zanox: From start-up to global player –
a Berlin success story
When the three Berliners, Thomas Hessler, Heiko Rauch and Jens Hewald developed the idea for the internet start-up company, zanox at the end of the 1990s, the world of online retail was still of very manageable scale and the term "affiliate marketing" was as yet largely unknown. For most entrepreneurs, this was still a far-removed pipe dream. Not so for the three internet pioneers who, filled with enthusiasm, explored the possibilities of the World Wide Web and just a short time later founded the fastest-growing affiliate network in Europe; a title that still applies today.
"We were in love with the internet"
Even in 1997, these students of business and information technology developed the visionary project, Inab (an abbreviation for "Internet Address Book"): a website for saving and managing bookmarks. Using their university dissertation, they took part in a business plan competition run by the Berlin Entrepreneur Forum, the Sparkasse building society and German news magazine, Stern, but they were clearly ahead of their time with this project. The young entrepreneurs were unable to convince the jury with their visionary business model during the competition and were defeated by a Berlin-based sandwich delivery service. In the meantime, Hessler, Rauch and Hewald were already working on their next ground-breaking project: an online-platform for recommendation marketing. It is at this time that the American online bookseller, Amazon launches its first affiliate programme in Germany and, with this step, triggers off a development that will fundamentally change online business. The three innovators recognised the enormous potential of this new market and now wanted to take their business model to the next level; with assistance from zanox, website operators should be able to generate earnings from their visitor traffic. However, that was not all: they wanted to create a win-win situation, where publishers can monetise their online businesses without risk and where retailers can increase sales efficiently. And above all, one thing was clear to them from the very start: such a platform could only be thought of on a global scale, just like the internet itself.
"Solid business model instead of castles in the sky"
However, when zanox was founded in March 2000, the signs were pointing to a crisis for the entire internet industry and the dotcom-bubble was threatening to burst. Is founding a new business in these conditions a daring undertaking?
"We launched in 2000, just before the crash," says Thomas Hessler. "In the end, that was possibly one of the factors in our success. We were forced to concentrate on the essentials, rather than building big castles in the sky."
And in the end they were successful: in 2009, zanox is a global market leader for performance-based online marketing and – despite the market trend – boasts double-figure growth and a turnover of more than 200 million Euros. This sustained positive development of the business is founded on a business model geared towards technological development, excellent service and international expansion. The company currently has branches in nine countries with a total of 388 employees.
The starting situation was certainly a very different one, but after a year working hard at acquisitions, the first customers were on board. The young entrepreneurs' take part at the first online marketing trade fair, OMD with a self-build stand, posters printed on a home PC and their own bar stools, but still they walked away having won Bertelsmann as their first major customer. A good year later, the company was already profitable. In 2007, the founders sold zanox to Axel Springer and PubliGroupe for 215 million Euros and in doing so stepped into a new phase in the company's history. As the company’s executive board, Hessler, Rauch and Hewald continued to push onward with their vision and concentrated on the further development of their profitable business model - even during times of crisis.
Monetization 2.0
"When marketing budgets are cut in a recession, this creates an opportunity for us."
When budgets are tight, more investments are directed into sales, rather than into marketing - something the three entrepreneurs know well: "it's a matter of monetisation, or a quick return on investment and much less about image; lots of clicks and vast communities. In this respect, we place great importance on our open-company philosophy, that is, on open interfaces and direct involvement of all our partners." This awareness also formed the basis for establishing zanox Web Services and the zanox Application Store, both as interfaces for creative third-party business models. These offers should create added value for all parties, therefore for publishers, advertisers and developers. With the launch of zanox Web Services, users of the network are now able to develop and monetise their own applications. In the first zanox Web Services Contest, Webtrekk GmbH was awarded 1 million Euros venture capital for their innovative business model for internet monetisation - based on zanox Web Services.
From affiliate network to the zanox Application Store
With the zanox Application Store, the world's first B2B innovation platform for the affiliate marketing industry, publishers and advertisers now have the perfect conditions for more effective deployment and smoother management of ad media. In this marketplace, developers may present their software and widgets which, up to then, publishers or their developers had frequently had to programme themselves. In this way, applications are available to all and the developers also benefit from the improved conversion rates in the form of commissions. A recently-launched 2 million dollar competition provides even greater incentives for developers to offer their tailor-made tools in the zanox network. "The next million-dollar business could be founded by a student tomorrow and we offer them the perfect environment to do it," says Thomas Hessler.
Global 'network of choice'
zanox places great value on the quality of its affiliate network. After all, the zanox founders have the clear objective of bringing together the best publishers in a global "network of choice". For this reason, zanox also called the Publisher Initiative into life, as well as the zanox VIP Club for top professional publishers with above-average performance. This offers exclusive earnings opportunities with even better conversion rates and a significantly expanded service package.
"The high standards and strict quality criteria of the zanox VIP Club create transparency for all of our partners. In this way, we are setting a new standard in matters of network quality which, to date, is completely unique in the industry in this form," says Thomas Hessler. "With the launch of the zanox VIP Club, we are a good step closer to our goal of becoming the global 'network of choice.'”
The number of advertisers in the zanox network has grown to more than 2000 at the present time; the same applies to the number of publishers which, during 2009, has grown into a global affiliate network of over one million. Now, with more than 60 million product data, 55 million sales and advertising turnover of more than 300 million US dollars a year, zanox has become a true global player.
"Open company" as a recipe for success
The zanox philosophy of an "open company," upon which all these developments are based, is filled with life every day through numerous blogs, the zanox Wiki and the open API, along with the zanox Campus founded in Berlin in 2008. The creation of this "open space" for developers, entrepreneurs and innovators was followed in June 2009 by the opening of a second zanox Campus in Silicon Valley and a further Campus in Milan. Collective intelligence and expertise are combined here and new collaborations called into life. In this respect, it is of particular importance to the founders that encouragement is given to young entrepreneurs who can still profit from increased pressure of change, even in times of recession. Start-ups can use zanox's established infrastructure, its technology and the vast customer base for their fresh ideas. In this way, the network becomes even more attractive and zanox earns a share from the emerging business models.
"In the end, this benefits all involved parties," thus is the vision of the zanox founders, "and what you have is the perfect network for successful monetisation of the internet.