The founder of leading digital agency lateral tells Digital Arts about his career, Lateral’s recent takeover by tangent, and what twitter’s actually for.

In the fledgling world of digital agencies, where five years’ experience makes you an industry veteran, Jon Bains is positively venerable.

He was one of the first 50 people to sign up for the now-defunct Daemon Internet, and built his first website in 1994.

Fifteen years later, he’s the owner of 12-year-old digital agency Lateral – which was recently bought by Tangent – and a seasoned industry commentator, with projects including a blog on the Digital Arts website.

As Twitter comes of age and we settle into Web 2.0, we sat down with Bains to talk about the state of the industry – and what’s ahead.

How did you start out?
If you can cast your mind all the way back to 1994, I was publishing a fanzine in Scotland, and I built a site for it. I was a geek from day one – I was into bulletin boards throughout the 1980s, so this was a natural progression.

As a result, I was dragged down to London to set up the Internet Underground Music Archive, which was the forerunner of iTunes. I got known as this mad Scottish dude who’d come down to London preaching this new Internet thing.

And I got picked up by Radio 1 and was supposed to work on its first Internet project, Radio Interact – the whole budget was about £3,000. So I set up a company, Obsolete, and from there we won the Radio 1 thing, and then pitched and won Levi’s with three people. I was only 23, I didn’t have much of a clue.

Is the digital sector feeling the recession?
Oh, absolutely. The thing is, we’ve always been an afterthought – the digital ghetto is the term for it. So they’ll spend 90 per cent of their money on TV and then 5 per cent on something else, and then they’ll say, “We’ve got a little bit left over, let’s do something digital.”

But right now, the whole world is in freefall, and even though clients are committed to doing things, they pause and it creates cash flow issues, which mean that companies go down.

That’s what’s happening: in the UK we’re about to be fundamentally decimated. The sad thing is that we are the ones who are in pole position when it comes back up, because the world is going our way.

Does Lateral’s collaborative approach cushion you from the recession?
It gets harder, actually. I’m a firm believer in collaboration, but it divides cash flow. The benefit is that you can get more done with less people, and you have access to much better expertise than you’d probably hire. The downside is that the money comes in and then immediately has to leave again. So when cashflow’s an issue you have to recede, and I hate that.

What can studios to do avoid getting credit crunched?
I’d say right now managing cashflow is key. The thing that hurt us recently was over-investing in pitches, and not doing enough business development, to keep your clients really, really happy; I think that happens in a lot of small companies.

There’s a desperation that comes out in this situation. The problem with free pitching is that there’s an awful lot of time-wasters out there. People are trying to use social media as a replacement for having to buy space.

Why did you sell to tangent?
We’d been planning to sell or merge for some time – not as a ‘get-out’ but as a ‘grow-up’. We’d found it increasingly hard to be stuck in the middle between boutique and full-service.

What the combined offering of Lateral and Tangent will enable is scale in terms of the kind of work we already did, but also breadth, with Tangent having strong print and mobile credentials.

The fantastic opportunity for us is having a well-oiled infrastructure to deliver our more ‘eccentric’ ideas and pitch for projects that would traditionally have been out of our grasp.

Coming from a pure DIY background this is simply amazing. The combined team is over 55 people with over half being developers – marvellous.

You’ve done lots of work with publishers. Is it easy to engage them with new technologies?
Maybe we’ve just lucked out with our clients, but publishing is one of the few areas where they appreciate our vertical specialization. When we worked for Channel Five they said, “You’re not allowed to work with any other broadcasters,” whereas publishers think it’s great if we’ve got other experience. They’re conservative, but they’re also intelligent, analytical and so far we haven’t had a problem convincing them to do anything.

What online innovations are we going to see this year?
Over a long period of time you tend to see cycles of innovation and then acceptance. And it’s really great that all these professionals are going on about the next big thing, but the best time is when everybody else gets it as well.

So in the last four years you’ve had Facebook and Myspace and blogs on the rise, but now you’ve got mass adoption, you’ve hit that tipping point. This year I don’t expect huge amounts of change in the ways that people behave online.

So you think we’re in a phase of consolidation?
Well, there’s two different things. One is technical innovation – new services that change our behaviour: I don’t see that there’s going to be very much this year that’s going to be fundamental beyond what we’ve already got.

At the moment you have a place to put your pictures, your videos, and places to interact socially in various ways. Those precedents are already set by the YouTubes, the MySpaces, iPhone, and people are just getting used to that.

What I think we’ll see is mass adoption. It’s about how people and technologies interact with the real world. And a lot of things we’re seeing now aren’t technically interesting, but in terms of behaviour they’re fantastic.

Any examples?
Over the last year we’ve seen Twitter taking off massively, but we haven’t figured out what its real purpose is. But then something like the Chinese earthquake happens and a lot of information comes through Twitter, and it’s suddenly a big, big deal.

The Twitterers’ social purpose is developing into one of, “OK, how do I let somebody else know that something interesting is happening?” It’s a tool and there are lots of different ways of using it. How it ends up being used in the future is for the masses to decide, and that’s what I’m excited about.

What’s the position of brands within social media?
Ah. This is a big question. Is it all about advertising on those spaces? No. Is it all about marketing within those spaces? Actually, there’s an awful lot that you could be doing. But not in the traditional way: we’re moving into a world where brands have to be disciplined in the social universe.

They have to understand the behaviour and participate in the micro-communities to do it, so it requires a huge tide shift for them. The biggest question is, how do you measure brand reputation in social media? And how do you involve or engage consumers, how do you measure brand participation? It’s the participation bit that’s the most complicated.

What’s your favourite example of social media branding?
I can’t think of any examples where I think, this is the way – because it’s evolutionary: you need to look at how it’s done over time. It’s not hard to come up with an idea that hasn’t been done yet.

The Burger King thing [a Facebook application inviting people to delete ten friends in return for a burger] was a great example of “Have we tried that yet?” But it doesn’t help the brand cross over; it’s an advertising idea.

The campaign that everyone will be talking about for a long time in terms of social engagement has got to be Obama’s. Nothing else has been so far-reaching, and it defined best practice.

It’s not about innovation, it’s just about using the tools correctly. It’s about getting away from novelty as the core metric, which is what the advertising and marketing world measures, to getting genuine participation.

Do you think the aims of social media and the aims of brands are in conflict?
It’s an issue. However, as consumers these days we look at not just what the product is, but also who’s bringing it to us. Look at Primark – a fairly substantial oversight in the supply chain basically leads to significant damage to the brand.

Companies such as Unilever and PNG have really embraced this, because they were in the firing line from consumers who were concerned about corporate social responsibility.

Coca-Cola did a thing that wasn’t bad – although they didn’t promote it heavily – which was an Ask Coke site. And they let everybody just go for the jugular. It was probably well and truly massaged, but it was needed.

It’s not about investing shitloads. It’s about whether you’re willing as a company to engage with the public and I think it’s prudent to prepare yourself for that engagement.

Antidote was a Europe-wide consumer engagement campaign for Levi’s in print, and online and live events, conceived by Lateral. The project gave money to young people to pursue their passions. Bains says it’s a personal favourite among Lateral’s projects: “There’s a ton of other stuff we’ve done that was great, but in terms of a paradigm shift, that’s the one.”

Lateral has completed a number of websites for publishers, including this one for Faber. “For the most part, we just let the authors speak for themselves,” he says.

Lateral’s Test Man campaign for consumer magazine Which? underlined the title’s reputation for rigorously testing products through a series of videos showing Test Man carrying out comically stringent tests on items.