SPOTLIGHT ON… Larry Organ from ConsumerBase

Adrian: Can you tell us a little about yourself?

Larry: I was born and raised in Canada. I came to the United States to go to school but quickly realized that I couldn’t afford it. There were many scholarships available but I soon decided that instead of looking for one, I would start a direct-mail business finding scholarships for others. My first year I took a beating, but by the second year, I had learned about the power of advertising in college newspapers and grew the business from $5,000 to $450,000. It went up steadily after that.

I also realized that I could do much better if, instead of charging people for the service, I gave it away for free and then sold the information I captured. So, gradually, the business converted from a direct-mail concern to a website called FASTWEB, which is an acronym for Financial Aid Search Through the Web.

I eventually sold FASTWEB to Monster. I was told recently that 50% of high school graduates now use it to look for scholarships.

And, even though I loved the Monster model, I thought it was flawed. It was one in which searches were free for job seekers but employers were charged. I thought if it were free for both, more of each would come. So, after I sold FASTWEB to Monster, I went on to compete with them by starting a company called JobsOnline.

Monster ended up buying JobsOnline as well. After that, I started a company called Custom Offers, which was in the email deployment business.

At Custom Offers we purchased data and deployed offers on behalf of the likes of Citibank, Chase and others; we were paid on a cost-per-active-use basis. We were really building a data product that we would resell to the market.

Custom Offers was purchased seven months after I started it by The Mosaic Group, a public company based in Toronto. It was a $50 million transaction. Mosaic had purchased many companies and we were their final acquisition. Mosaic filed for Chapter 11, eleven months after they purchased us. The original employees and I bought our piece of the company back in 2001 and renamed it ConsumerBase. We have the same core product and have, to date, assembled a database of some 77 million U.S. consumers.

Adrian: How do you get click-stream data? Are you installing some sort of client-side application?

Larry: Absolutely not. We send emails from, for example, American Express. When a recipient clicks on it, we track that activity. We then resell that data. We also sell data appends to the large bureaus. We constantly improve data and make it available for both offline and online use.

Adrian: You’re almost like an ESP. Is it only your list, or are you managing lists for others as well?

Larry: Because CAN-SPAM is such a big concern, the only way that we can truly control what we do is to deploy our own list. That’s it.

Adrian: I’m interested in learning about the recent article Forbes ran about you and your ResponderInfo product. (http://www.forbes.com/business/forbes/2006/0327/052.html). I was shocked at the privacy implications. Can you tell us a little bit about that? What kind of resistance are you getting?

Larry: I can answer that question on a couple of different levels. First, when I’m at a party with my peers, half of them say, “Oh my goodness, that’s such an invasion of privacy.” The other half ask, “How can I buy that data?”

To all those who are concerned, I see us as a company that brings down the cost-per-client for American business. I feel very good about what we do, and I can give you a great example of why. In the old days when someone wanted to send out an offer, a forest got chopped down, and 50 million mail pieces were sent. Today, we can target offers to consumers who have clicked on particular products. So, instead of 50 million pieces being sent, that number can be cut to, say, two-and-a-half million, and the sender gets a much higher response rate. This lowers their overall costs and the cost to acquire clients—which can then be passed along to consumers. I think that when efficiencies are achieved everybody wins.

Adrian: What are some micro-trends you see in the industry? Where do you see things going, from the perspective that you have, of data brokering?

Larry: The dominant trend that I see is that data purchasers are getting smarter. I believe that the average order that we will receive in the next year, five years, ten years, will be smaller, but CPM’s will be higher because the data will be more intelligent. I think it will be better for us and better for our clients to have smaller orders with higher dollar values.

Adrian: Something that I see going on a fair amount in some parts, like in lead generation, is increased competition. Margins are getting squeezed and there’s nowhere for the industry to go. Do you see your margins getting squeezed in the same way?

Larry: The Internet, to a great degree, is still the Wild, Wild West. Let me take you back to 2000 when I was at JobsOnline. A client, OfficeMax, wanted to purchase co-reg leads from us. So a user went through an application, the resume process on JobsOnline, and just before they clicked “Enter”, there was a little button, a pre-select that said, “I want to receive a catalogue from OfficeMax.” Now, since it was a pre-select 99% of the people got registered.

OfficeMax paid us $1 per lead, for a million leads. I realized back in 2000 that that was not the future. The leads were not the most qualified, but they were what the client wanted. And, as you well know, most co-reg leads today are opt-in, not pre-selected. The cost of co-reg leads has fallen tremendously, but so has the cost of traffic, I believe.

The huge opportunities come when there’s new technology in the market and you are one of the first to be there. But, as the market gets more intelligent, I believe, competition presents itself and margins do shrink. However, I don’t think we’re anywhere close to being there yet. I still think that in the scheme of time, the Internet is still very, very young and there are still some tremendous opportunities for nimble companies.

Adrian: We talked a bit about CPA and CPM and some of that stuff. What do you think about Google going CPA?

Larry: I don’t believe it will happen.

I would not be surprised if, at some point, users click Google and find Yellow Pages. I think that YP is their biggest competitor. Google is heading toward local marketing—Yellow Pages would be a bonanza for them.

Anyone can sell CPA. It’s a weak way of selling, in my opinion. We don’t sell CPA today and we haven’t for a few years because I just don’t believe in it. It’s very hard to know what your revenue is and there are reporting issues. If you see Google move in any direction, look for it to be local advertising.

Adrian: Do you feel that Google would lose money if they were to switch from a cost per click to CPA?

Larry: They have a perfect model right now because the client decides how much he or she wants to pay.

I’ve been involved in the CPA world for years. You just never do as well in it as you do as an advertiser. Changing would be a billing nightmare for Google. I just don’t see it working.

Adrian: So you talk about local search that Google is getting into. Do you see them brokering data in the same way that you’re doing now?

Larry: I’d be stunned if they didn’t in the future.

Adrian: What you’re talking about is quite new to me in regards to appending data. How does it work? Lets say you buy a co-registration list and you get, say, first name, last name, email address and maybe one or two other data points. When you go ahead and do a merge with some other database, how accurate is the matching that happens?

Larry: You’re asking a two-part question. First, we don’t buy data unless it contains a full name and postal. When we get it, the first thing we do is standardize the address to make sure that it is accurate according to the U.S. Postal Service. Second, we test the email address to make sure it’s a working address. Finally, we standardize the name.

Adrian: On a typical co-registration list, how much of that data are you able to append?

Larry: For every million names that we look at, we end up taking in about 25%.

Adrian: Very interesting. So, which people would you want to have contact you after they’ve read this interview?

Larry: We’re a pretty big buyer of raw data since we already have a pipeline of people who are interested in buying our enhanced products. So, highest of interest to us would be those who sell it. Second would be those people who have established relationships with people who need enhanced data—especially in New York, Chicago and London.

We also want to hear from aggressive people who have experience in this industry and are looking to work for a dynamic company. Those interested can reach us at [email protected]

Adrian: This has been a great interview, thanks.

Larry: Thank you.

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