Virgin - Let the brands run.

Sir Richard Branson has proved remarkably adept at diversifying his business interests - from trains, planes and automobiles to vodka. Ravi Chandiramani asks whether will he be able to bring his Midas touch to bear on the internet.

Life used to be so simple. A business would deal in one thing and one thing only. To coin an advertising phrase, it did exactly what it said on the tin. Then came the nomad brand. These were companies that extended their tentacles across different products and services and sectors, carried by the strength of the brand. Virgin is the granddaddy of all nomad brands.

Trains and planes and automobiles, holidays, weddings and wines, music, mobiles and cola ... you name it, these days Virgin does it. And it does it because it believes people trust and like the values of the brand, namely entrepreneurship, quality, value-for-money, innovation and fun. As one senior executive puts it, this is a mantra that "gets chiselled into your forehead once you've joined".

So how on earth does what is one of the most promiscuous brands on the planet, attaching itself to all kinds of businesses, stay focused and triumph on the internet? This has been Sir Richard Branson's online pickle.

But before picking over the challenges that new media has thrown up for the grinning, jumpered, bearded one, here's a brief overview of what sets Virgin apart from the rest. The Virgin Group is not your typical British plc with a board that sits above various subsidiaries. "We're a branded venture capital organisation," explains Will Whitehorn, brand strategy and corporate affairs director for the Virgin Group. Whitehorn is Branson's foremost advisor and official mouthpiece. He joined Virgin in 1985 and is to Branson what Alistair Campbell and Peter Mandelson combined are to Tony Blair. The public might never have heard of him, but Will Whitehorn is Branson's right-hand man.

Whitehorn says of the company: "Virgin is a sort of cross between a British venture capital company and a Japanese keiretsu. A good example of a keiretsu is Mitsubishi." He explains that this is an example of a family of companies which are bound together by a single brand - in this case associated with cars, stereo equipment and brown goods, as well as a bank and an insurance company.

Virgin started to grow beyond Virgin Atlantic and Virgin Records in the late 1980s, drawing on the keiretsu model. Whitehorn says: "When we start a new business, Virgin often takes a stake and so does a relevant partner, whether it is a venture capital company or an investor with some infrastructure and expertise to bring to the party."

With Virgin Net, that partner was cable and telecoms giant ntl; for Virgin Energy, its online utility supply venture, it's London Electricity. In each case, Virgin piggybacks that expertise and brings its brand and its values to the business.

However, the company that first made a name for itself in the music and airline industries didn't exactly hit the ground running with the internet.

Although Virgin Net, the ISP-cum-entertainment portal joint venture with ntl, was launched in late 1996, the bulk of Virgin's enterprises that carry a strong online element arrived during 2000. This year has seen the arrival of Virgin Cars, Virgin Energy, Virginmoney.com and Virgin Student, while Virgin Mobile, a joint venture with Deutsche Telekom-owned One2One, launched in November last year.

The group has always refrained from imposing a hierarchical structure on its activities, treating each business as an autonomous entity. For example, James Lacey, brand director at Virgin Student, says: "I'm trying to revitalise the Virgin brand with a very media-savvy audience. Because of this, I don't want the site plastered with other Virgin merchandise. If they've had a positive experience with us, they are more likely to use the Virgin brand again.

As Whitehorn puts it: "Instead of centralising our online activities, we've tried to take a more collegiate approach." Earlier this year, however, it very nearly dumped this philosophy with its plans for virgin.com.

Virgin.com was to be a separate holding company, a standalone business that would pool together all the online businesses and online aspects of Virgin's traditional businesses. A public flotation was touted around March, the dizziest height of the tech stock frenzy, when analysts valued virgin.com at £6 billion.

"There was a six-month debate over whether we let the centre dictate or, within a set of guidelines, rules and structures that would make life easy for the consumer, we let the businesses dictate their own futures," says Whitehorn. "We finally realised that it is better to keep those businesses independent and follow the model of our history rather than over centralise." The switch triggered around 30 redundancies at virgin.com in October, but Whitehorn says that most of these staff have been redeployed elsewhere within the group's online activities.

The new non-interfering virgin.com goes live early next year. As Ashley Stockwell, brand director at virgin.com, puts it: "Virgin.com won't sell anything. It is going to be a neutral portal to the world of Virgin. It will facilitate." On the site currently is just a list of group companies, press releases and Branson's diary, which catalogues his hotfooting it from event to event.

The new virgin.com will enable single registration, providing customers with a single user name and password to interact with all group companies, and a single search function for seeking e out any Virgin product from a central source. Also under development is a virtual V wallet to speed up transactions and prevent customers filling out their credit card details every time they make a purchase. In addition, Stockwell says that there are plans to develop a hotmail-type Virgin web-based email service. All these functions will be presented in a toolbar on virgin.com and all the other group sites' home pages.

Virgin.com represents the first time that all the group's businesses have appeared together. And it's not only in their personal environment, but on the high street too. Virgin's V. Shop stores contain kiosks parading the virgin.com portal and access to any of the group's businesses at the touch of a screen. It gives Virgin's internet interests a high street presence. Customers will be able to pay for anything that's available via virgin.com over the counter at a V. Shop outlet.

"V. Shops are the first real move by a brand to integrate an entertainment offering with completely different products," says Rebecca Ulph, an analyst at Forrester Research. "It'll be interesting to see whether the kiosks grasp people's attention and if they'll take to going to a physical outlet to sit down by a kiosk. The introduction of the V. Shop concept suggests it would help Virgin to appoint a strategic e-commerce head. There's no cohesive thought in the design of all its web sites.

"With virgin.com, it's realised that there's no point spending loads of money and a standalone portal would be too generic to work, so it's better off assisting and signposting people to the businesses in which they're interested," she adds.

Virgin.com's role as a central facilitator is a policy that has filtered through into other areas. For example, Whitehorn has appointed Manning Gottlieb Media as the media buying and e planning agency for all its businesses. "Buying through a central agency gets us consortium buying power without us managing the businesses and damaging their creativity," he says. Online media accounts, however, remain fragmented. He adds that it is also considering a centralised approach to procurement, call centres and delivery. Another move to foster a group strategic spirit is the recent setting up of Virgin marketing forums, where the businesses' marketing directors gather every eight weeks to discuss opportunities to co-operate.

Virgin.com hasn't been the only scene of seismic shift in the group's internet strategy this year. While Virgin Mobile has been persuading the country to divorce its current network operator, Virgin Net has undergone its own divorce from partner ntl. The move hands over control and ownership of the ISP side of the business to ntl, which the latter believes makes it the UK's third-largest service provider behind Freeserve and AOL. This has left Virgin to morph its Virgin Net entertainment and leisure content into a shopping portal.

Alex Heath, who founded personal finance site Interactive Investor, is the managing director of Virgin Net. "In order to be sustainable and provide returns, we have to move beyond an entertainment guide to enable people to book and complete transactions," he says. "We've got the context with the content. We now need the execution through e-commerce and the ability to turn our unique users into registered users."

The site now offers games, movies, food and drink, music, sport and travel products through a network of e-commerce partners. There are also 17 premier partners, labelled Virgin Recommends, with which the company has data-sharing agreements. "We want to be an independent provider of e best-in-class partners. We are open to providing links with other Virgin companies, but they don't have an unspoken right to be a preferred partner at the top of the list. They have to come and prove their proposition to us."

Tom Bower, in the first Branson biography not to be vetted by the man himself, sees Whitehorn as the culprit of what he portrays as Virgin's sluggish approach to new media and the confusion over Virgin Net's specific role. Titled Branson, the book claims that "Branson did not appear to understand the difference between ISP and e-commerce. A succession of Virgin managers, discovering that ntl could not provide e-commerce, were appointed to renegotiate or unravel the deal, but Branson seemed unable to grasp either the problems or the opportunities. Having become so dependent for advice upon Will Whitehorn, he had missed the start of the telecommunications revolution".

Nevertheless, the brand so far appears to have propelled Virgin Net into a strong position. The site is one of the most popular among 25 to 34-year-olds, according to MMXI. Heath has specific targets going forward.

He says that Virgin Net currently has 1.5 million unique users. He wants 10 per cent of those registered by Christmas, one third by the end of next year and two thirds, or one million registered users, in two years' time. The site will make a profit within 18 months, reckons Heath. The site employs 100 people and, to underline its new, wholly owned status, will rebrand some time next year.

Whitehorn says that he has always been sceptical about the internet's impact on business: "The internet in itself is merely something that eases the path of the consumer's relationship with the provider of the good or the service."

So far, much of the group's energies have been directed towards the prospect of mobile commerce, driven through Virgin Mobile. Although Whitehorn asserts that he's firmly in the "WAP is crap camp", Virgin has a third-generation mobile licence through One2One.

On the interactive TV front, it's in preliminary discussions with Open.

Back at Virgin Net, Heath struck a deal a few months ago with Alba for a 20 per cent share in Bush Internet TV, the 14-inch set with an internet facility that retails for less than £200, carrying Virgin Net's entertainment content. It has limitations - it can't handle Flash animations or play sound - but it promises to introduce a previously untapped, cash-strapped audience segment to e-commerce. "There's a portal with 20 partners in place and an email service, but the portal is designed and managed by us," explains Heath.

Heath leaves the Leicester Square building - the new offices of both Virgin Net and virgin.com - to be whisked off to Branson's Holland Park home for the Virgin King's first glimpse of a Bush Internet TV - a welcome break, apparently, from spending most of his waking hours on his bid to run the lottery.

Later that evening, all the Virgin top bods can be found at Clerkenwell's Fabric nightclub to celebrate the first birthday of Virgin Mobile. It's a star-studded bash that has managed to wheel out none other than DJs Boy George and, er, Tony Blackburn.

After virgin.com and Virgin Net's mutations this year, it's at last becoming clearer just how the group proposes to interact with consumers in the digital age. But will Branson and Whitehorn be celebrating the 'winner takes it all' business philosophy, or will new media prove to be a step too far for Virgin?



VIRGIN PUTS ITS BRAND ON THE LINE

Virgin first entered the mobile phone business in November 1999, piggybacking on the One2One network as a virtual operator. Its pitch to consumers was its introduction of a single and thereby simpler tariff structure, compared with existing players.

"We became the first consumer brand to enter the mobile business anywhere in the world," says Steven Day, Virgin Mobile's head of communications.

Subscribers are provided with access to a suite of e-commerce services, branded Virgin Xtras, which enable the purchase of goods such as holidays, CDs and electrical goods. A 'jukebox' facility enables users to listen to samples of music tracks and buy from a catalogue of around 25,000 items for 15 per cent less than the high street price.

Virgin Mobile is also on the verge of launching a comparative shopping service called Virgin Shopper in conjunction with Virgin Net. Initially, it will compare prices between retailers of "low-price, mass-market goods", before expanding to include bulkier purchases such as furniture and even houses.

Virgin Shopper is based on the comparative shopping engine of agency digitalRUM, which is also used by Mviva, the portal co-owned by Carphone Warehouse and AOL Europe, for its own service branded m dealfinder.

"Virgin took the approach of opening up all these services to every single customer, not just WAP customers," says Day.

However, there is a WAP portal for holders of the snazzier phones with content from the likes of Interactive Investor, lastminute.com and unmissabletv.com.

The company has shifted somewhere between 10 and 15 per cent of its phones online at www.virginmobile.com, making it the biggest selling network operator over the internet. Around 75,000 phones are sold through the site each month.

Virgin Mobile also accounts for 30 per cent of record store V. Shop's total sales.

"V. Shop was inspired partly by Virgin Mobile," comments Day. The company expects to have 750,000 subscribers by Christmas and around one million by April.



VIRGIN CARS TRUSTS BRAND AND PRICE WILL TEMPT BUYERS

Virgin Cars was the creation of five people with, between them, several decades of experience in the automotive industry, who approached Virgin with the idea. The business launched in May this year backed by £10 million of investment.

"The internet is perfect for researching a purchase. Dragging yourself and your family around five or six different showrooms is a painful process," says Ian Lancaster, chief executive of Virgin Cars. "And we are not just internet-bound - half our sales are made over the telephone."

The business currently deals in new cars. Customers can arrange a test drive online, cars can be ordered custom-built according to colour, trim and options, delivered in eight to 10 weeks, or users can opt for the fast-track route, with a ready-configured vehicle deliverable within a fortnight.

Last month, Virgin Cars began offering used cars, less than one year old with less than 14,000 miles on the clock, promising up to 40 per cent off the street price. Lancaster says it will sell cars up to three years old early next year, a move that will coincide with a revamp of the site.

Although it is importing cheaper cars from suppliers on the Continent, Lancaster says: "We are using the price difference to kick-start the business." He says the weak euro has prolonged the price gap between the UK and the Continent, but it will close. "Dotcoms such as OneSwoop and Carbusters don't have anything but cheap price to offer. Our long-term proposition isn't price, but value for money from a trusted provider." He says one quarter of cars are sourced within the UK and that figure will rise, cutting the business's supply chain costs.

Virgin Cars offers more than 1,000 models from 24 manufacturers, covering more than 90 per cent of the market. It has linked up with Alliance & Leicester to offer customers unsecured personal loans through the site, while personal contract plans can be organised with PHH. The PHH deal is significant because it gives Virgin Cars access to 1,500 UK dealers able to provide after-sales service and maintenance, even though the business ships most of its cars from mainland Europe.



THE MANY FACES OF THE VIRGIN EMPIRE

Virgin.com

100 per cent Virgin.

Portal for all the other group sites.

448,000 unique users; 1.5 million page impressions

Virgin Money (www.virginmoney.com)

50 per cent Virgin, 50 per cent Australian financial services company AMP.

Apply online for mortgages, unit trusts, share dealing plus news and views.

Figures unavailable.



Virgin Energy (www.virgin-energy.co.uk)

75 per cent Virgin, 25 per cent London Electricity.

Buy gas and electricity for homes online.

Figures unavailable.



Virgin Mobile (www.virginmobile.com)

50 per cent Virgin, 50 per cent One2One.

75,000 phones per month sold online; 750,000 expected to be sold by Christmas.



Virgin Cars (www.virgincars.com)

70 per cent Virgin, 30 per cent management team.

Offers 92 per cent of car models. Book test drives and get advice online.

Up to 200,000 page views per day.



Virgin Net (www.virgin.net)

51 per cent Virgin, 49 per cent ntl.

Entertainment listings service and shopping portal.

1.5 million unique users and 18 million page views in July.



Virgin Student (www.virginstudent.com)

100 per cent Virgin.

Provides content for students, plus a toolset to enable users to vmail, chat, store and share files. 76,000 registered users.



Virgin Wines (www.virginwines.com)

45 per cent Virgin, 45 per cent staff,

10 per cent Andersen Consulting.

Enables users to search or purchase ready mixed cases of wine.

3,500 to 5,000 new unique users a day.



Virgin Atlantic (www.virginatlantic.com)

51 per cent Virgin, 49 per cent Singapore Airlines.



Virgin Rail Group (www.virgintrains.com)

51 per cent Virgin, 49 per cent Stagecoach.



Virgin Holidays (www.virginholidays.com)

51 per cent Virgin Travel Group, 49 per cent Singapore Airlines.



Virgin Cola (www.virgincola.co.uk)

Cola is a product range of Virgin Drinks, 100 per cent owned by Virgin Trading Group. 200,000 impressions monthly.

Virgin Megastores 100 per cent owned by Virgin. UK web site to launch in 2001.



thetrainline.com

51 per cent Virgin, 49 per cent Stagecoach.



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