SPOTLIGHT ON

Adrian: Tell us a little bit about you.

James: I moved out to California after I finished school and took a job as a business analyst for Target Corporation in the late 90’s when things were heating up in the Valley. I was introduced to the founders of NetFlip (now MetaReward) and I was part of the early team there.

Adrian: So you moved to a direct marketing company just as everything was melting down.

James: Actually, I joined the company a few months before the peak in March 2000. After that, we definitely had some tough times but fortunately picked a burgeoning market in online advertising.

Adrian: Did you realize that you were going to be less impacted by the downturn?

James: I did not realize that in advance so, in retrospect, it was a good move for me. I knew that I wanted to work for a start-up and I’ve always been entrepreneurial so it just seemed like the right fit. I took the plunge and never looked back.

Adrian: Where did you come from before that? Where did you grow up?

James: I’m originally from Lincoln, Nebraska. I went to school at the University of Wisconsin-Madison. Growing up in a relatively small town, I knew I wanted to live in a big city after graduation. I looked at several different opportunities on both coasts and took advantage of what I thought was the best one. I realized pretty quickly through that my true calling was in building companies.

Adrian: So what happened after NetFlip?

James: After three and a half years at NetFlip/MetaReward, I decided my learning curve had leveled off. I wanted to tackle a new opportunity so I looked at several different options and decided to join Ken Chan, Scott Rewick and Derek Pilch at YourFreeDVDS.com.

Adrian: Now just to help me understand, MetaReward, is that a zip code offer?

James: No, MetaReward was one of the first affiliate networks on the Internet. Originally the company was a “get-paid-to-search” company. Think GoTo.com meets AllAdvantage.com. It didn’t work out all that well though so we did some research and surmised that pay-for-performance advertising was the next big trend. I guess we were right. We were one of the early pioneers in cost-per-acquisition marketing. The zip code offer stuff didn’t come until later.

Adrian: Talk a little bit about Netblue and how it worked.

James: Netblue started as YourFreeDVDS.com and then became YF Direct after that. When we raised money from Oak Investment Partners in the middle of 2004 we changed the name to Netblue.

Adrian: Is YourFreeDVDs.com still active?

James: No, it was just an impetus for building the company. Originally the company was just one incentive site but it became much more than that over time. YF Direct (and then Netblue) was a multitude of different incentive sites, a handful of lead generation sites and then in late 2004 we decided to build up the affiliate network.

Adrian: So the foundation of the business was that advertisers can come to you, put out their offer, you’ll drive traffic to their offer and then you give consumers some kind of incentive?

James: Yeah. There’s clearly a performance-based theme throughout everything we do. The great thing about the incentive sites is that you can service a large number of Fortune-class advertisers. Very few companies can do this as effectively as we do. And we give away something for free to consumers to attract eyeballs.

Adrian: All you have to do is make up a new landing page saying that you’ll get some sort of free gift. And you guys can come up with those in a day?

James: Back then, that was one of our competitive advantages. We could launch new promotions more quickly than anyone and generate a significant amount of consumer interest in a short period and then deliver great results for advertisers.

Adrian: What sort of promotions did you launch?

James: We started by launching promotions that collected email addresses but we also got into the zip code business. Both are an extremely effective way to deliver leads and customers to advertisers. We realized that the best place to set the pricing was at the beginning of the funnel. We started paying publishers for every consumer that they sent us as long as the consumer gave us an e-mail address or zip code.

Adrian: Why are the zip codes useful?

James: It doesn’t really matter whether the consumer provides an e-mail address or a zip code. Both are valuable in different ways. What matters is that we are able to qualify the consumer’s interest and evaluate the performance of the publisher or channel.

Adrian: And you’re able to pay $1.50 or so with a zip code.

James: Yes, it is definitely a model that works. We’ve also developed some lead generation sites in various market verticals as well, which had nothing at all to do with the incentive model. By then, we had raised some money, scaled the business pretty nicely and Ken and the Board made the decision to hire a CEO. The market was very hot at the time so we were able to interview some great candidates. We finally decided on Art Shaw who had launched Charles Schwab’s Internet business and built it from nothing to something like 1000 employees and over $1B in revenue. After that he was CEO of myCFO. He joined Netblue in January of 2005. Later that year, after Art led the company’s growth in profits and investments in management and technology, Ken gave the reigns completely to Art and the executive team. It’s been a rewarding experience for me to be part of both the founding and current executive teams.

Adrian: That’s got to have been tough going through all those changes.

James: It has been tough to part ways but it’s been a tremendous learning experience for me as well. And it was a very amicable split. It was done for the purposes of moving the company forward and thus far it’s been a very successful move. Proof of that is the fact that we announced a merger with Vendare Media just a few months ago.

Adrian: It’s typical in the Valley that founders leave the company at a certain point. Was this a typical founder leaving?

James: I think it’s all about the lifecycle of the company. We had done the tough job of making something out of nothing and getting a company off the ground. But at some point, the needs and focus of the company change. It’s part of that natural transition that companies face. I give Ken a lot of credit for seeing that.

Adrian: So we talked a little bit about Vendare Media and the merger. A skeptic or a cynic might say its two weak companies coming together.

James: Everybody’s got their view of a situation. I’ve developed the view that if people’s opinions about other companies are as accurate as their opinions about my company, then I’ve been given a lot of bad information over the years! 

In the case of Netblue, we did the merger with Vendare Media from a position of strength. We had built some outstanding advertiser relationships and gotten to a point where the numbers were far better than they’d ever been. Our depth in management and technology gave us the platform to make this move to broaden our solution set for advertisers and publishers. In the case of Vendare Media, a large portion of their management team was no longer with the company so the fit was great. And they had several great businesses such as TrafficMarketPlace, New.net and eMarketMakers.

Fortunately, we were able to put the two companies together and take advantage of a ton of synergies. We now have one of the largest and broadest multi-channel networks on the Internet. It includes a display network and an affiliate network. We’ve also got a great portfolio of proprietary properties including Netblue’s promotional sites, lead gen sites from both Netblue and Vendare and Vendare’s half million domain names.

Finally, we’ve built what we think is a world-class tech capability. Nobody else of our size operates on a unified technology platform like we do. We think this is a real advantage moving forward. It will give us a great opportunity to really scale. We’re starting to see some initial results and we’re very excited about it.

Adrian: There are hiccups as with any kind of merger, but is it starting to work out?

James: You have to deal with all the different personalities, two different operating and technology platforms and two sets of customers, and all that stuff is tough. We are very happy with how things are coming together though. Now comes the hard work of delivering on the promise of the merger but we think we have the team do get it done and are working hard at it. The response that we’ve seen from the marketplace thus far has been outstanding. The number of major advertisers that have already called and asked us to work with them or to take a closer look at what they’re doing currently is significant. Advertisers want large, capable partners that can help them meet their goals broadly throughout the customer lifecycle. We can do that now.

Adrian: Who will be your major competitor?

James: ValueClick would be an obvious competitor. Advertising.com and Aquantive are also competitors. All three are partners of ours as well. There’s a lot of competition and cooperation online right now. I think it will be that way for some time. Things are moving too quickly to draw any bright lines. We have built a great partnership with ValueClick in particular. What’s great about it is that it is a mutually beneficial partnership and we look forward to building more partnerships like that.

Adrian: What have been the incentives that kept you there and what kinds of things are being done to try and stop employees leaving and doing their own thing?

James: Early on at NetFlip back in 2000, we used to debate internally whether or not we should partner with competitors or conversely try to be the one and only winner in our space. We learned pretty quickly that when things are as dynamic as they are in online advertising, it doesn’t pay to try to be the only winner. The odds of success are very low. It makes far more sense to partner with folks and create mutual success as opposed to individual success. That’s how the world works. We look at former employees leaving as the same thing. We are striving to build a company that’s a great place for people to work. We’ve got 250 employees who are committed and are excited about working at VendareNetblue and we’re hiring a lot more right now. Our employees see the path to being a true market leader in online advertising, about creating industry-leading tools for advertisers and publishers and creating fun and helpful products for consumers. And from time to time, if folks decide that they want to break off and do something different, then so be it. It’s the nature of business.

Adrian: What’s been the incentive that’s kept you with VendareNetblue?

James: I think this company has enormous potential. And personally, I have built a sales team here that I’m very proud of. Our numbers are proof of their great work. I wake up every morning and ask myself what do I really want to be working on and the answer continues to be to work here with my team and continue to go out and build great partnerships with advertisers and publishers and create value for the company.

Adrian: So if I come to you, let’s say I’m representing Capital One and they’ve never worked with VendareNetblue before. What kind of things can you do for me? What’s going to be the reason I’m going to want to work with you?

James: Well, first and foremost, what we have to offer is a performance-based advertising solution that beats just about every other advertising solution in the history of mankind. There’s very little risk in working with VendareNetblue as an advertiser. There is no such thing as click fraud. And if you’re looking for a channel where there is a pre-determined cost for each new lead or customer you receive, then there’s nobody else online with our ability to offer such a large volume of high quality leads or customers.

Adrian: How do you decide which offers you’ll take and which ones you won’t?

James: We have a ton of advertisers coming to us asking us to promote their product or service. But we have to be concerned with performance ourselves, so we can’t just run everything that comes our way. This is one of the reasons advertisers like working with us so much – we eat our own dog food. At the core what we’ve done is simple. We’ve created a marketplace whereby the best performing advertisers have access to the best performing publishers. The better your offer performs, the more you get.

Adrian: Let’s say I come to you and I’m “unknowncompany.com.” What’s the process towards accepting my offer or not?

James: We’ve worked with several thousand advertisers at this point and we have a pretty good idea of what works and what doesn’t in our marketplace. We screen folks on the front-end to gauge if they have offers that will perform.

Adrian: Do you take a couple of thousand dollars to do a test to see how the offer runs or you’ll do an eyeball filter first?

James: We qualify the advertiser first based on past experience. We have a strong analytical platform that enables us to measure the performance a new advertiser across multiple channels pretty quickly. Within 24 hours, we know whether or not it’s an advertiser that will perform in our marketplace. What’s great about our model is that once we know it’s working, because of the performance-based nature of our model, we don’t really deal with finite marketing budgets. We often have access to unlimited budgets.

Adrian: So you’re working with Blockbuster and all those kinds of people.

James: Yes, we work with some of the biggest entertainment companies in the world. We also do a ton of business with the major credit card issuers. Many have been clients for over three years. We are also in a number of other market verticals including CPG, Telecom and Pharma. The merger has enabled us to spread our wings quite a bit. We’ve got so much more to offer advertisers and publishers now. We are now a leader in a number of different areas.

Adrian: So let’s say I’m coming to you as a credit card company. What’s the advantage in working with VendareNetblue?

James: First, what matters most to the credit card issuers is that the partners they do business with are working proactively to protect their brand. A lot of the major credit card issuers have selected us to be their exclusive partner in the incentive space for this reason. They know we will protect their brand. Second, obviously you have to be able to deliver strong performance over time, not only in terms of the volume of new cardholders that you deliver, but also the quality of those cardholders. Third, they are interested in demographic and behavioral targeting and we can provide that through our display network, TrafficMarketPlace.

Adrian: Tell me about protecting the brand. Let’s say you’re giving away a free $100 dollar Best Buy gift card, and putting the Best Buy name on the front page. Is that something that Best Buy is happy with?

James: In some cases, we have partnerships with retail partners where they encourage us to promote their brand and in other cases retail partners have made it clear over time that they don’t want to participate. From the beginning we’ve tried to be respectful of the situation.

Adrian: You have lots of different types of inventory. Do you do co-registration, for example?

James: Yes, we do co-registration. We offer advertisers just about any inventory you can find online through our network. It’s all performance-based. We’re the leader online in cost-per-acquisition or cost-per-customer advertising. In addition, we offer multiple types of cost-per-lead advertising. We generate customers and leads for a variety of different industries, such as Travel, Food & Beverage and Health & Beauty. Finally, we offer top tier display inventory through TrafficMarketPlace.

Adrian: Could we actually step through a typical offer?

James: We’ve obviously got a lot of great offers from advertisers. All of them are available in our network for publishers to check out. We also build our own proprietary sites or offers. Two examples are “youarealwaysconnected.com” and “easyfaxanywhere.com”. These are just two of the many custom advertiser micro-sites that we’ve developed in partnership with our advertisers. Once developed, we distribute them across a variety of different channels including e-mail, display, search and co-registration. It’s been extremely successful for us.

Adrian: What would be your company’s three biggest challenges at the moment?

James: First, we’ve got our work cut out for us in terms of combining the two companies. Mergers are not easy and we want to take full advantage of the strengths of both companies and combine them to create significant value for shareholders. Second, we’re considering future strategic investments. There are so many different opportunities out there and it can be tough to figure out where to invest.

Adrian: And what would be number three?

James: Third is to continue hiring really talented folks to help us scale the business. There’s a lot of competition for talent in the Valley, L.A., and New York right now. We are working extra hard to go out and find the best and the brightest in each of the functional areas to add to our industry-leading team.

Adrian: You’ve got some of the sharpest guys in online advertising reading this. What kind of people are you looking for to hire on your team?

James: We’re looking for people who are hungry. People who want to build a business, create a new product, want to sign a deal badly. Obviously, someone who has experience in online advertising is of great interest to us. There is so much talent in other industries though too. Finally, we try to hire people who are very intelligent, creative, forward-thinking – folks who can help us understand where things are headed.

Adrian: People who are interested in working with you and for you can contact you at [email protected]. And are there any other reasons why you’d want people reading this to contact you?

James: Yes, obviously as a result of the merger we’ve got a whole new set of capabilities and solutions to offer advertisers and publishers and anyone that’s interested in hearing more should contact us.