Ex-TV mogul Bert Ellis building new fortune online

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When Bert Ellis sold Atlanta-based Ellis Communications and its 13 TV stations to Raycom Media in 1996 for $745 million, he says Raycom wasn't interested in Ellis' small interactive unit.

Less than two years later, that "sideline," now called iXL Communications, is aiming to become far bigger than Ellis Communications ever was, creating online storefronts for the Fortune 500.

"It's a lot different than TV. It runs a lot faster and it's a lot of fun," Mr. Ellis says. "The minimum ante for this business is $250 (million) to $500 million in sales," and Mr. Ellis is scaling that "sideline" to achieve it.

Privately held iXL was founded with $30 million from New York-based Kelso & Co., which also backed Ellis Communications and Mr. Ellis' previous company, Act III Broadcasting.

iXL has since secured $37 million in funding from other venture capitalists, and along the way has bought eight small shops that do design and production: FloyDesign and CCG Online, Denver; Creative Video, Atlanta; Whitley Group, Charlotte, N.C.; Memphis Online, Memphis, Tenn.; Small World, New York; Green Room Productions, San Francisco; and Boxtop Interactive, Los Angeles. All have since taken on the iXL name.

The idea is to build an interactive design and engineering company that combines the marketing savvy of a Young & Rubicam with the technical expertise of a computer systems integrator such as Cambridge Technology Partners.

Big clients are "spending a huge amount of money on the Web, on sales force automation, on presentation software, trade show exhibits and online training," Mr. Ellis says. "We provide the opportunity to consolidate all or most of that with one company."

An example is AutoConnect, a joint venture between Cox Enterprises' Manheim Auctions unit and Automatic Data Processing.

With help from iXL, AutoConnect relaunched last month, offering used-car dealers the opportunity to sell their wares online, linked to a central database.

Joe George, director of dealer services at iXL, says his iXL team also offers software, called PitchMan, to create presentations. His salespeople can use it with a laptop projector when they call on dealers, persuading them to affiliate their sites with AutoConnect and to use iXL's SiteMan to create them. SiteMan is software used to design Web pages.

"We could build several thousand sites this year (with Siteman)," says Andrew Drake, AutoConnect's director of business development. No other software offers that ability, he says.

Market research company ActivMedia Inc., Peterborough, N.H., says it expects Web managers to put $23.6 billion into upgrading their sites in the next four years, mainly so they can do real business online. Another market research company, International Data Corp., Framingham, Mass., reports that $333 billion in sales will be done online by 2002.

Mr. Ellis' company needs to grow fast to meet that market. When Business Marketing talked to him, Mr. Ellis had just bagged a $50 million, three-year contract for iXL requiring 100 new employees.

"That's a whole raft of people," he says. "You can't hire them one at a time."

More acquisitions are necessary, he says.

"We have three teams aggressively calling on the best companies, convincing them that rather than being independent, they ought to match up with someone who's blowing, growing and going," he says. "And if they look to combine, we have to convince them we're the right choice."

There are, of course, a lot of buyers for those small shops. Ad agencies want to add new media to their expertise. IBM's interactive media unit is based just a few miles from iXL in Atlanta. And EDS has its c2o Interactive Architects group in Dallas.

Then there are competitors such as USWeb, whose plans sound directly competitive with iXL, and technology integrators Cambridge Technology Partners. And hundreds of start-ups are doing cutting-edge work.

Mr. Ellis says he thinks the winners will be those companies whose marketing savvy is closely tied to engineering.

"The commerce numbers bantered about may be low," he says. "I believe the advertising numbers may be high. The real numbers are in selling stuff on the Web."

Drew Lanni, who analyzes the online advertising market for New York-based Jupiter Communications, warns that acquiring Web shops is only the first step in gaining the critical mass needed to succeed. You have to persuade the people in the acquired operation to stay, he says.

"What we're dealing with is pure intellectual capital," he says. "The question is whether the cultures mesh well."

Mr. Ellis agrees.

"These are smart kids who are in high demand," he says.

They make big salaries but need more, he says.

"It's got to be fun, good, cool. Your boxes (computers) have to be fast, and your pipes (network connections to the Internet) have to be big. You have to have great clients," he adds.

Bill Nussey recently was recruited from Boston-based Greylock Ventures, one of iXL's venture capital partners, to become iXL's chief operating officer. The key to making these acquisitions work, he says, is the leadership Mr. Ellis provides.

What does that mean in the real world?

"Give people lots of information and latitude, then let them make some mistakes and learn from them," Mr. Ellis says. "I trust people until they give me a reason not to. That means I have lots of entrepreneurs running their own businesses."

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