would lend to him, particularly as "they didn't really understand what I was trying to make". But with enough savings to last the firm a year, he decided to "take the plunge" without any backing. To keep costs down he shared his tiny rented office with another firm. With his staff working on the technology side, Barnett tried to find customers. But it wasn't an easy sell. "No one had ever heard of the product before and I couldn't even show them an example, because we hadn't built it yet." It took eight months to develop. "They were the longest eight months of my life. We were burning cash and only had a few months left."
With the product ready, Barnett "got back on the sales trail". But companies were simply "unwilling to try something that they had never seen before. They thought if it was such a good idea then somebody would already have shown them." His cause wasn't helped by the deepening recession "the advertising budget is always the first thing to go". The breakthrough came via an online gambling site. "It turns out that gambling does well during a recession." Sites such as Casino Tropez Struq's first customer were still spending on advertising and were willing to take a risk on new technology.
Barnett targeted more gambling sites. Sales began to "snowball". Other types of business became interested "once I could point to a working example".
He commissioned studies that showed how effective his advertisements were. He was able to tell clients that "every £1 spent with us will generate £14 for our customers a very persuasive argument". And it seems to have worked. Last year sales hit £6m and Struq now employs 30 people. But Barnett is not complacent. "The technology changes all the time, there are lots of competitors now and we have to make sure that the advertisements we produce are better than the rest."
Review: Eden Roc Cap Cana – fun, sun and golf in the Caribbean
Reeves delays cash ISA reform, but savers are not out of the woods yet
