Online Extra: Q&A with Bertelsmann's Klaus Eierhoff

Last year, as the dot-com business model started to look shaky, German media giant Bertelsmann decided to try a new "multichannel" strategy. It combined its traditional direct-to-customers businesses, such as book clubs, with its Internet ventures such as, which sells books and music online. The man put in charge of the new entity, known as DirectGroup Bertelsmann, was Klaus Eierhoff, 47. Recently Eierhoff spoke with BusinessWeek Frankfurt Bureau Chief Jack Ewing about the future of e-commerce and the task of leading the money-losing businesses into the black. Here are edited excerpts of their conversation:

Q: How has Bertelsmann's approach to e-commerce changed in the last year?

A: Two years ago, if I wanted to hire a young person, they would ask me if the job was based purely on the Internet business. That was all they were interested in. Today, they ask if the business is multichannel. The young people understand multichannel is the strategy that will succeed. There must be a strong interconnection between online and offline businesses. In the end, the success criteria are the same as in traditional business. Results count and nothing else. Just a market position and a charismatic chairman aren't enough.

Q: What are some examples of traditional and Internet business working together?

A: Our book clubs offer a limited selection, 300 to 1,000 titles each quarter. BOL has almost 5 million European titles. So the book club retail stores in Europe have a PC with a connection to BOL. Meanwhile, there's a bestseller page on BOL with links to the club. By joining a book club, customers can get a 30% or 40% discount.

Right now in the U.S., we are acquiring up to 200,000 new book-club members per month via the Internet -- one-third of new members are coming from the Internet. I expect this will happen in Europe in one or two years in the same way.

Q: When will Bertelsmann's Internet ventures be profitable?

A: There is no difference between traditional business such as magazines or music and Internet business. We have to match the same targets for each business. In between four or five years, we expect results.

Q: As the Nasdaq slides and the U.S. tech industry hits a very bumpy period, will the innovation in e-commerce come from other parts of the world?

A: In the past, the Internet revolution was coming from the U.S. to Europe to Asia. In mobile phones, it will be just the other way around. In mobile, the leader is Japan. Europe will be No. 2. The U.S. is not in a leading position right now.

Q: Will third-generation mobile phones replace the PC?

A: I don't think the new technology will replace the older one at all. It will be much more common that people access the Internet using different platforms. It will be a normal way to gather information and perhaps order later. There will be a smooth interchange between all these alternatives.

Q: Will Europe or Asia develop centers of innovation to rival Silicon Valley?

A: If a European company is very interested in innovation, it must be present in centers of innovation like Silicon Valley. But it doesn't matter to Bertelsmann where these innovation centers are. We have good links to companies in Israel, for example, because we believe they are very innovative.

Q: Will big companies like Bertelsmann take over from venture capital firms as the source of capital for e-business?

A: It's not a disadvantage to have deep pockets.

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