In the fall of 1998, Microsoft co-founder Paul Allen wanted to get into e-commerce and he tapped Tom Van Horn to start up a new Internet company. At first Allen’s idea was to create an online store that sold everything. He even purchased the URL “everything.com.” In one of the early meetings, Van Horn jokingly asked Allen if the new company could start with selling “a little less than everything and work up to everything.” Ultimately Van Horn and Allen looked at existing e-commerce companies like Amazon and decided the new company needed to be something different. Allen wasn’t exactly sure what he wanted, so he charged Van Horn to develop a business model which was better suited to the unique dynamics of an online company. In other words, Allen wanted an online e-commerce company that couldn’t exist offline.

Van Horn assembled a small team including me, Terry Miller, Dale Woodford, Niklas Gustafsson, Janet Sorrentino, Rich Halbert, and a number of other smart folks. We locked ourselves in conference rooms and brainstormed for weeks, generating dozens of ideas. Then we spent a few more weeks carefully vetting the ideas. After an exhaustive process, we landed on a business model that we were all very excited about. Inspired by buying co-ops (everything from small-farm seed co-ops to PCC, Seattle’s local natural food co-op), we imagined a new way of buying where people would form buying groups all centered around one specific item. They’d commit to buy that item at a certain price and our site would somehow negotiate the volume discount. As Tom explained it, “What if you and 19 of your friends went down to the Ford dealer and said you all were ready to buy the same car right now if the price was right. If that particular dealer didn’t want to make 20 sales right then and there, the Ford dealer across town probably would.” It was kind of like fleet sales, but for consumers.

Mercata billboard

The core concept was to help consumers participate in volume discounts even if they were only buying one of an item. To do this, Mercata would use the Internet to aggregate demand. And as we refined the concept, we got very excited about doing this in real time. As I later would phrase it in the ads I created, the more people who buy, the lower the price.

Mercata would be the opposite of eBay. With eBay, buyers competed to drive prices up. With Mercata, buyers would cooperate to drive prices down. Strategically, we were aligning ourselves with consumers. However, there was a little nagging doubt in the back of my mind. I posed the question to Tom Van Horn. “What if manufacturers didn’t want to lower prices—even if we bring them a lot of buyers?” “We’ll see,” Tom said. “There’s a lot of competition among brands. Someone will want an edge.”

Tom’s idea was to launch the concept as a consumer e-commerce store selling everything from baby strollers to DVD players to razor scooters. Not a massively deep selection, but a few brands in many categories. Kind of like a Costco. (To that end he hired Linda Perkins who was Costco’s general merchandise manager). But in the back of his mind Tom saw the store as kind of a proof-of-concept. His plan was to follow up the retail division with a marketplace—like eBay—where other sellers could use our group buying technology to offer dynamic prices for their own goods and services. But first we needed to see if the idea would work.

So while the rest of the team worked on the dynamic pricing algorithms, coded the site, began sourcing products, drafted patent applications, and started staffing up, my job was to bring the customer into the equation. I needed to determine if our model would make sense to customers and how best communicate the value proposition. This included everything from the name of the site, the logo, graphics, and other brand attributes—to the actual words we would use to describe what we offered.

At that point in my career, I’d had over a decade of big ad agency experience — working with companies like P&G, General Mills, and Bank of America. So while many internet companies at the time, took a very tech-centric approach (some, like Google, still do), I believed that we needed to be much more customer-focused. To that end, I travelled around the country conducting focus groups and other research projects where I had the opportunity to hear directly from consumers. I got feedback on what they were looking for from an online store, ad concepts, value proposition wording, UI design, customer experience, merchandise selection, and much more. With this great information (gathered directly from consumers), I returned to headquarters and started putting everything together.

After flirting with some odd, but potentially memorable monikers like “topfrog.com,” we landed on “Mercata” as a name. It had a latinesque root “merc” which suggested shopping (like the Spanish “mercado”). There was some debate as to whether or not we should name the company “Mercata.com” (as the ‘dot coms’ were becoming all the rage), but I advocated for the simpler ‘Mercata.’ After all, what if some day we expanded beyond the Internet?

I also designed the logo to be simple—and convey trust with a slight “advanced technology” flavor. I used the Orator typeface and placed a yellow/gold rectangle behind the ‘E’ in Mercata as a subtle nod to old school computer CRT cursors as well as the ‘E’ in ‘e-commerce.’ Several years later, the logo and graphics for the Jennifer Garner spy TV show “Alias” used the same technique. Coincidence?

We were eager to start building some buzz—even before the site was ready, so Tom asked if I could create a “teaser” TV spot to run in our home market of Seattle. So, working with freelance commercial producer Sue Mowrer and Pinnacle Productions in Seattle, we put together this spot.

Right from the start, I was inclined not to hire an ad agency to develop the creative work. Given my most recent background as an award-winning VP/Creative at EvansGroup Advertising (now Publicis), I knew I do much of the work myself — bolstered by “A-list” freelance producers and other production resources. We did want a top PR firm however, and were fortunate to work with the visionary Kathy Savitt and her team at MWW/Savitt Public Relations. It was Kathy and her team who scored our biggest PR coup (and arguably one of the best company launches of the decade) by getting CEO Tom Van Horn on Oprah’s TV show. When Tom appeared on the show and explained what Mercata does (allows you and hundreds of your friends to get together and drive down prices in real time), Oprah exclaimed “I’m liking that!” and gave Tom a big hug. All the while a giant Mercata logo and URL were projected on the wall behind Oprah and Tom. Needless to say, all the traffic from that appearance on Oprah crashed our servers (and did the same even six months later when the show was rebroadcast).

Continue to Part 2