We know Rupert Murdoch is acquisitive. He owns the Fox movie studio and what's been described as America's fourth television network. He has Sky Channel, Europe's first satellite TV station. He also runs a swarm of magazines, publishing houses and newspapers. No matter where in the world you are, if there are pages to turn or channels to change, odds are that Murdoch is there, too.
So why on Earth is this multimedia mogul spending millions on Etak, a "digital mapping" company originally set up by Atari founder Nolan Bushnell, a k a the P.T. Barnum of high technology? Where's the glamour and big money in a computerized database of maps for all the cities in Europe and North America? Does Rupert Murdoch really want to be Rand McNally?
The answers reveal a lot about the way Rupert Murdoch manages innovation. Not incidentally, it also says something about the future of both media and advertising. Etak's acquisition and ongoing transformation may ultimately be a bust, but it displays an inordinately clever perception of the media marketplace. If nothing else, we'll see if Murdoch's business failures can be as entertaining as his show business successes.
The journey to Etak began in 1984 when Murdoch paid the then-outrageous sum of $350 million to buy the Ziff-Davis trade magazines. John Evans, then-publisher of the Village Voice, was less than enthusiastic. "Because I was the naysayer," Evans cracks, "he gave them to me to run."
Evans found he was running a fairly lucrative business and that "the most successful of these publications were in the travel industry. I became heavily involved in these travel trade publications."
The problem was that these publications had Gutenberg's Disease -- they were too reliant on paper in an era of computer technology. "They were print products in an industry that had been on-line more years than any others," says Evans, now executive vice president of News Corp., Murdoch's parent company. "The airline reservation business and the travel agents are just a couple of examples."
Unfortunately, Evans remembers, "We had no technical center. We were kind of Luddites." The magazines lacked the infrastructure to turn ink-based data into digital wells of information that could be tapped electronically. Evans resolved to build it. He persuaded Murdoch to authorize a $50,000 investment to build an on-line prototype of a hotel and travel index.
"I ultimately embarked on a trail that led to our spending $50 million to transform the technology of the travel information industry," says Evans. That included efforts ranging from hooking up airline reservations systems with hotel reservations systems to developing multimedia, "multisensual environments" that could virtually transport "travel agents like Tinkerbells through hotels and resorts."
Fueled by deregulation and globalization, the demand for instant on-line access to travel data exploded. In effect, Murdoch's profitable travel publications were transformed into even more lucrative on-line information networks. Indeed, the travel businesses were so successful that -- much to Evans's dismay -- Murdoch sold them to Reed International in 1989 for more than $825 million to help pay down News Corp.'s multibillion-dollar debt. "We made a $440 million profit on it," Evans notes.
But Murdoch's company wouldn't go completely out of the travel business. In the course of his travels, Evans had come across Etak Inc., a small, venture-funded firm in Menlo Park, Calif., that was building "on-board navigation systems" for cars. In other words, even if you didn't know where you were going, your computerized Etak map built into the dashboard of your car would tell you. Evans was intrigued and drove Murdoch around Los Angeles in an Etak car, and News Corp. acquired the company for about $25 million last year.
The real value of Etak, however, wasn't the on-board navigation system but the company's database of maps and the software it uses to generate custom-designed maps. "By 1992, we can map every street address in America and Western Europe," says Evans. "Once you scratch the surface of mapping, you discover worlds of dynamic publishing opportunities. ... We want to be the Microsoft of digital mapping."
In the same way that American Express uses its proprietary database of cardholders to create market opportunities, Evans wants Etak's digital map database to create market opportunities for Murdoch.
Etak's maps are already used by ambulance dispatch services to provide explicit directions for emergency vehicles. The Los Angeles Times uses them to help plan distribution routes. Trans World Airlines's travel reservation system uses Etak's maps for "geocoding" -- enabling travel agents to enter into their computer an address of, say, a hotel, and then immediately see a map of the surrounding area -- including nearest restaurants, rental car facilities, highways, etc.
"Analog maps are art," says Evans. "When you can geocode maps, you have a useful technology." For example, he suggests, wouldn't the publishers of yellow pages love to be able to provide instant maps showing how to get to the advertised wares? Wouldn't travel agents like to give their clients customized maps providing explicit directions for their itineraries? How about Hertz or Avis giving you the maps you need when you rent a car?
Ultimately, Evans wants advertisers to sponsor the compact discs that will run Etak's on-board automobile navigation systems. "You can put a quarter of America and 200,000 to 400,000 advertisements on CD," says Evans. Shell Oil or Exxon might be delighted to sponsor a disc that, incidentally, highlights every Shell service station along the route. Similarly, McDonald's might pay a premium to be listed first on the dashboard computer when the kids start whining in the back seat about how hungry they are.
With geocoding, the advertising can be neatly insinuated into the information. The digital map becomes a terrific advertising medium as well as a navigation device. Even Fox Chairman Barry Diller is excited about it. "It's a great little thing, this Etak. In 10 years, it will be in every car," says Diller.
Whether or not that's true, the fact remains that this is an interesting little business that has the demonstrated potential of becoming an even more interesting big business. Murdoch is charting an unusual direction to explore the multibillion-dollar potential of electronic publishing. "Rand McNally should be sweating," says Evans.
Actually, the folks at International Business Machines Corp. and Sears, Roebuck and Co. who market the Prodigy on-line home computer service are the ones who should be getting nervous. It could well be that Rupert Murdoch will make as big an impact in electronic data services to the home as he has in television, publishing and the movies. Communications giants better keep an eye on this venture because Murdoch may be showing them how to make money with new media.
Michael Schrage is a columnist for the Los Angeles Times.