Fast Track Interview

Adrian Bye: Abed Abusaleh has joined me for today’s interview. He works in the direct response television field. We have not yet had the opportunity to talk with someone in this field. Abed, can you tell us a little bit about who you are and what your company has done?

Abed Abusaleh: I am the Executive Vice-President of Long-Form Media for Euro RSCG. Basically, I head up the long-form television buying and planning division of our agency. As an agency, we do just over $500 million a year in both television and online advertising. Almost $400 million of that is television and direct response television advertising between long-form and short-form commercials. The other $100 million is split evenly between production and the online services we provide.

We place media in every media market across the country as well as on every national cable network. Steve Netzley and John Shearson started the agency 17 years ago out of a garage. Since then, we’ve had 17 consecutive years of growth.

Adrian Bye: Can you elaborate on the difference between long-form and short-form commercials?

Abed Abusaleh: Long-form is an infomercial that is 28 minutes and 30 seconds long. The short-form commercial is what people are most commonly used to seeing, which is a 30-second, 60-second or 2-minute advertisement. The long-form advertisement is used when you have a product that needs more explanation than what can be accomplished in a short-form advertisement.

If you’re doing a lead-generation spot for refinancing your home, the message can pretty much be accomplished in 30 seconds, 60 seconds, or two minutes. Long-form is used when you need to build the offer in a unique selling proposition where it takes the full 28 minutes and 30 seconds to explain the product you’re selling.

For example, thousands of vacuums are on the market, but some of our clients have a unique selling proposition for the vacuums they are bringing to market. Maybe it’s a self-cleaning vacuum or the vacuum has a much higher power level than others. These messages usually take longer than a couple of minutes to explain and sell.

Adrian Bye: You’re also bringing your television clients online, correct?

Abed Abusaleh: Very much so. A lot more people are completing their transactions online instead of picking up the phone and talking to a telemarketer. Integrating the online capabilities into your television ad campaign is the way the industry is heading and is essential for most people’s success.

Adrian Bye: What do you look for when you’re working with the client? How do you decide whether you want to work with someone?

Abed Abusaleh: There is no perfect screening process. There are times where people are just trying to throw something together and get it on the air. You really never want to burn a bridge in this industry. Often when people come in with a poor product or one we know probably doesn’t have a very good chance of success, we find that they are committed to the process.

While their first show fails, they meet others in the industry, they find a better producer, they surround themselves with a stronger team, and they develop and find a better product. Often their second or third foray into the space is much more successful. It’s rare for us to turn down a campaign because you never know what small fish ends up becoming the giant fish down the road.

Adrian Bye: You’ll then test any campaign?

Abed Abusaleh: There are certain things we won’t test across the barrier of what we know the stations will allow. For example, a lot of people will come to us with Girls Gone Wild knockoffs. We turn those shows down. There’s not a huge place for that in the marketplace. It’s a lot more headache than it’s worth, and it’s just not the type of product we really want to be associated with.

The only other reason we would possibly walk away from a product is if a client doesn’t have the funding to run a media test. For example, someone puts something together and wants to run a $500 test. If the client is not well-funded, they’re not seriously looking at their test. They’re just trying to throw something into the market and see if it sticks. We would probably walk away from something like that.

Otherwise, we would test most things. If somebody comes to us with a $5,000 to $10,000 budget, a show that’s produced, and is looking to see if it’s viable, the answer is yes. We would probably test it.

Adrian Bye: If I produce my show and come to you with $10,000 for a test, what do I receive?

Abed Abusaleh: For $10,000, your test would include anywhere from 15 to 35 airings in local broadcast markets, probably smaller ones in the Southeast or Midwest. You probably wouldn’t be on somewhere like New York or Los Angeles. You would be on very small national cable stations if any.

The idea is to get as many data points as possible on proven stations that have worked for DR TV to see if the show is at all viable. Those stations are vetted carefully to make sure they have proven history. If it works on those stations, then we can go on to other stations and expand them. If the test fails on those stations, you’re most likely not going to have a successful campaign. At that point, people usually go back to the drawing board or rework their show.

Adrian Bye: How much does it cost to have a show produced?

Abed Abusaleh: It depends. There are hundreds of producers in the industry. If you wanted to get a half-hour show produced through our agency, you’re probably looking at $300,000 to $600,000. This includes production costs and talent fees. There are producers in the industry that will do it for a lot less money. Some of them have not been successful though because the quality of the video tape is different or corners are cut in order to produce a bare-bones production.

Some clients produce shows internally for under $50,000. These resemble a CNN news format where you have one set, two people talking, and two or three cameras on them at all times. Then they edit the show later. Shows can be produced for as little as $30,000 to $40,000. I’ve also seen shows go up to $1.2 million in budget.

Adrian Bye: How does someone with a product that works well get started on TV?

Abed Abusaleh: Unless you’re familiar with the business, I wouldn’t invest $600,000 to $700,000 in a new infomercial out-of-the-gate. I would try to get it produced for as little as possible. The main thing I would suggest is that you spend your dollars wisely. Talk to as many agencies and producers as you can, so you’re making an informed decision and have a comprehensive perspective on the industry.

For example, if somebody comes to us and says, “I want you guys to help me,” I recommend that they also talk to three or four other agencies. I want them to know what the market has in store as well as know other opinions. I want them to work with us because they feel we have the best ideas.

Adrian Bye: Who are some of the clients you currently have?

Abed Abusaleh: Jordan Whitney and IMS are two tracking services that rank infomercials nationally on a weekly basis. We’re booking eight out of the top 25 infomercials in IMS. On Jordan Whitney, we’re booking 22 out of the top 60 shows. Based on our average spend, which is about $5.1 million a week in long-form billing alone, we estimate we comprise approximately 30 percent of the marketplace.

Some of the shows we have worked on include Euro-Pro, Body by Jake, Kodak, 6 Second Abs, Melt It Off with Mitch Gaylord, Contour Abs, and Works GT. We also work with a lot of business opportunities including Dean Graziosi’s program, The Real Estate Millionaire, the Better Trade Seminars, the Russ Whitney Seminars, and the Dynatech Seminars. We have a wide array of clients, and it’s a pretty diversified agency. There’s not one client in our agency that represents more than eight percent of our annual billing.

Adrian Bye: When we buy media on the Internet, we have a campaign and give it to someone else who monitors the numbers. Then we check in periodically on the campaign. Is it the same on TV?

Abed Abusaleh: It’s similar on TV except in direct response television everything you do is infinitely visible to a client. Within 24 hours of an airing, the client knows how the spot did, how much money it made, how much money it lost, and how many orders were received because of it. They have online visibility to their call centers, and they have a media schedule from us. Most clients know within 30 minutes how much money they made or lost.

Because our clients have such visibility to all of this, they’re very interactive in what we do with them. As a result, they influence the decisions we make. For example, they know the day of the airing how it did. If it worked, they want to know what future actions we’re going to take to get similar results. If it didn’t work, they want to make sure they’re not exposed to future media in that direction. It makes for a very fast-paced and sometimes high-stress environment.

Adrian Bye: Who tracks the results of the media buy?

Abed Abusaleh: We do. On a daily basis, we “source” to find out how many orders came in, where they came from, and what media the orders are attributed to. We develop their overall revenue for the spot, cost per call, and cost per order. We then provide them with that information in a daily report. For example, “Yesterday, you spent $5,000 on these five stations and you made $15,000. Here’s what stations did well. Here’s what stations did poorly, and here’s what stations are on the bubble.”

Adrian Bye: Why do they need to talk to you on a regular basis? Can’t they just check-in once a week or once a month?

Abed Abusaleh: Technically they could, but most people are extremely active in the businesses they run. You’re dealing with a lot of entrepreneurs who want to know every detail no matter the size of the business. They’re intricately involved with every aspect of the process. Honestly, those are the types of clients we work best with because their passion and our passion usually produces a winning formula.

Adrian Bye: How do you buy media? On the Internet, we talk about CPM, and we always back towards CPA. Is that not what you’re doing when you buy on TV?

Abed Abusaleh: We don’t buy on CPM. It is supply and demand. We work off a database that has over $2 to $3 billion in media history. Our system tracks every station we’ve ever run, every rate we’ve ever paid, and how the shows have performed over the past 17 years. From that, we’ve developed a target rate by station and identified where things probably work, and where the majority of your products have the best chance of success.

When we’re negotiating with stations, our goal is to get media at a rate that makes sense for the products we have and for how the time period performs. Time periods have a value. Since infomercials are not rated, there’s no way for them to know how many people are or aren’t watching. The only thing you can default to is response. For example, “This time period traditionally has this much response for this type of product. It normally responds to this type of dollar figure at this type of product.”

That’s how we get a rate understanding of whether this spot is worth $300, $500, or $1,000. The entire industry negotiates time on historical responses, not eyeballs.

Adrian Bye: How are spots sold? Is there an auction or bidding system for spots?

Abed Abusaleh: About 10 percent of the spots are sold via auction where the highest bidder gets the spot. I like to avoid those stations because, frankly, their inventories are usually overpriced.

The other 90 percent are sold on a package basis or an incumbency basis, which means agency “A” previously had these spots and has the first right of refusal on those spots for the second quarter. In other words, blocks of time are allotted to agencies on most of these stations, and as long as those agencies keep them for the quarter, they usually have the first right of refusal for the following quarter.

Adrian Bye: What products currently work best on TV?

Abed Abusaleh: Housewares, hardwares, and electronics have had a major comeback in 2008. These are things for your home, such as vacuum cleaners, hedge trimmers, work benches, drill sets, and computers. It’s good to see the consumer goods come back because there’s a high demand for those products right now. This industry has been dominated for so long by business opportunity and fitness.

Business opportunity shows were at one point spending over $150 million to $200 million a year in television long-form alone. This included opportunities such as “Come to this hotel and learn how to trade real estate.” They had such a huge appetite for media buys that it almost artificially inflated the rates and priced out the direct-to-consumer products. That industry has probably decreased by about 80 percent over the last year and a half. The direct response industry has almost come back to a fairer playing field for the rest of the people who are trying to purchase time.

Fast Track Interview

Adrian Bye: Today, I’m talking with Matt Hill, who is the CEO of Shopit.com. Matt has a pretty diverse Internet marketing background. Matt, why don’t you tell us a little bit about yourself and the companies in which you have been involved?

Matt Hill: I’m originally from Canada. After I went to Boston College, I moved to California. In 1997, I started working at Shopping.com. I was introduced to that company and its founders through an investment opportunity. I went in as an early member of the founding team.

I learned everything I know about early e-commerce during my time in that first business. We raised over $15 million in a year-and-a-half period. We built the business over a nine-month period and added about a million SKUs to the database. In early 1999, we signed the company to the Compaq Computer Corporation.

After that, I went to work for a company funded in part by the Hong Kong government’s Asia Tech Fund. They were launching a company in San Francisco that had initially started as a B-to-B toy distribution company based in Hong Kong. I was tasked to be a liaison and help build the merchandising part of the business in San Francisco. I did that for about a year and a half. We raised a total of $18 million for that company and had a planned IPO. In the end, however, things did not work out as planned.

I ended up meeting Richard Rosenblatt, who had started a $20 million venture capital fund called Prime Ventures. I later joined as his partner and sourced deals. Early on, we were involved in a few good properties, one of which was with Jeff Tinsley, the founder of Reunion.com. While we didn’t actually perform the investment out of the fund, we’re all investors in Reunion.com.

We also invested in and ran a company called Superdudes, which was a kid’s gaming network where boys 14 and under create avatars and superhero characters to play Shockwave-type games online. We later sold Superdudes to Intermix.

Since then, we have had an opportunity to invest in 10 or 15 different companies. I sit on the board of three or four of them. One company I founded, which is still around today, is eForce Media. It’s a customer acquisition marketing company, also known as a lead gen company by some people. We have raised about $13 million from Clearstone, Ventures, and WTI.

Adrian Bye: Why would you raise money to start some of these companies rather than just do it yourself? And why would you raise money to start a lead generation company when you can generally begin without raising money?

Matt Hill: As founders of some of these companies, we put our own cash in first. However, the company often requires more than the first $500,000 or million dollars we put into the company.

With eForce, we were able to raise a large amount of capital because of our unique approach. I see the lead gen business very differently than a lot of people. In some verticals, huge operating deficiencies exist. Most lead gen companies operating in these verticals drop up to 40 percent of their leads on the floor because they’re not matching them appropriately with the retail client in that industry. For whatever reason, they don’t have nationwide coverage for those particular leads. When you cast a wide net on the Internet through advertising, you’re going to bring in leads or consumer requests for services from anywhere.

We built a system that focuses on higher yield management from a lead delivery standpoint. That’s why we built a lot of technology in the early years and raised the necessary capital.

Adrian Bye: How well does that actually work?

Matt Hill: A lot of people spend time driving traffic to a Web page and focusing on the conversion of that raw traffic. Very few people spend time focusing on how that consumer request actually was sold and monetized on the back end. While it’s mostly done on a traffic basis, it’s not done once the lead data has been created.

We have a series of algorithms that allow us to multi-sell the lead when it’s appropriate and directly sell them into other networks with coverage in those specific areas. For example, if somebody is buying a yellow Mustang on a Tuesday in Arkansas, we’ll know where that dealer is located. We are able to service all the aggregators, so they can dump their entire overflow inventory into us. We have a hundred sites, and we generate our own leads in all of these industries.

Adrian Bye: For Internet businesses, do you give venture capital a thumbs up or thumbs down?

Matt Hill: My advice to an entrepreneur is to analyze it closely. Venture capital for a small entrepreneur might be a really comfortable environment to initially move into because you have a lot of support, people on your board, and good advice. Once you grow in the business, the landscape changes especially if you’re trying to maneuver from a valuation standpoint in raising additional capital. It can be challenging. Specifically, major business decisions, strategic moves, partnerships, and M&A type activity can become more challenging because you signed up for preferences and rights that may prevent you from doing certain things.

Adrian Bye: Why don’t you tell us about Shopit?

Matt Hill: I really fell in love with this big box retail concept of the eToys, Amazon, Buy.com, and Shopping.com that were popping up in the late 90s. Then there was the next wave in e-commerce with the shopping comparison engines, such as PriceGrabber and Shopzilla

I thought to myself that the next evolution in e-commerce is going to be a hyper-distributed commerce platform or world that brings together social networking communities simply because they’re the fastest growing communities. It could be anywhere on the Internet. It could be bloggers. It could be anything from a commerce perspective that puts buyers and sellers together using the same type of intelligence that brings people together on Facebook.

If people are given the opportunity to transact in a simple way on the Internet, they will do so. For example, you may have a basketball or a pair of hockey skates that you wouldn’t have otherwise taken the time to sell by going through the process of registering with eBay and paying listing and transaction fees. However, if you are given the opportunity to simply upload the item on your Facebook page, blast it out to your network, and advertise in a simple way, you might do that. For an individual, e-commerce right now is time consuming, costly, and complicated. All we’re doing is removing those contingencies.

Adrian Bye: Let’s say I have a basketball I want to sell, and I upload the photo to my Facebook page. Does that mean that only my friends see it? How does that get published? How do people search for it?

Matt Hill: If you’re in Santa Monica, California, and upload your basketball to sell, we’re going to immediately show you the 25 people on Facebook from Santa Monica that are interested in buying your basketball. We’re also going to show you the 38 people on MySpace that live in Santa Monica and are interested in buying a basketball. The only reason we know all that information is because we’re extracting it from two sources. One is from all the people who have already installed the Shopit application on their Facebook, MySpace, or Bebo page. The other source is from the publisher networks within those social networks.

For example, we know where the people live because open APIs from the social networks feed some profile information. We can also gather information through other applications and APIs. We know things about a person that can become commerce-related information. For example, Joe lives in Santa Monica. He’s 27 years old. He plays for the basketball club of Santa Monica and wears Nike shoes. He drinks Slurpees on Thursdays and beer on Fridays.

Eventually we’ll be able to tell you whether this person previously searched for a basketball. At that point, we’ll be able to say, “Here are all the people that have previously searched for basketballs, and these are the people you should target.” It is similar to the way Reunion.com operates in connecting people after they pay. We’re going to allow people to buy small incremental units of advertising to connect to these buyers through other networks.

The most important thing about Shopit is that it’s a community agnostic platform. It operates and connects buyers and sellers from Facebook to MySpace to Bebo to Hi5 to Xanga to the huge blogger world. It synchronizes your profile anywhere you are. If you’re selling something on your store on Bebo, you can launch the application on Facebook, and all your products will show up there.

We will bring buyers and sellers together based on information we have from these social networks. It’s really just connecting a buyer and seller based on specific data about the seller’s item.

Adrian Bye: Let’s say you and I don’t know each other, but I want to sell that basketball in Santa Monica. It would look at your profile and see you’re registered on MySpace with the keyword basketball on your profile. When I’m trying to sell, will it send you a message to let you know that I have basketball for sale?

Matt Hill: It will advertise through one of my applications or send a message to my mobile phone or anywhere else. It’s a very targeted, specific ad network for e-commerce.

Adrian Bye: How will it not turn into spam?

Matt Hill: There’s a function where you can turn any messaging on and off. If we’re sending the message to you via e-mail, we’re going to say, “We noticed you’re excited about basketballs. Would you like to hear about people selling basketballs?” If you say yes, great. It’s just targeted advertising. There’s no secret recipe.

They can also remove it at a Facebook level by making a profile private or shutting off specific things, such as “Yes, I’m involved in horse riding, but I don’t really want to tell people or show people about that.” We would then message them saying, “There’s a horse riding club in Santa Monica. There’s 45 people buying and selling that are connected with this club.” Then if you want to, you would connect to them.

Adrian Bye: How many users do you have so far?

Matt Hill: Right now, we have 165,000 stores or users. Each store has a user, and each user has a store. You become a user when the Shopit application installs on your MySpace, Facebook, or Bebo page.

We hope to have a million stores or users by the end of the year. We’re the fastest growing e-commerce application on Facebook. We’re about 15 times the size of eBay on Facebook, probably because we are free and easier to use. The number of new stores in the network daily ranges in the thousands growing into the tens of thousands.

Adrian Bye: That’s just virally driven?

Matt Hill: Yes. For example, Matt loaded the shopping store. Now, Jimmy loads the shopping store. People are treating it like a real business. We’re noticing that 88 percent of the people installing the store application are uploading products to sell within a two to three-day period.

Adrian Bye: Can you talk about the actual numbers of transactions?

Matt Hill: We don’t charge transaction fees, so that number is not as relevant for us.

Adrian Bye: How do you make money?

Matt Hill: It’s an advertising network. Similar to the way you would buy a Google keyword as a small advertiser to promote your Web site in a search engine, you’re going to promote your basketball by buying small amounts of advertising. For one dollar, two dollars, or three dollars, we’re going to show you the people to whom you can advertise directly. Then we’re going to say, “Come in, buy the small advertising units, and create your ad.” It’s a console you access through your profile on Facebook or MySpace. Then you can create your ad and upload your picture.

Adrian Bye: Basically, the items you are selling get free promotions to your friends linked to your profile. If you want wider access to other people, you can buy some small amount of advertising?

Matt Hill: Absolutely correct. We have a lot of eBay power sellers uploading thousands of products. We even put a button on our homepage to import your entire eBay catalog in one click. These power sellers don’t want to pay fees, and it costs them nothing to do that.

The first thing they want to do with their expendable money is buy advertising. They say, “Where do I buy advertising? How do I promote my items? I don’t have a big network on MySpace, but I want to reach the 150 million people on MySpace. How do I do that?” We can take those products they are selling on eBay and syndicate them through other publisher networks.

It’s a big opportunity. We want six million people spending a dollar a week on advertising, and we’re going to make it easy for them. We’re going to give them the advertising for free because it is paid for by partners. We have lead generation opportunities and partnerships with companies like Revolution Money.

People are signing up for this because there is a world out there demanding free commerce. We’re not trying to drive traffic to our site. Instead, we have gone to where the traffic is located.

Fast Track Interview

Adrian Bye: Today, Joe Abrams from The Software Toolworks is with me. Joe, why don’t you tell us who you are and what you’ve done.

Joe Abrams: My background as an entrepreneur began in the early 1980s when I co-founded a small entertainment company called The Software Toolworks. My cousin and I started the company in his garage in Sherman Oaks, California. We did programming tools for operating systems. This was before the Mac and the IBM PC. We eventually had six or seven people and moved out of his garage. By 1988, we had grown to $2 million in revenue.

At that point, we branched out from pure publishing tools, such as C compilers and macroassemblers, to publishing applications. We had two hit products in the late 80s. One was a chess-playing program called Chessmaster. The other was a typing tutorial product called Mavis Beacon Teaches Typing.

We had grown the company all by sweat equity up until then, and we needed to raise some capital. Through a combination of circumstances, we did a reverse merger in 1988 and raised a couple of million dollars. We went public with a $10 million market cap. From 1988 until 1994, we used that public currency and access to the capital markets to grow the company to over $150 million in revenue. In 1994, we sold that company to Pearson, the British publishing and media company, for $460 million.

I then started working with small technology companies as an investor and also helping in other areas, such as business development. In 1999, I co-founded the company called eUniverse, a very early stage Internet company. We later renamed that company Intermix. Our most famous Web site was a site called MySpace.

Adrian Bye: Did Software Toolworks publish the game Defender of the Crown?

Joe Abrams: Defender of the Crown was Cinemaware. In 1989, The Software Toolworks acquired a company called Mindscape. Mindscape distributed Defender of the Crown on the Amiga, so yes, we published it. We were very early stage Amiga developers.

We were developing across many platforms: the Atari 8-bit, Commodore 64, Atari ST, Amiga, Apple II, Apple IIGS, Apple III, PC, and PCjr. Every time we would develop a game, we would have to find programmers who specialized in that particular hardware. Our products looked very state-of-the-art for each hardware platform we were developing.

Adrian Bye: You have been through a big wave of time and growth in the industry. You even competed against Microsoft. How did that feel?

Joe Abrams: Back in 1981 or 1982, we were close to the same size as Microsoft. One of the things I tried to do over my career is to segregate. There are two types of competitors at which I looked. One type is the traditional business going into new technology. Whether it is a movie company going into the software business or a book publishing company going into the social networking business, those types of companies don’t scare me. In fact, I’d look at them as opportunities. It’s relatively easy to compete against traditional companies going into new media or new technology because they don’t understand the culture it takes to create the products.

The other type of competitor has actually grown out of that industry. The Microsoft’s. The Google’s. I tend to try to stay away from those companies because they do scare me. We would never try to compete in the Flight Simulator market with Microsoft. I would never try to compete on the Internet side of the business or in the search-engine business with Google. They’ve grown up in that space.

I would have people come to me all the time and say, “I could write a better spreadsheet in Microsoft Word.” I’m sure they could write a better spreadsheet in Microsoft Word, but there’s no way I’m going to compete on the sales and the marketing side of that juggernaut. We’ll find a niche where we can compete and succeed. There is plenty of room to compete, make money, and build big companies without tackling these guys directly.

Adrian Bye: Why don’t you tell us your big story of Intermix and MySpace?

Joe Abrams: Brad Greenspan and I co-founded the company and were the first two shareholders. There are different perspectives on what actually happened. I will give you my take on it.

At the beginning, I viewed it as the cable TV model. Let’s build a network of viewers, and then we’ll have these little stations. For example, we’ll have stations for health and nutrition, photo sharing, joke of the day, and video gamer reviews.

In order to make money, we started selling advertising. We were having a fairly difficult time selling it. We said, “Let’s go into e-commerce and sell products.” We started to sell reusable inkjet cartridges. We then sold everything from Salt Lake City Olympic berets to health and nutrition products, and we were fairly successful in that.

Then we said, “We’re really not experts in marketing.” Instead, we decided to buy a marketing company. The guys who started that marketing company came to work for us and really helped it evolve. An idea had been percolating in the back of their mind for a social networking site. Of course, this is before anybody knew what social networking meant.

They said, “We have this idea. We’re amateur musicians. We think there’s opportunity to do something where people who are looking for band members can get together and say, ‘I’m in L.A. I’m looking for a drummer, and this is the kind of music I like to play.’”

They went to Brad and said, “We have this idea. We’d like to create this idea and plug it into the Intermix network.” From there it gets fuzzy. If you talk to Brad, he will say, “They sort of came to me with this idea, but it was really my concept and my implementation.” They’ll say, “No. It was my idea and implementation of the concept. Basically, we just leveraged off the Intermix traffic.”

I can tell you it was not my idea. They plugged it into the network. Inside of three months, we could really see that it was going to be bigger than the whole network. We knew we had lightning in the bottle.

Adrian Bye: Was your goal to build a social network and acquire traffic so you could then monetize that traffic?

Joe Abrams: It started as a marketing vehicle, but it gradually took over everything else. In fact, News Corp bought us for MySpace, which they had used successfully as a promotional vehicle for some of their TV shows and movie properties. It really wasn’t until after they bought the company that MySpace went to the next level. They were buying it as a marketing and promotional tool.

Adrian Bye: I was reading on Brad Greenspan’s site how they plugged MySpace into the various properties you already had, and that’s what gave it the initial kick. I also understood that a key part was the e-mail company you acquired, which helped you get mail through.

What was the key driver of sign-ups? Was it that you plugged into those properties and people informally invited each other? Was it the address book importing process people were using to send invites?

Joe Abrams: It’s one of those things where we were doing so many things. The viral marketing was working; the e-mail delivery was working; the Internet was exploding. The functionality of the site was good.

When we started doing this, Friendster was the gold standard. Within five or six months, they became, in effect, a bankrupt company. Because we were doing a lot of things, I’m not exactly sure what the big driver was.

You have to tell the story in as many different ways as possible, and you have to be creative about the way in which to do it. You want to do affiliates, viral marketing, sweepstakes, contests, and traditional PR. When something is working and you’re pouring fuel on that fire, it goes crazy.

I don’t usually figure out the one best thing to do. Instead, I try to do as many things as possible and let the market tell me if it’s working or not. It’s similar to the old days with software. When we had a hit product, I would increase the advertising budget. People, however, tend to decrease the advertising budgets. They’d say, “I don’t need the advertising because my product is selling well.” I need to advertise the hot product and promote it because that product is pulling the rest of my product line along with it.

Adrian Bye: You’ve hit massive home runs. First through the dawn of the computer industry, and then with MySpace.

Joe Abrams: I didn’t tell you about the third one. About 15 months ago, I took a company public in the solar space called the Akeena Solar (AKNS). That company has a $250 million market cap.

I’ve actually had three companies start with no one knowing what industry they were in, but they each have become very big winners.

I’m a believer in small companies that have great management using public currency to build their companies into mid-size companies and am now focused on helping them do that.

Adrian Bye: Why would a CEO of a company that could grow organically on its own want to talk to you?

Joe Abrams: Being the CEO of a public company is not for everybody. Just like everything else, there are good and bad points. The bad points are that you’re in front of the public eye all the time. You really work for the shareholders. You probably have to spend a third of your time involved in the things that are necessary to being a public company, such as investor conferences. The good news is it’s a way to build incredible wealth.

In terms of raising capital, there’s no better way to raise capital than in a public company. When you’re a public company, the only question is how much of a premium of my stock price am I going to pay. When you’re a private company, you get into issues of worth and earn outs. You can spend months arguing over valuation. At the end of the day, it’s still an art, not a science.

Very few IPOs are now being done. Most mature companies that already have revenues and profits are really not candidates for venture capital money anymore, and venture capital comes with its own baggage. If you need to raise capital, then the only alternative is the private equity market, which is every bit or more onerous than the venture capital market.

There are very few alternatives for people today in terms of raising capital. If I had a business that was generating $5 or $10 million a year in profit and I was putting all that in my pocket, I’m not sure I would go public.

However, if I was doing $5 or $10 million a year in revenue and trying to figure out how to get to $100 million in revenue, or I was making a salary but wasn’t building any wealth, I would then try to figure out how to grow bigger faster and compete. All these businesses have shelf lives. You either have to grow bigger or become less significant. If you’re a one-product one-market company where you haven’t spread your risk around, then you really run into a situation where you’re just one competitor away.

A perfect example, by the way, is Friendster, which was rumored to have turned down a $50 or $60 million offer to buy their company. Several months later, they were close to bankruptcy . You have a very narrow window as a private company sometimes. If you don’t take advantage of that window, you’re doomed.

I like being a public company because there is always access to capital. Your stock price may be down, but you can always have access to capital.

Adrian Bye: Would you rather be thinly traded on the Pink Sheets or on one of the smaller exchanges?

Joe Abrams: I wouldn’t do pink sheets, but I would do over-the-counter all day long.

Adrian Bye: What type of company was Intermix?

Joe Abrams: We started over-the-counter. Then when you meet the reporting requirements, you go to NASDAQ. Last year there were maybe five IPOs in the United States. There were probably 250 or 300 reverse mergers in the United States, and all those raised capital. Since I have done a lot of reverse mergers, I have a very defined process for how to do them. Just like any business, there are things to avoid and things to be careful of during the process. It’s not for everybody.

I always do triangular mergers, which is a combination of capital, public vehicle, and the private entity. I would not go public unless I have enough capital to make sure the company was able to perform for at least the next year.

In effect, AOL was a reverse merger; MCI was a reverse merger. It’s a very common process. It’s very fast and bypasses millions of dollars of accounting and legal fees because to do an IPO is a very expensive, very time-consuming process.

Then the issue is getting the stock trading. That in itself is its own process. That’s why the CEO has to spend a third of his time talking to after-market investors and speaking at investor conferences. At the end of the day, management raises money in common stock with no board control and no liquidity preference on the money. Then they have a currency with which they can build their company. If they execute on the plan, they’ll be rewarded.

Today, private companies sell at two to three times cash flow. Public companies sell at 20 times cash flow.

Adrian Bye: Why is there such a difference?

Joe Abrams: Full value is 20 times cash flow. In the public market, it’s giving credit to the full value. In the private market, they’re giving you discounts because you are a private company, and there’s no competition for that. You wouldn’t pay what you’re getting in the public markets for a private company. It just wouldn’t be worth the acquisition cost.

Adrian Bye: What kind of companies do you look for? What constitutes a company you are interested in?

Joe Abrams: I have looked at 200 companies over the last 25 years. I can look at the company, the market it’s in, and the financial metrics and tell whether the company would be an easy or a hard one in the public markets. Then, it depends really on the entrepreneur’s goal. Is the goal to sell out and go off to the islands? Is the goal to build something even bigger? Is the goal to take on partners to help?

After understanding the entrepreneur’s goal, I figure out, “What’s the right financial strategy? What’s the right deal?” At the end of the day, if the entrepreneur is not happy, the deal doesn’t work.

Fast Track Interview

Adrian Bye: Today, I’m here talking with John Marshall. John is originally from the United Kingdom and built a business there. In the United States, he worked for Netscape. He also started and sold a company called ClickTracks. He is now starting a new company called Market Motive. John, you can tell us a little bit about yourself before we talk about ClickTracks and Market Motive?

John Marshall: I’ve always been a software entrepreneur. I started writing software when I was about 13 and have been selling it since the age of 14. At that time, I wrote eight-bit video games and sold them on cassette tape. After school, I would open the mail, collect the checks, and duplicate the cassettes myself. It was a good introduction to the process of building and commercializing software. I left the video game business in 1986 or 1987.

I then started writing driver software for color printers. I started a company with another programmer, and we built an OEM business. We developed a tool kit that made it very easy to write a color printer driver. We probably wrote drivers for 40 or more different printers. Printer manufacturers licensed the tool kit from us. In 1992, I moved to California to expand our business by selling more in the United States. I sold that company and then worked at Netscape for a while.

Adrian Bye: You left Netscape at the time AOL was taking over the company. What happened next?

John Marshall: I was recruited to run a small software company that was developing an e-learning product. The company was attempting to market the product entirely online. It was a small company, so one of my many jobs was marketing the product for the Web site.

We bought a copy of WebTrends because we needed to know what was happening on the Web site. The product really did not answer what people were doing on the site. Because I know the fundamental process to design quality software from the users’ point of view and to design an underlying product, I found the experience frustrating. I knew I could create something better.

I had an epiphany about revealing where people click on a Web site. I remember saying to somebody, “All these reports from WebTrends are just not doing any good. What I really need to see is what people click on. Then, I’ll understand what they’re trying to do on the Web site.”

I decided to start a new company focused on solving that problem: what do people click on when they come to the Web site. That was the beginning of ClickTracks. I bootstrapped that company and designed the initial version of the product.

The product’s key feature was the idea of placing little bars next to each hyperlink. Those bars represent the number of people who click on that link. It can be put on any Web page, homepage or site that you’re analyzing.

We took that idea and developed a complete package around it. We made the product available for a relatively inexpensive price. It was also available as a downloadable trial.

Adrian Bye: When they downloaded the trial you wanted them to be able to do receive value within five minutes, is that correct?

John Marshall: Yes. Most people with a Web site had already bought or implemented a product for Web analytics. However, it didn’t actually help them understand what people were doing, and it didn’t produce useful results.

We had a ready-made market into which we could sell. Because the market was utterly dominated by WebTrends, we had to promise our customers that they were going to be able to understand the results. We made this promise, “You’ll be able to use it in five minutes.” We also made the program really easy to access and install.

Adrian Bye: What did you do to make sure they received value in that time?

John Marshall: Most of the programs, such as WebTrends, were extremely heavyweight. They were big and slow. They also needed to be installed on a big fast machine, which typically was a server. We built a very lightweight desktop application. In order for someone to try it, all they had to do was install it on the desktop. It was a completely different approach.

We also made it look very friendly and very icon driven. It looked like an Apple-type product with little blue images that made it very easy for people to use. We were recognizing that the user of the program was a very busy person who didn’t have a lot of time, and they already didn’t have a lot of confidence that the program was going to work. We needed to win them over in the first few minutes of use.

Adrian Bye: Did you have outside investors for your company?

John Marshall: We had two investors. Both of them came in separately after the company was already three years old, profitable, and selling products. We just needed a little bit of a cash infusion to help us develop additional products.

My wife and I used our own money to start the company. It certainly was not easy, but it had a very happy outcome. I retained control of the company. I had my own decision-making power. In the end, the key was that I hired an investment bank to help us sell the company.

Adrian Bye: Why did you want to sell?

John Marshall: It was a personal diversification goal. When you start a company and you and your wife are the majority shareholders, a lot of your personal wealth is tied up in that one asset. That’s not necessarily a smart move. You need to diversify from that one asset because technology changes so fast. If your product is no longer selling in two years, that asset has become worthless.

Web analytics was also clearly moving in a direction where it was going to be central to many other products. For example, Web analytics is at the heart of online marketing activities with search engines, ad banner companies, e-mail providers, and RSS feeds. All of these ways of marketing to people need to have integrated Web analytics in order to be effective.

It was really a matter of approaching companies that do those things and making sure ClickTracks was the Web analytics product they are going to use as opposed to some other company. We were already partnering with various companies. If we didn’t “marry” one of those companies, then they were going to “marry” a different Web analytic’s vendor.

Adrian Bye: Couldn’t you have been coy and let them pursue you?

John Marshall: At first, I thought the way to do this was to be coy and wait for the phone to ring. I was already getting VCs calling and wanting to invest in the company, but I never took that money. Since I was getting calls, I felt that selling the company would be the same thing. It really doesn’t work that way.

If you’re waiting for the phone to ring and somebody to offer to buy you, it often doesn’t happen. If you hire an investment bank, it sends a signal to the market that this company is for sale. Additionally, it motivates company A to buy because if they don’t, company B will.

Adrian Bye: Is it necessary to send that signal through paying expensive fees to an investment banker? Why do you need the intermediary?

John Marshall: The intermediary implies a degree of seriousness. If you’re the buyer and you know the company is represented by an investment bank, you know that the principals of the company are paying that investment bank a significant amount of money to get the deal done. Therefore, the deal is going to get done. This company is going to be sold to somebody because that’s the only way that the principals can recoup the amount of money that they’re paying to the investment bank.

If company A knows that your company is going to be acquired, then they fear that company B, their competitor, is going to get it. Company A says, “Okay, we’re going to make this happen because the consequence of a competitor getting this technology is worse than us spending the money to do it.” There is this degree of intent that hiring an investment bank implies to the market, which is not there if you just sit around and wait for it to happen.

Adrian Bye: Can you tell us the numbers or percentages you paid the investment bank?

John Marshall: All investment banks charge different amounts. A lot of it depends on the structure of the deal. Typically it is somewhere in the range of five, seven, or eight percent of the total sale price.

Another important detail about the acquisition process is the fact that ClickTracks was not VC-backed. This was instrumental in getting the deal done. The first question acquirers asked was, “Are you VC-backed?” Later they said, “We never would have bought you if you’d been VC-backed because the deal would have been just too painful.” I think that word “painful” means financially and legally.

Entrepreneurs should think about that when starting their company and determining the company’s structure. If you take VC money, you potentially close the door to an acquisition. Sometimes, an entrepreneur would be better off not taking the money, keeping the company small, quickly turning it into something profitable, building really unique technology that other companies need, and then deliberately setting out to sell it. That’s the way I’ll do things from now on.

Adrian Bye: Tell us about your latest venture, Market Motive.

John Marshall: The idea for Market Motive came from ClickTracks. Michael Stebbins, who was the vice president of marketing at ClickTracks, and I were discussing a common problem we had with selling the ClickTracks’ products.

One of the fundamental problems is that the user often lacks enough knowledge of the particular nuances of online marketing to really be able to make the most effective use of the numeric data the program can produce.

Our solution was to provide a really good foundational training environment to give people this basic knowledge. With the blessing of the new owners of ClickTracks, Michael and I started Market Motive.

It’s a subscription Web site with premium content. Subscribers have access to training material that covers the whole gamut of online marketing. The content is put together by some of the top minds in the industry. For example, Avinash Kaushik, a leading author and blogger, teaches Web analytics. Brian Eisenberg teaches conversion, optimization, and testing. Alan Rimm-Kaufman teaches paid search and effective PPC campaigns.

A subscriber has access to all of that training material. They also get a conference call with the faculty where they can ask specific questions and access to an online forum for questions.

Adrian Bye: What kind of people should sign up for the material?

John Marshall: We wanted to address the general problem of teaching people how to do really high-quality and effective online marketing. The types of people that do best with this material are new hires at companies, such as someone brought on board to manage online marketing. It works great at agencies that are hiring staff to work on client accounts. We also have some small business subscribers who have a common problem of doing everything all at once.

The material is fairly structured with a step-by-step approach. We provide the training in the form of 30-minute videos that are very topic specific. They’re focused on the ins and outs of actually getting something done, such as building a good campaign.

Adrian Bye: Where do you see the business going?

John Marshall: We’re expanding the amount of content. We recently decided to offer certifications. We had a lot of requests from subscribers for that, and we had been thinking of what to do there. We will have some announcements coming out shortly about the certifications, which will be accredited.

We’ll also be announcing some partnerships with other companies. We’re going to start doing live training, which is all Web-based delivery. We’re not doing physical world training. It’s very difficult to get people to leave the office long enough to attend physical world classes. Our specialty is doing it online.

Adrian Bye: How do you find your buyers?

John Marshall: We do a certain amount of advertising, but a lot of it is just word-of-mouth. The members of the faculty are all very well-known; they are all personalities and public speakers in their own right. We also use blog coverage and Public Relations.

Adrian Bye: Have you considered a lead generation or CPA campaign to drive traffic?

John Marshall: We have an affiliate program, which is basically a CPA program. We have limited roll out of that, and we’ve been testing it. We’ve learned that lead generation partners work well, but the degree to which we’ve driven that has been small so far. I think that’s going to change.

Adrian Bye: Is there anything else you’d like to share?

John Marshall: I do have a recommendation for how entrepreneurs and technologists need to think about hiring developers. If entrepreneurs, who are trying to make progress in the tech world, are not developers, they have a hard time working through the process of hiring and understanding developers. Yet developers are probably the most important people that you’re going to hire because of the important role they have in actually building the products. I’m often surprised at how entrepreneurs are not doing very well at hiring developers.

A Web site I recommend is JoelOnSoftware. It’s an Econ site. If you’re an entrepreneur and you’re trying to build a software product or service, you really need to read what Joel has to say on his site. His advice has really saved me multiple times.

If you mishandle the development of your product, you really will pay for that long term. Within ClickTracks, we did many things wrong. However, we were right with the architecture of the product and the clarity of thought that went into the design of the products.

I realized in retrospect that we would have paid a very heavy price if we had not gotten the architecture of that product right from the start. Entrepreneurs may say, “Well, big companies can afford to do that. As small companies, we do not have time to worry about those things.”

My closing advice is worry about it. You will absolutely pay, and pay big, if you get those things wrong.

Fast Track Interview

Adrian Bye: Today, I’m here with Chris Young, who founded Klipmart and now Digital Broadcasting Group. His businesses have focused on online video, advertising, sponsorship, and promotion. Chris, tell us about yourself and the companies you founded.

Chris Young: In 1999, I founded a company called Klipmart, which specialized in putting ad banners on the Internet. Specifically, it encouraged advertisers to run their video of TV spots within those ad banners. This took off in 2002-2003. The business grew from six people to 65 people and $20,000 in revenue to $15 million in revenue. In June 2006, we sold the company to DoubleClick. I stayed at DoubleClick as the Executive Vice-President of their rich media business. In January 2008, I left DoubleClick.

Recently, I started a new business called Digital Broadcasting Group or DBG. We’re focused on creating, producing, and syndicating original broadband webisodic content. In other words, we’re working with all kinds of different people in creating shows for the Internet, whether they’re scripted comedies, documentaries, etc. Then, we secure agencies and advertisers to sponsor the show.

This is really creating a broadband show of 10 shows in a series of three to five minutes in length. We have an empowered consumer that can switch your brand on or off at a bat of an eyelash. Creating a webisode is a way to really emerge your brand and engage your consumer in their lifestyle rather than talking down to a very smart, empowered consumer in an ad banner.

Adrian Bye: Why the focus on video?

Chris Young: When I founded Klipmart, the company’s mission statement was to take the best of TV broadcast commercial and marry it with the interactive and reporting capabilities of the Internet. That mission statement never changed over the seven years of the company. In essence, the thought process was that TV is a tried and true medium. It’s just a matter of time before it migrates its way onto the Internet through flesh and blood video. That’s exactly what happened. It started potentially because it was broadband constrained to 30-second commercials and 60-second commercials. Now, it’s moving from the TV commercial realm into long-form video content because the broadband pipes can support it.

Adrian Bye: Is putting video in banners something that increases click-through rates and, therefore, makes advertising more effective?

Chris Young: With video, we’re able to measure a lot of things that you can’t necessarily measure when you’re running an ad on television or a simple banner ad.

Namely, we look at the percent of video viewed. The clip index in 2006 indicated that, on average, a consumer would watch 20.5 seconds of a 30-second spot. That’s a really dynamic new metric that advertisers could only guesstimate through Nielsen Ratings. It was a huge moment to be able to go a step further toward accountability and say how many people you’ve reached and the percent of the video watched. There’s so much more accountability with the Internet.

Click-through rate was always higher with the video ad. As an industry, we really struck ourselves in the foot in the mid-90s saying, “Look here. Look here. Pick me. Pick me. Look at what we can do. We can track the amount of people that click on an ad.” It was a double-edged sword. At the end of the day, the industry got dragged down by this fairly ineffective metric that had nothing to do with branding. It was really a contrived direct response mechanism, and we were really held to that. It wasn’t until 2004 that we finally shrugged off the click-through rate, and people effectively didn”t look at that with such a singular focus as they had before.

Adrian Bye: What does an ad look like?

Chris Young: We’ve done some really neat executions. We shot Tiger Woods on a green screen for Electronics Arts. We did live banner streaming into an ad banner for New Line Entertainment’s movie The Number 23.

Generally as you”re reading an article, there’s an ad within the page that’s 300 x 250 in size, for example. When the user’s reading the article, the page loads, and the TV commercial starts playing within that ad unit. There are millions of different variations on the theme with different shapes and sizes, and some expand if you roll your mouse over them.

Adrian Bye: If someone like Sony says, “We have a new movie coming out”, you’ll talk to them and help them promote the movie. You’ll make the creative. Do you help them with the media buying as well?

Chris Young: The great thing about this business is the ad agency does the media buy. What Klipmart did, and what DoubleClick now does, is takes the creative assets from the creative agency. It takes the media plan from the media agency and takes the video assets from the advertiser and puts them all together. Then it distributes it to the Web sites from the media plan.

Adrian Bye: You’re effectively a consulting agency helping create the creatives?

Chris Young: We’re delivered the shell of the ads. Then we get the video. We get a media plan telling us where it should be executed, and we put the whole thing together. We handle all the metrics tracking and all the rich reporting that happens on the back end, such as the percent of video viewed. We tag everything, so we can do reporting against it. If there’s live streaming or a green screen, we handle that. We’re really experts in video.

Adrian Bye: Are you involved in discussions where they’re setting the CPM rate? Chris Young: We’re not really involved in the CPM rate. That’s between the agency and the website in terms of what they’re going to pay. For a banner video ad, the rates are probably on average about $15. We charge an additional $2 CPM as the vendor to deliver that video ad, or we’ll embed our rate with the websites, such as the global deals we have in place with Yahoo, AOL, and MSN where our fee is baked into the cost of the media.

Adrian Bye: What have been key metrics that they are tracking?

Chris Young: We’re able to track all kinds of things. We’re able to track the percent of video viewed. We can look at the different things within an ad. For example, say it has a game or video in it, or you can download a wallpaper. We’re able to track who did what, who played the game, for how long they played, who downloaded the wallpaper, and which wallpaper they downloaded. We’re able to track functionality, such as sharing the ad with a friend or putting the ad on a social network page through the ad unit’s widget share function.

Adrian Bye: Basically you can buy media, and then it will get virally passed around. You might have a CPM buy at about $12 to $15, but then you go and get free inventory because people share all these ads. Do you have any numbers on how that actually works?

Chris Young: I was with a client a couple of weeks ago at Sundance, and I said, “How did that go?” Without revealing too much, it was very effective. I was amazed and shocked that the amount of impressions he ran to the amount of people that actually shared it was so high.

It goes right back to what I was saying at the beginning, which is in the notion with the the Empowered Consumer. You need to now elevate the conversation with your consumer on their terms, which is immersing your brand into their experience hence the share functionality, the share widget functionality, or empowering them to participate.

For example, we’re producing a new show called Celebrity Game Wars. In that show, it’s going to revolve around this new game called Rock Band. We’re going to have a celebrity show up, and we’re going to interview them. They can fill their band with their entourage. Then they face off. The points tell only half the story. The Internet audience can then vote for whom they thought rocked out the hardest and, in essence, will select the celebrity winner.

Adrian Bye: The concept you’re working with now is again taking video. You want to have short clips of video that users can easily put on different Web sites around the net, but instead of working with advertisers this time, you’re actually producing content?

Chris Young: Yes and no. If you think about the value chain, we create or co-create broadband shows, we secure digital ad sponsors to sponsor those shows, who foot the bill for production. Then, we produce those shows and need to create reach and frequency for those shows. Unlike TV, you don’t have a built in audience somewhere. You have to sit down with the media agency and say, “Where do we want this show to live?”

In essence, we are creating shows that only live online. I met with Oscar winning actor about six weeks ago. He has a new show where he came up with the concept, produced it, and stars in it. He wants to take it to the Internet. In that case, we may work with him to secure the ad sponsor, and we’re syndicating. We’re providing the reach and frequency.

Adrian Bye: How does the sponsoring work? Does an ad run before, after, or during the show?

Chris Young: A lot of product integration is built into the show. For example, we have another show called Shopping with the Stars where a famous person goes up and down Rodeo Drive and goes into his or her favorite shops. At the shops, there’s some no name person with a thousand dollars to spend. They get outfitted and get fashion tips from this star. In that case, there are opportunities to do tasteful product integration.

We want smart integration because, remember, we have a very smart, empowered consumer. The cars they drive to get to the stores, the credit cards they use, and the stores they go to give us different ways to do that. The advertiser or the sponsor is getting product integration and maybe a 15-second pre-roll before the show starts. For example, a15-second ad for the sponsor’s brand or a 5-second introduction saying “Brought to you by Chevy.”

Adrian Bye: Since these are webisodes, we’re going to see more than just one. How do I know there are others? How do I get those, subscribe to them, or find out when there are more?

Chris Young: Basically the show would live and breathe on an anchor Web site we pick, such as Yahoo, MSN, or MySpace. Then there’d be a whole community with news about the upcoming show. In order to really create reach, you need to go beyond the destination site.

We would sit down with the sponsor’s media agency and ask about the consumer, such as where they live to determine where the show should live. Then we will begin to build a syndication plan just like a media plan of the show. The show is not only going to live on a destination site. It’s also going to live in places around the Internet. For example, Celebrity Game Wars can go on MaximOnline.com, MTV, Heavy.com, IGN.com, GameSpy, Yahoo Games, or MSN Entertainment.

Adrian Bye: You can pay to have the video run on those sites with your ads. They don’t try to put their own ad on it?

Chris Young: No, they don’t because it’s a paid buy.

Adrian Bye: It doesn’t show up on their site as a featured video?

Chris Young: It would just be another piece of content within their player. We have a whole syndication group at DBG that does this in conjunction with the ad agency. Depending on the deal they struck with the Web site, they might run a whole bunch of banner ads promoting the show.

Adrian Bye: Someone is going to be paying actors, writers, and all of those people. Is all of that covered by the advertisers?

Chris Young: Correct. It’s exactly the same way on TV. Corporate sponsors pay for all those talent salaries on television. They do it indirectly through their TV spot purchases, but it’s the exact same thing.

Adrian Bye: This way they actually have more control over it, don’t they?

Chris Young: A hundred percent and much better reporting metrics. It’s much more targeted to their consumer. It’s the wave of the future. The television will be replaced by the computer as the video distribution vehicle in the next 5 to 10 years without a doubt.

Adrian Bye: Since it is a series, if I watched the second one but I missed the first one, how do I find out about the remaining episode and catch up? Is there a link at the end saying, “Come and see other episodes here”? How are you actually building a relationship and getting their content at the consumer ongoing?

Chris Young: The consumer knows that every Tuesday at 11:00 a.m. for example, the new installment of Celebrity Game Wars comes out or Shopping with the Stars. It comes out on the anchor site and, simultaneously, on all the syndicated sites on a regularly scheduled phase. People will see it by the sheer fact that they’re consuming video on all these top Web sites.

Adrian Bye: Is there anything else we haven’t talked about yet?

Chris Young: What is so exciting about the Internet is it’s like the industrial revolution. We have the opportunity that the previous couple of generations didn’t have to really innovate with this really fun, brand new medium. It’s really exciting to redefine modern media. I’m really excited about broadband video, where it’s going, and how it’s going to completely transform our media consumption habits.

Fast Track Interview

Adrian Bye: I’m talking today with Aaron Broder, who is co-founder and CEO of Gorilla Nation, an online rep firm. Aaron, tell us about yourself and what your company does.

Aaron Broder: My grandfather was a movie producer in the 1940s and 1950s. My family has also had a career in entertainment. I have a CPA, JD, and an MBA. Early on, I realized I wasn’t that interested in entertainment. Instead, I started my first Internet company built around creating an entertainment community site centered on young celebrities. In 1998, I started Celebrity Boulevard with my business partner Brian Fitzgerald.

We quickly realized that business was difficult. We were working with a company that was brokering our ads for our site, Celebrity Boulevard, and they were taking a good commission. We realized our skills were really in the business aspect and not necessarily building a site. We then become more of an ad rep company. That’s how Gorilla Nation started.

Adrian Bye: You’ve been around the entertainment business for a long time. What you’re doing with Gorilla Nation is taking that expertise and bringing it to web publishers?

Aaron Broder: That’s correct. I spent several years around Hollywood agencies, which represent writers, directors, film producers, composers, and editors. Once we had the Celebrity Boulevard model and started talking to ad rep companies, we realized that a media rep was very similar to a Hollywood agency. We’re an agency rep for web publishers.

Around 2001, we switched to repping. At that point, we felt there was a great opportunity to help movies studios connect with audiences online. We signed some of the leading independent movie information sites, such as Rotten Tomatoes which News Corp purchased, Box Office, Mojo, Jo Blo, Dark Horizons, and other sites.

Then we started signing other sites to reach that elusive film fan, such as leading comic sites, anime sites, and scary movie sites, where they can properly market a science fiction thriller across a grouping of science fiction sites and movie sites.

Right now, we’re focused across 37 different verticals. We represent a number of marquee properties, which include Marvel.com, Starwars.com, and some of the aforementioned film sites. We represent a lot of the leading celebrity blog sites, such as TheSuperficial and PinkIsTheNewBlog. We also represent Millsberry, one of the largest children’s sites.

We’re really still entertainment and lifestyle focused, but we do represent a variety of sites in different categories, such as anime comic book, science fiction, and hunting and fishing enthusiasts. We also represent sites in broader categories, such as leading film sites, leading video games sites, news and information sites, leading music sites, and celebrity gossip sites. In addition to those categories, we also represent leading women’s sites, which include general female interest sites, style sites, fashion sites, and sites appealing to celebrity gossip.

Adrian Bye: What kind of annual volume of ad sales are you managing?

Aaron Broder: Our total company’s revenues last year hovered around $47,000,000. Since 2002, we’ve experienced anywhere between 50 to 200 percent growth based on the year. We expect 2008 to continue that trend.

Adrian Bye: Let’s say I have a site and come to you. What would happen?

Aaron Broder: We would discuss the site and agree to a representation contract where we would go out and act as the exclusive premium ad sales entity that would directly replace any internal sales team.

Our direct responsibility would be dealing with brand marketers relevant for the site. We target those marketers through a variety of integrative promotions as well as banner media. In addition to just selling the banners on the site, we sell different ad formats or custom units, such as creating custom advertorial, actually re-skinning the page, or creating very interesting programs that can engage with the reader through vehicles other than just a mere ad. We pitch those programs to marketing partners, and then we agree to rates, the specs, the duration, and the budget of the buy. We end up using our ad server to serve our ads.

Adrian Bye: Does re-brokering happen? Do you go to other agencies and get bigger rates that way?

Aaron Broder: No. We only work directly with our publishers. We could work with a group of people that own more than one site, but we do not work through other brokers. It’s our belief that it’s important to work directly with the publishers. If you’re going to come up with custom programs, you need to work with that very specific person or owner in charge of the site.

Adrian Bye: Let’s say you’re a big publisher, and you’ve been running your inventory yourself. Then you have one of your friends start selling it. You get to a certain scale, and it suddenly starts to make sense to bring him in house again.

Aaron Broder: It really depends on the individual publisher. A lot of publishers, for example Marvel.com, are owned by parent companies that aren’t advertising focused businesses, such as the revenue they’re generating through their site in comparison to the revenue earning to Starwars.com. What they’re looking to do is have a clean and efficient solution from an outside sales agency.

A lot of independent publishers also need to have their properties reach the brand equity levels or have the total amount of inventory where it makes sense to bring that in house. If you have a big enough site, you cannot simply service that site by having one sales person. You need to have sales planners, ad traffickers, and multiple sales people. It is difficult to find those people, especially confident people.

In addition, there’s a lot of clutter and noise in the market. What we’re seeing is that marketers prefer to work through rep firms for sites that are everything but the very large and very top in the sense that they just can’t be bothered with buying five different celebrity blogs directly through celebrity blogs owners. They’d rather have a company that aggregated those five, was sophisticated enough to fill the media program that may transcend all five sites, and create something more powerful than anyone of the sites can do on their own. From those standpoints, there’s a variety of reasons why certain publishers will always choose to work with a rep company.

Generally around 25 to 35 percent of the site’s traffic is international. Since last year, Gorilla Nation is making really strong attempts to grow and fill that international sales force. We have a big team in Toronto, and we’re looking to hire and establish components to our business in the United Kingdom and Australia during this year.

Adrian Bye: How do you monetize international?

Aaron Broder: In international markets, they’re running more performance based advertising that are mostly remnant in nature because there aren’t a lot of sophisticated sales of U.S.-based dot.coms or sites to media buyers and foreign markets. Based on our initial success in the Canadian market, we’re very confident that we’re going to be able to build an end-to-end ad rep company, which can effectively sell a dot.com ad inventory across the globe.

Once we’re set up in the United Kingdom, Australia, and New Zealand, we’ll be able to gauge how to sell in Southeast Asia and Europe.

Adrian Bye: Are there not many companies that are doing well with what you guys do?

Aaron Broder: No, not in the US for a variety of reasons. It’s a much tougher proposition. A lot of people are coming into the Internet space. They’re primarily coming up with different tech plays that can be scalable whether it’s a widget maker or an ad server. They’re addressing those aspects of the model in the media services space. If they are addressing it they usually have underlying technologies. While we have a very robust ad platform and ad op system that we built for our publishers, it’s still primarily a high touch point sale. If we’re not selling high touch point ad campaigns, everything else is sort of irrelevant, and most people have decided not to enter in that space.

Adrian Bye: Could that be because there’s not a lot of competition or is it not a fast-growing market?

Aaron Broder: It is fast growing. You have to build surrounding businesses around your core rep, you have to go in an international way, or you have to really think through some of the weaknesses of being a pure service provider or pure rep company. It’s also very hard, and you have to get to scale. You have to rep enough sites that you’re meaningful to advertisers. In order to sign those sites, you better have campaigns for them otherwise they’re going to be dropping you pretty quickly.

Rather than focusing only on what we would call the fat end of the long tail, we’ve really defined the term mid-tail. We refer to mid-tail as sites that are really important niche affinity content sites with meaningful audiences and meaningful marketing opportunities. We try to represent as many of those sites as possible in our existing categories so marketers can create a scalable media campaign reaching millions of people by aggregating 8 to 10, or 8 to 20 really strong sites. Typical rep companies in the past have focused only on the very top sites. Those top sites are the most likely to potentially leave them, and then they’re left with nothing. As a result, their businesses don’t grow. By focusing on the mid-size and then going up, we’ve been much more successful than those companies that have focused on the top sites and gone down.

On the other hand, we are working with several very large sites. Millsberry, for example, is one of the top three or four kids’ sites and is owned by General Mills. They just are not experts in ad selling. They still want to make sure they have safe, secure, and conservative ad placements. It really depends on the business objectives of the particular publisher. Based on that, sometimes you very well may represent very large sites.

Adrian Bye: Do you ever do deals around other stuff, for example Lead Generation. Do you ever do creative stuff like that or do you only just focus on CPM?

Aaron Broder: We only focus on CPM, but we will do creative stuff if it’s surrounding a branding experience. We are not trying to position ourselves or sell ourselves as a a performance based company for purely performance campaigns. However, we do want to create engaging and measurable integrated media programs that benefit brand marketers.

Adrian Bye: What about behavioral?

Aaron Broder: Behavioral is very different than contextual. If you think about ourselves, we are a contextual ad sales company. We are repping premium content. Because of that, we personally believe that premium contents trusts behavioral. If you have a great auto site, you don’t need to run a behavioral campaign to reach those users that are intending to purchase on automotive sites. Similarly, if you’re on a great movie site, you don’t need to run a campaign or reach people that are most likely to see movies. Behavioral is also an important media vehicle online, but it should be used as an additive factor to an online campaign, not as a substitute for running media on content sites. Behavioral really comes to play when you’re having the premium inventory within a specific user always being sold out. When marketers just can’t buy enough of that inventory, then they want to look toward behavioral solutions to reach users who are interested in that in an alternative manner.

Adrian Bye: How do you find the new client?

Aaron Broder: We have a very big business development department whose sole job is to go out and cover verticals and make sure we’re above the leading new sites that are popping up as well as existing sites. We also get a lot of referrals from happy publishers or advertisers that believe the site would be a great addition to Gorilla Nation.

Adrian Bye: How many guys do you have?

Aaron Broder: Right now, we probably have at least ten people between going out and securing new publishers, re-signing new publishers, and then managing those relationships day to day. We have a business development team that self-sufficiently interacts with our legal department, and they go out and do their deals.

Adrian Bye: What actual day-to-day stuff are you involved with? Are you more focused on managing and running the business?

Aaron Broder: Mostly the business right now is reaching a scale where we have management running the business. We fill our company with bright people who are leaders in their own right, and we really leave it to those people to run their departments and manage their teams. However, they’re always free to come in and speak with us, and we’re always going to them if we have any great ideas of new sites of our own, or more approaches that we should be taking with a specific department. We really are trying to let our group leaders lead their individual units.

Adrian Bye: Is there anything else we should talk about?

Aaron Broder: We are constantly coming up with new solutions for our publishers aside from just representing their ad inventory. We’re looking out for broad programs that we can offer the better program; basically where we add as the wholesaler in that respect. We’re also trying to develop ad technology, such as our ad ops system to make managing publishers and getting information to publishers in a much more seamless experience. In addition, we’re trying to develop ad technologies. One example is building a syndicated video player where sites will have access to host their own video or upload their videos that we’re sure to make available to other Gorilla Nation sites. This will then create video advertising opportunities at their sites. We’re really looking to become a broader business partner with their sites and make sure that we’re helping a lot of sites that may not have the expertise, the time or know-how to build better platforms and create new modernization strategy.

We’re always looking to build other areas that compliment our entertainment and lifestyle content sites. We’re really excited about working with larger publishers in the international markets. Once we kind of get through the United Kingdom and Australia, I think we’ll be looking to get into a couple of new verticals as well.

Fast Track Interview

Adrian Bye: I’m here with John Linden, who is the CTO of Think Partnership. John was the founder of a company called ValidClick, which was then acquired by Think Partnership. John, tell us about yourself and what you do.

John Linden: We really had two products within the company, which was originally called Litmus Media. The flagship was the ValidClick property. At the time it was called the ValidClick Network. We also had a property called Second Bite, which is a shopping cart abandonment recovery technology. Think Partnership acquired our company in April of 2006, and we’ve integrated both products into the organization substantially. I joined Think Partnership as a CTO a few months after we were acquired and have been really working on product strategies.

My main role for the company is taking what was then 14 different acquisitions and putting them into one entity as well as making sure we have a good story and that all of our technology works together. I handle pretty much all the technology assets of most of the teams. We’re building what we consider super-applications at this point.

Adrian Bye: What are the main products you want to tell us about today?

John Linden: Two of the big products we’re pushing are centered on our performance-based advertising platform. We have a new product called the ValidClick Ad Exchange. It’s been a product long in the works that has really stemmed from an exclusive technology alliance with a company called Fair Isaac. Fair Isaac invented the FICO credit score, and they’re also responsible for fraud detection on about 65 percent of all credit card transactions in the entire world.

The MyApp platform, Kowa!Bunga, really sold a software platform that people could essentially license and use to run their own affiliate marketing instead of joining a network like CJ or LinkShare Performix. It was a self-service, self-maintained system.

We’ve actually seen a lot of interest recently with Kowa!Bunga’s MyApp platform. We’ve picked up a lot of very strong clients such as Microsoft and a division of Apple. Lenovus also has a program with us now. We’re doing all of CNET’s affiliate marketing. It turned into a very strong platform for us.

Adrian Bye: How is Microsoft doing affiliate marketing?

John Linden: They actually have a new program called the Microsoft Affiliate Network. It’s in MicrosoftAffiliates.net. You won’t see Kowa!Bunga or MyApp anywhere on the site, but we actually power the entire system. Right now, we have five or six of their deals, and they probably have 30 deals overall they’d like to eventually to get into this system.

Adrian Bye: How did this happen that you had something for small businesses and then you suddenly started selling it to big businesses? Did they come to you or did you go out to them?

John Linden: You know, actually, they’ve been coming to us. We don’t yet have a real formal sales team, honestly. We do a lot of referral business; we do a lot of word-of-mouth or inbound sales right now. We’re just now gearing up to start going after bigger companies ourselves. Our software’s been selling itself, and that’s a great position to be in from a company perspective.

Adrian Bye: Why don’t we move onto ValidClick?

John Linden: It’s a very exciting project for us. Previously, we had what was called the ValidClick Network. Basically, the way to think of it was a tier-two Pay-Per-Click network (like Miva or Kanoodle) with tier-one pricing. We have very high dollar pricing. Yahoo!’s syndicated their ads into the ValidClick Network as did Ask.com. We also had a lot of our own direct advertisers buy into the ValidClick Network on a Pay-Per-Click basis.

What we would do is syndicate those out to our partners. We had a one-on-one relationship with publishers. We would essentially click fraud protect their websites and then serve click ad protected ads on their site. As a result, we have very high quality conversions for our advertisers.

We were able to fill that gap for not only our own advertisers but also for companies like Yahoo!. We could click fraud protect that technology and lower the risk for Yahoo!. For example, if something went wrong with one of these sites, they’re big enough to cause some damage and make it really hurt numbers if they were fraudulent. In our case, we were able to protect Yahoo! and our advertisers from fraudulent traffic that might sometimes come from bigger sites.

Adrian Bye: You’re doing that protection using predictive analysis to figure out what is valid traffic and what is not, is that correct?

John Linden: Our network is a legacy product based on our patent-pending click fraud technology, which is called Feed Patrol. We’re actually working for their client server methodology. Basically what that means is a lot of people use server methodologies or server analysis, which is looking at patterns, looking at weblogs, and things like that.

We actually have a client script that runs as well; it collects additional use behaviors. Our technology can answer two questions better than anybody else from the industry. The first question is, “Is there a real user behind the click, or was it a bot, script or some form of automated clicking?” We could do that very well just because of the user behaviors that we have.

The second one, which I think a lot of people overlook, is, “Great, it was a real user behind that click, but did they intend to click on it?” Our technology can detect click fraud and detect that question better than anybody else. We can watch things with or without algorithms. We can watch mouse movement to see if (1) there is any mouse movement, and (2) does it look like a normal pattern, or does it look like it’s an automated form. If you’re just looking at weblogs, you can’t really collect that.

We actually had this concept of building an Ad Exchange. What we want to do is build the first open PPC ad exchange. We want to work not only with single publishers but with any network and be able to safely syndicate our ads or anybody that wants to provide ads through the exchange.

One of the keys to doing that was making sure we can use our click fraud technology to detect most of that traffic and use it as a pre-screen. Then we started finding that even if it follows all the rules and even if it’s good traffic, there’s a huge difference in quality of traffic.

So we formed this technology alliance with Fair Isaac. Basically, what we’ve built with them is called the Fair Isaac Click Conversion Score, which is a credit score for web publishers. What we’re able to do is look at every source of traffic that comes into the Ad Exchange, even sub sources of traffic, and score those appropriately.

It’s a nice system where we can throw out blatantly bad traffic and dynamically price the rest of the traffic based on the actual quality of that source. That’s what we’ve launched with the Ad Exchange. We’ve just announced that ABC Search, which is another PPC network, joined the Ad Exchange.

Our first goal of the Ad Exchange is to take all of these other sources out there, such as the LookSmarts, ABC Searches, and the Mivas of the world, and put them into one exchange to give people one way to advertise with a consistent set of rules.

We have about 600 million searches a month through the Ad Exchange. Our goal right now is to make sure the algorithms work. Our internal goal is to protect the advertisers at all cost. We would rather throw away 99.99 percent of the traffic than to have a bad ROI experience. Our second goal is to, obviously, pay the publisher as much as possible so they want the traffic.

Adrian Bye: How much of this bad traffic can actually be turned into equivalently good traffic?

John Linden: Our goal is not to necessarily replace Google and Yahoo!. Our goal is to really provide an open alternative form of traffic that really cleans up everybody else. It will give everybody else access to a lot more advertisers than they have access to now, and it gives advertisers one portal into a huge world of traffic, using one set of rules and using Fair Isaac as one of the policemen.

Adrian Bye: How long do you envision yourself doing what you’re doing right now?

John Linden: I’m actually having a great time. I started a couple of companies in the past. I’ll probably start another one some day. Right now, I’m having a good time and learning a lot. As long as we keep doing projects like the Ad Exchange and continue to grow our products here, I’m very content with what we’re doing.

We’re doing some really interesting opportunities. I’ve met several of your listeners in the past and would love to explore business relationships. There are a lot of ways we can work together.

Fast Track Interview

Adrian Bye: Tell us a little about your personal side first.

Larry Organ: I’m Larry Organ, 47 years old, born in Toronto, Canada; moved to the U.S. 22 years ago to start my own business. I started out in the scholarship search business, business called Student Services. We had a product called Financial Aid Search through the web, which became FastWeb, and was sold to Monster in 1998. I loved the Monster model so much I decided to see if I could improve upon it. I started JobsOnline, which eventually actually grew to a bigger size than Monster from a traffic point of view.

Our strategy was a little different. Whereas Monster charged employers and made it free for the job seeker, we made it free for the job seeker and the employer so more of both would come. The strategy was a back-end data model, where we found companies to go out and buy the data, both from the job seeker and employer side. So every time someone came to the site and entered information it was pre-sold and that was the company’s revenue model.

Adrian Bye: But after you did that, you obviously did drive a lot of traffic and it went pretty well. Did you ever get any kind of backlash from consumers as to having their data sold?

Larry Organ: Absolutely not. I can’t say that I’m a pioneer in selling data, because data has been around for a lot longer than we have; at least the buying and selling and manipulating of it. When someone came in to JobsOnline we would tell them the quid pro quo of using the service is we are going to sell the personal information that you give us. To the extent that someone saw the value in the services we were providing they had no issue with it.

For employers, it was like a bonanza, because Monster typically, especially back in the late ’90s, was used by mid-sized to larger employers. They weren’t really accessible to a smaller company with maybe 50 employees and fewer, because they really couldn’t afford to recruit that way. By making it free, we had local bar owners coming and listing jobs, on JobsOnline. And they knew when they signed up we were selling the information that we were capturing. My biggest client back then was Donnelly who was trying to build a business database, and they told me that the most difficult thing that they had to capture was square footage of plant.

And, so the bar owner would come in and list information about the job that he was trying to fill; we would ask him how many square feet is your bar? And that information was uploaded to Donnelly, who would pay us for that information. The employer got what he wanted, he or she wanted: people applying for their jobs, and it was free. The job seeker got what they wanted: they found employers that they couldn’t otherwise find through Monster. And we got what we wanted, because we were making revenue off of both of them, the job seeker and the employer.

Adrian Bye: Let’s backtrack a little bit. Tell us a more about Larry Organ.

Larry Organ: After we sold JobsOnline to Acxiom, because of all the data we had captured in the database and the sales channels we were selling through, they took the name and sold it to Monster. So if you type in JobsOnline today you’ll get the Monster, but all the data still resides with the folks at Acxiom.

After that, we started a company called Custom Offers and I remember it well. It was April of 2001, and January 2002 sold it to Mosaic. They filled for bankruptcy 11 months later and we the employees bought the company back in 2003 and renamed it ConsumerBase and we’ve been going ever since. So that’s a short history of the past 22 years.

Adrian Bye: And you’re married, kids?

Larry Organ: Married, four kids, age ranging from 8 to 15, and live in a suburb of Chicago called Winnetka.

Adrian Bye: Explain what ConsumerBase is, how big it is, the kind of stuff you’re doing, how many employees.

Larry Organ: ConsumerBase today is a three-channel business. Channel one is the digital agency where we provide online marketing digital agency services to clients like monster.com, military.com and others. We will either do their banner ad buys for them or their search engine buys for them on a cost-plus basis. We have been doing that since 2002 and we are fairly good at it, using all the tools that are commercially available.

The second channel in our business is the website channel. We own and operate about ten different websites, maybe a few more, because they’re different faces to different sites. What they all have in common, is they’re all transactional websites, where they make money by selling like leads, typically. The byproduct of those is data which all goes into our database, which is the third channel in our business. And the real core of our business is in the data business where we are an original data supplier to the folks at infoUSA, Equifax, Experion, R.L. Polk and others. And we also slice and dice the database and sell that direct to companies throughout the country who are interested in one piece of data or another.

As far as the company goes, we are approximately 40 people, based in Chicago. We have and are continuing to set up sales people in different cities throughout the country so we can do a better job at going direct by being a part of local markets.

Adrian Bye: Are you working with an advertiser to buy media for a particular advertiser?

Larry Organ: We’re buying media for our clients. We’re kind of agnostic as to what we buy for our clients. Our goal is really to bring in for the most part, all direct response clients. They understand what their acquisition costs per sale or per re’sume’ or whatever their target is, and it’s up to us to go out and get it. And it is that expertise that lends itself fairly nicely to the website channel of our business, because the same skill set that we use to buy traffic for our clients we also use it to buy for our own proprietary websites as well.

Adrian Bye: If someone who may have offers around how to make money on eBay wants to increase their volume is that something they can bring to you?

Larry Organ: Probably not. I mean it’s a great business; I made money on eBay and I’m going to lose tens of thousands of people out there doing it. But, a typical client for us is someone with a minimum monthly spend of $10,000, number one. Number two, as much as we love branding business, our clients tend to be focused on understanding their metrics and communicating same to us. Then we go out and put together a marketing plan and execute, on a cost-plus basis. Typically we find catalogers understand the metrics very well.

Adrian Bye: Anything else you want to talk about on the media-buying aspect or that side of the business that’s interesting?

Larry Organ: The media-buying side of our business is something I think we do well. But we are a commodity, because we use tools commercially available to everyone. It’s part art, part science. I think that we’re as good as anyone at the art part of it, but to do the science part we have tools to help us be very good. But the more exciting part of our business, frankly, is what happens in channel number three, which is where the data comes from.

Adrian Bye: Are you tracking clinks and doing any kind of behavioral stuff there?

Larry Organ: It really depends on what our client is asking us for. At the end of the day what they care about is acquisition costs per lead or acquisition cost per sale. If we track back to the target acquisition cost per sale made, the number of opens doesn’t really matter. Also the same is true for a number of clicks. The most important metric to a sophisticated buyer is what it is costing them to make a sale.

Adrian Bye: As an example, is a site like email email-lookup.com generating a lot of traffic, or these other sites that you have or is it small targeted traffic that becomes worth a lot?

Larry Organ: Really data sales drive how much traffic we need, and to a certain extent will even drive how we select which websites to promote. For example, InfoUSA was looking for as many people as they could to mark that had an interest in travel. We have a joint venture with Yahoo. Yahoo’s biggest pain, as you can imagine, is competing with Google for clicks, because they both have about the same advertisers and they both get their comps on a per click basis. Google has a lot more natural traffic and Yahoo, to compete, has to find different ways to distribute. So one of the ways they do it is through us, through e-mail deployed under the Reports2007 brand.

Adrian Bye: So have you actually been sending out SMSs on behalf of clients now or yourself?

Larry Organ: Right now we’re building a database and find about 25 percent of the people that use the site give us their cell phone numbers. We’re taking orders, but don’t want to start deploying, however, until probably towards November, when we have a decent saturation of the phone numbers so we can make a campaign worthwhile.

Adrian Bye: How do you think consumers are going to respond to it?

Larry Organ: When people sign up for the dating site we ask, “How do you want to be contacted, by e-mail or by cell phone?” Twenty-five percent of the people say they want to be contacted by text message on their cell phone. We then tell those people that part of signing up is that we are going to send you commercial messages. Next, we send a text message to them, with a code directing them to go back to the site, and enter the code to prove it’s really them.

Then there’s the practical side of it; if we send people five messages a day, if I got five text messages a day from a commercial advertiser, I’d be up in arms, but if we limit it to once every couple of days and it’s useful, you know, if I am a 35-year-old mom and it’s 5:30 and it’s Monday and someone says “Here’s a coupon for Domino’s,” I’d be pretty happy about that, quite frankly.

Adrian Bye: So would it be an accurate statement to make that most of your business is driven around serving the direct response needs of blue chip advertisers using advertisers using clever direct response marketing techniques on the web and offline?

Larry Organ: You’re 100 percent correct. I’d add we consider ourselves to be in the solution-providing business. We went to HSBC; they didn’t come to us, and said “Tell us what your pain is.” They said, “We want every man and woman to have one of our credit cards.” But there is, about 100 million people today on FTC’s do-not-call list and they can’t get through to those people and wanted to know whether we had solutions for them. And we said, “Hey, we do have the solution,” and that’s how we got into the e-mail append business with HSBC.

We’re working now with one of the large car companies here in the U.S. who spends a tremendous amount of money recruiting people to do surveys for them. That’s how they decide what model change they want to make with their cars based on survey data. We’re showing them how they can lower their cost to capture people who will fill out their surveys by acquiring those people online as opposed to doing it through the traditional telephone methods. Again, it’s a solution that we can provide based on the data that we’ve captured.

Adrian Bye: So you built the whole process of driving traffic all the way through to selling the data, or do you prefer to work part way through the process where someone else is driving the traffic and then you’re doing some value add on the data and then working with the client?

Larry Organ: I prefer to just work with the data part of it, because I believe it’s what we’re best at. Any agency will tell you this, we may love the business, but we hate the margins. Typically the agency business is 15 to 20 percent margin and you can’t spend the amount of time you’d like on any one client based on the amount you’re being paid, and if you try to charge more then they’re going to give the business to someone else.

We keep that part of the business going because it’s a necessary spoke in the wheel to drive our entire business model. When we generate data from our own websites, which typically we like to keep at 50 percent margin, the byproduct of those websites is the data that we’re putting into our database, then those sales are 100 percent margin. And it allows us the bandwidth to really dedicate the resources necessary to make sure the solution that we are providing is the best of all.

We also have a competitive advantage over other companies out there who are providing a data solution but don’t own the data because they can’t be as flexible as we can be, and frankly their cost structure is very different.

Adrian Bye: So it makes you more competitive?

Larry Organ: That makes us more competitive and so we feel that on the data side of our business not only do we know what we’re doing, and do it very well, but we have a price advantage based on the fact that we own the data that we’re selling.

Adrian Bye: Any comments you’d like to make or any other things you’d like to tell us.

Larry Organ: No. I think the only thing I’d like to reemphasize is that we’ve talked about, whether you could make more money back five, ten years ago, or can you make more money today, and my answer was there is more money being spent online today.

I do think the next generation, will be advertising through text messaging, and that’s where I plan to bring ConsumerBase so that we’re one of the main players in that market. I think this is going to be the next major shift or change in how technology affects advertising. Offline, and online were two separate and distinct annals before. Now we’re bringing them closer together. Text messaging is not part of that group right now, but I think you’re going to see it brought into that as well. And so all three mediums are going to be working much closer together in the future and that’s the direction of ConsumerBase I would hope.

Adrian Bye: So ConsumerBase could become a company very much focused around just text messaging.

Larry Organ: Not text messaging, but sending out very highly targeted advertising through text messaging. And, again, we can’t do that though if we don’t have the websites capturing the data.

Adrian Bye: So for the publishers listening, if they’re generating signups every day, is this something that you could build into their signup process?

Larry Organ: Absolutely. But built into signup process, I believe the key success and the key to selling to the people they want to be selling to, is capturing them correctly. And there is no legislation out there now that tells you how you need to do it, like CannedSpam does on the e-mail side. Just make sure you have some sort of double oft-in process that you can say this is how we’re doing it.

Adrian Bye: Yes, that logically makes sense. So we talked about a number of different areas. What kinds of people do you want to have contacting you and for what kind of stuff?

Larry Organ: Oh, great question. Anyone in the data sales business right now and looking for new opportunities should definitely contact us, number one. Number two, any company out there with a brand, who has a product to sell, and is interested in testing text messaging should contact us. And anyone interested in generally using our digital agency service should contact us as well.

Adrian Bye: Okay, and then is there anything else you’d like to add in closing?

Larry Organ: No. It’s been fun. Thank you very much. It’s always great talking to you and I hope that you can get something started with a group of us who can get together and share some of our ideas across a table and see what relationships we can form.

Adrian Bye: Cool.

Fast Track Interview

Adrian Bye: So Brady, what have you been up to?

Brady Whittingham: Life’s been crazy. After we got through all the details of the acquisition, I decided to retire for three weeks. My wife and family were due for a break, so I left my phone and laptop behind – no connection to the office whatsoever – and we went to Europe.. We spent time in London, and traveled all throughout France and Italy. It was awesome.

Adrian Bye: Sounds like a really great time.

Why don’t you tell us about yourself? I know that you were 19 when you went and did some missionary work in Spain. How did this fit in with your goals? Did you feel like you were being delayed?

Brady Whittingham: Not a delay at all. I grew up in a Mormon family in Utah, and so it’s a fairly standard practice to expect that at 19 you’ll go on a mission. Unless you’ve really changed your views between the time you’re eight years old, when you’re baptized, and 19 years old when it’s normal for active Mormon kids to go do this for two years. It’s not anything that’s forced, but I would say there’s a certain amount of social pressure. However, it’s purely by choice, and you pay your own way.

Basically, after high school, most Mormon kids will either attend one year of college or work for a year to save money and then go on a mission.

If you go, you really grow up during those two years. From 19 to 21 years old, you’ll leave your family and friends, and you literally will not see anybody that you know. Even if you serve your mission in Idaho, and you live in Utah, it’s highly discouraged that you have any interaction, other than writing letters. You’re supposed to be completely focused on teaching interested people about your religion.

Adrian Bye: For the two years that you spent out, how many people did you get involved with Mormonism?

Brady Whittingham: In Spain, it’s a fairly closed country as far as new religion opportunities. People are Catholic, and they’re comfortable that way. They’re not too open to change. In a two-year span, we would get maybe five to seven people interested to the point where they were baptized and became members of the Church of Jesus Christ of Latter Day Saints (the official name of the Mormon church).

Adrian Bye: While teaching others about your religion is, of course, a deep and spiritual experience, in a way it can be related to the industry. You’re effectively selling something, so how removed is this from door-to-door sales? Do you think the work that you did promoting your religion has helped you with what you’ve done on your online business?

Brady Whittingham: Absolutely. It is similar to door-to-door sales, but when you’re talking about religion, you don’t want to convince somebody to join your religion, you want them to feel it inside themselves, spiritually. So it’s really not the same as knocking on the door and trying to sell a set of steak knives.

Adrian Bye: So knocking on doors, what percentage of people would actually be willing to talk with you?

Brady Whittingham: In Spain every apartment building was ten to fifteen stories high. You start at the top, knock on every door, and work your way to the bottom. If a ten-story building has four apartments per floor, you’re knocking on 40 doors, but it was highly unlikely that you’d get invited into any of them.

So, you do have to get creative. We’d go down to some of the main paseos and set up a booth or display. Then we would just strike up conversations with every single person that walked past. In a way, the type of marketing you do at a trade show is very common in a mission, and if you don’t go outside the box, you can spend two years knocking and having doors slammed in your face.

The missionaries come back to Utah, and I would guess that’s why there is a disproportionate amount of sales organizations in the state. If you’re willing to go and strike up conversations cold to talk about religion, something that people, for the most part, don’t want to talk about, making the transition is pretty easy when you get back. Rejection no longer bothers you. When you’ve already experienced two years of people slamming doors in your face, spitting on you and swearing at you, it’s very easy now to pick up a phone or go door to door.

Adrian Bye: Fascinating. So we’ve talked a lot about your religion, let’s talk about your business.

Brady Whittingham: Sure. I got my start as an entrepreneur back in 1999 when I launched WinDaily.com. It was a traditional co-registration data company. We did well, but it wasn’t too long before all the CPMs and CPAs started disappearing. People started to pay attention to what they were getting, and they were no longer just building a database.

We made some shifts, and we started giving away free vacation certificates and selling the leads to travel companies in Florida. Companies that wanted to capture data on people that were interested in travel. We did quite well and decided that we were going to shift the model and instead of just giving away these vacation certificates, we were going to give those away free, plus shipping and handling.

So now we’re in 2000 and we rolled out our first free plus shipping and handling program. As a lead generator it strengthened the quality of leads because now not only did somebody tell us that they were interested in travel, but they were willing to pay for it.

When 9/11 hit, our travel business disappeared overnight, for obvious reasons, and we were forced to figure out, with our 50 employees that we had, how we were going to survive. We looked out into the market, and in Utah there were a high number of telemarketing companies that sell home business opportunity. So we were introduced, through a former partner of mine, to some call centers that needed business opportunity leads. They needed to find people who were interested in making money from home, and then they’d do the rest.

We rolled out a program called Free Boulevard. We were selling a home-based business that told people how to make money from their desktop for $29. Then we’d sell that lead to the call center, and we found another gold mine. It wasn’t long before every call center in Utah was knocking down our door trying to get some of our leads.

My partner was much more interested in travel which was mostly offline, and I was much more interested in business opportunity which was mostly Internet marketing. In mid-2002, we made the decision to split. My division was worth a little bit more than his at the time, so I agreed to pay him some money. I took the Internet business, and we called it ‘iLeadMedia’.

Since that time, we’ve really refined our focus. Instead of just generating leads, we’ve developed some of our own home business opportunity packages. The primary package that we sell is an Ebay training program. We got back to our roots of free plus shipping to capture a qualified customer, and we started selling free plus shipping ‘Learn How to Sell on Ebay’ programs.

The company has been very successful. We’ve had to change our business model, drastically once, and slightly over the last few years but I have hired some very capable, talented people. I think that the strength of this company is the team that we’ve assembled, and the fact that the team works together – a success engine.

Adrian Bye: So you’re doing Ebay now, are there other markets that you’re interested in going into, or moving into, in the future?

Brady Whittingham: Joining Think partnership has expanded us into a number of different opportunities – whether or not we actually own the programs. There’s a tremendous opportunity to create leads in the fitness space, credit repair space, debt consolidation space, stock market and real estate. You can expect to see us out there as a third party service provider, generating leads and sales for companies in these mass appeal categories.

Adrian Bye: Can you tell us how iLeadMedia and Think Partnership came together?

Brady Whittingham: About a year ago, we decided that we were ready to take our company to the next level. We were going to find either a venture capital firm that wanted to put some money and experience into the company or find a company that was willing to bring us into what they were doing, as an acquisition.

A good friend of mine, Rob Nicolosi from Transact, had heard of a company that was acquiring – Think Partnership. He lined up a phone call between a representative of Think Partnership and myself. We went through the same basic numbers and the same basic reasons why we were ready to take it to the next level with a partner. That same day, I mentioned that phone call to Roth Capital Partners, our investment banking firm, and their faces kind of dropped and they said, “That is so odd. We’re having dinner tonight with the executive management team of Think Partnership”. I don’t usually believe in fate or karma, but I think the stars kind of aligned that day.

I went out to the Roth Capital Partners investors’ conference that they have in New York every November. That’s when we spent a lot of face-to-face time with the then Chairman of the Board and CEO, Ben Jennings and Gerard Jacobs, and they liked what they saw. We hired an audit team to take a look at our books and make sure that everything was in order. They hired their audit team and started that process as well. We signed our letter of intent with them.

As our deal progressed, internally there were some things progressing as well, and as you’ve been able to read, I’m sure, by watching the news releases about Think Partnership, it was time that the old management stepped aside and the new management stepped forward. Ben Jennings, Gerard Jacobs and another board member left the company. This was right near the time we were supposed to close our deal.

We just kept pressing forward and I developed a great relationship with Scott Mitchell, who is now the CEO and is the guy that’s running this company. Scott kept us on the hook. He got through the internal issues, got our deal approved by the Board of Directors, we signed up and away we went.

Adrian Bye: There are some great companies inside Think Partnership, but the overall financials don’t look very strong. How do you respond to that?

Brady Whittingham: From the very beginning, Roth told us that this company is a broken story, and they believe that it can be fixed. A lot of the things that have happened over the course of the last several months are huge steps towards fixing the story.

What’s important is that I know what my company’s doing. I know what the other subsidiary companies are doing, and by integrating our talent and our businesses, and leveraging the synergies that exist, I have no doubt that we’ll fix the broken story. In my opinion, the market hasn’t seen anything yet. We’re maturing; we’re getting our synergies together. Every company that I’m familiar with in the partnership is very healthy, and I’m excited to show the market what we can do.

Adrian Bye: Think Partnership is a very distributed company even though there are many divisions that operate very closely. So you’re not getting the same level of ideas, compared to if you’re all in one building and working together day by day. What’s your response to that?

Brady Whittingham: Well, you certainly are made smarter by surrounding yourself with people that are smarter than you. What you say about being in the same building, it’s partially accurate. It would allow you to sit down together at a conference table on a more regular basis. For me, I get more out of the monthly meetings that are organized between the Presidents. I think you’d take the day-to-day involvement with each other for granted, and everybody’s so busy, you actually wouldn’t have time to sit down with Presidents on a regular basis.

I think the way that Scott and the senior management team is organizing our off-site Presidents meetings – where we go into those meetings with a strong agenda of things that we want to accomplish and we leave those meetings with a tasks list and responsibilities – I get that stimulation. Then I have 30 days to capitalize on the stimulation and make things happen before we get back together and do it all over again. That combined with the fact that I have nine IM chat windows going on at any given time. They’re all organized and tiled across my screen and that’s how I stay in touch on a regular basis with the other Presidents and the other people in the management of this company, so I get plenty of stimulation. My guys here at iLeadMedia, they joke around about my A.D.D. I get to the point, with any business, when it’s operating smoothly and making money, and it probably shouldn’t be changed – I get antsy.

So, for me the opportunity to work with 12 other companies all with very unique business models is the perfect medicine for my A.D.D. I’m stimulated every day now that I’m back to work after my three-week retirement.

Adrian Bye: Was there anything else you wanted to mention?

Brady Whittingham: Well, iLeadMedia is known for having offers that convert, and we’re always looking for more partners to run those offers with us. We are very appreciative of the affiliate networks that we work with. If an affiliate is reading this article and they have a strong relationship with an affiliate network, we encourage them to work with their affiliate network and ask for iLead offers. Our current top performer is eBay for Dummies.