David Atherton on football, why mags beat Google, and what he's doing next

Interview Part 2 This is part two of a two-part interview with Dabs founder David Atherton. Part one is here.

David Atherton, the multimillionaire founder of Dabs.com, is heading back into the technology industry and sees electronic security and Facebook games as strong bets for his money.

Last week he made his first industry appearance since selling his business to BT in 2006, at the TCA conference in Leicester, and spoke exclusively to The Register.

Atherton sold Dabs for around £30m, and had to stay out of the technology industry for two years as part of the deal. Ten months out of his contract, with around £20m left in the bank, he is close to grabbing the controlling interest in an alarms company, and is also backing a start-up developing social networking games like FarmVille.

He's not naming the businesses until the deals are done.

Atherton hasn't worked since the sale of Dabs but says if gets the alarms company he'll go in as chairman and run it. Run right he believes he can boost profits from £400,000 to £2m. “The electronic security industry is most laggard of all electronics industries. There are no Wi-Fi products, no blue tooth products, and alarm calls are phone calls not data calls. There are great opportunities to modernise.”

He says social networking games is a high risk investment, with not many players spending money, but rationalises that if FarmVille has 74 million players, with one million of them spending $1 a week, then that adds up to $1m a week.

Atherton also put £1m into DBAM Systems, a WAN optimisation and application acceleration business which went into administration last month. He thinks the software behind the company is very strong and feels there's a good possibility of the business selling its intellectual property for “decent money”.

The Bolton-based entrepreneur is also building up a property portfolio alongside his luxury home, Lanzarrote holiday pad. He's put aside a £2m pot to buy flats and small houses in the North West. “This is the business my accountant likes best,” he says. “The prices I'm buying at, it should mean 40 properties.”

He's buying up foreclosure apartments at around one third of 2007 prices, letting at over 10 per cent, and planning to sell when prices recover.

Atherton says he has no emotional attachment or loyalty to Dabs but is still very proud of the systems and business he built. “I know its an honest firm and does things properly. When we failed it was invariably the carriers fault, or the suppliers fault. It was very rarely our fault.”

He thinks BT have achieved revenue and profits which are pretty flat, from when he sold it, which he understands is pretty good in this market. “And they have the advantages of infinite credit lines, and presumably a perfect internet connection,” he says.

Atherton considers the golden years are over for the Dabs side of the industry. “That's why I got out. There is nothing particularly special about IT any more.”

Eighteen months prior to the sale to BT, Dabs' profits dropped as the advertising model for the business flipped from the big IT magazines (Dennis' Computer Shopper and VNU's Personal Computer World) to Google.

“I had to do quite a lot of work to get profits back, and being very hard about using Google advertising. I foresaw the next few years being a battle with not letting Google have all my profit,” he says.

Atherton thinks the ROI on Google AdWords is not as good as it was with the print model, and that Dabs suffered a lot of click fraud when he was there. Click fraud occurs when a business receives a lot of automated clicking on their ads, for the purpose of generating a charge per click without having actual interest in the target of the ad's link. “I'm a big disbeliever they've got click fraud sorted,” Atherton says.

Once he'd established Dabs' “perfect” online systems, Atherton considers some of his best decisions to have been in Premier League football sponsorship. “We got the Fulham shirts very cheap for a premiership club.” This figure was probably around £1.5m for a two year deal in 2003. Bolton's shirts were unavailable at the time, but Dabs got its name in its Reebok Stadium tunnel, for a bargain figure which increased seven-fold the following season.

At the time BT bought Dabs, rival eBuyer caught up with the business and surpassed it. Atherton believes it ran a sustained “penny under Dabs” strategy to help achieve this. Ebuyer is backed by mega-multimillionaire kitchen magnate Malcolm Healey.

“It was perfectly legal and a very smart tactic. They were determined to get revenue, revenue, revenue and when one of Britain's 20 richest people decides to take on Dabs – they're going to win.”

Atherton started Dabs.com in 1990. Highlights under his watch include boosting profits from £500,000 to £5m in one four-year period, and getting sales to £190m. ®