Adrian: Why don’t you tell me a little bit about yourself?
Scott: I was born and raised in Chicago. I was an advanced student in junior high, and my mother got involved with my counselor, and they both decided that I would be bored going through high school. So I took my standardized tests and scored extraordinarily high. They decided I should skip high school and go straight to college.
Adrian: In hindsight, do you think that was the right thing to do or would you have done it differently?
Scott: I would have done it differently. I missed out on a lot of social development through high school. Luckily, I lived vicariously through my wife, at least the last couple of years of high school, literally going to proms and homecomings and stuff like that.
Adrian: How old were you when you started college?
Scott: I started two weeks after my 14th birthday. By the time I was 18, I had received two Bachelor’s degrees and had my first child too. Went on to grad school and in a three year period, I earned three Master’s degrees. Then at 21, I started working for Andersen Consulting and teaching college part time, which I thought was interesting. I spent six years at Andersen Consulting doing a lot of large project work. I managed a project for America Online, and that was my first entrance into Internet technologies. After six years at Andersen, I made partner, and two weeks after that, I ended up quitting because I wanted to start my own Internet company.
Adrian: I’ve never worked for one of those kinds of firms, but isn’t the goal that you work a long time there to become partner so that then you’re on easy street? But you got there and you’re like, “Forget this, I’m out of here.”
Scott: I was the youngest partner in that firm’s history, but this was 1998 and still early on. I decided that I had a bigger opportunity starting my own business. I left Andersen and joined some other partners, and we bought the online rights to Rolling Stone Magazine, The Source Magazine and Downbeat Jazz Magazine, and we created a large music network online. We named the company Tunes.com. We eventually built a large enough traffic base to be ranked number 21 in the Media Metrics Top 50 sites. We raised $48 million in venture capital with Goldman Sachs being the lead, and in late 1999, we wanted to take it public. We wanted to raise about $150 million in an IPO, and we ended up not taking it public because the market took a dip. We sold it a couple months later for $180 million to a west coast public company called Emusic.
Adrian: So did you cash out then?
Scott: Well, I was all of 28 years old and I decided that it was time for me to retire or at least take a little time off. This was a very bad move. I stayed at home for two or three months, and I sunk into this horrible world of daytime television because I didn’t really have any hobbies. I didn’t golf, didn’t fish and really, work was my hobby. My wife came home around 7:00 one night, and I was sitting in bed with flannel boxer shorts, unshaven and having not showered for two days. I’m sitting there eating a bowl of fruit, and she said, “Look, you have to do something. I can’t watch you waste your life away.”
So I started looking around for some other projects. Barry Diller had a company that was located in St. Petersburg, Florida called Home Shopping Network, which tried twice to start up an e-commerce division and failed, so I took on the project sort of on a challenge type of situation and started up HSN.com, and we were profitable within the first 90 days. After the first year of operations, we did $125 million in revenue and about $20 million in EBITA. After our second year of operations, we were doing about $200 million of revenue, about $32-33 million EBITA. I think HSN.com is now doing about a half-billion dollars in revenue and about $125-130 million EBITA.
I was there for two years. After two years, I hit all my goals for that deal, and then I spent about four to six months working for Diller doing a lot of merger and acquisition work. Then I decided that I wanted to get involved in my own thing again and thought it was an exciting space, so I left. At the time, my wife had started up this online dating company in Chicago, and we sort of forgot about it. I was doing my taxes, and I realized that we had $2 million of pre-tax that year. We decided to close it down in Chicago and move it down to Tampa where we lived. I built it out, and within a year-and-a-half, I was able to double the pre-tax and double the revenue.
I merged the business with this company called CGI Holding Corporation – it was a public company on the bulletin board. I was the lead person on most of our acquisitions from 2004 to 2005. We took the company from the bulletin board to the AMEX in February 2005, and we did 13 acquisitions for the company. In August 2005, I was invited to be the company’s president, and then just a couple weeks ago, I was appointed to be the company’s CEO.
Adrian: Your background really indicates you’ve done pretty well for yourself. However, the news and the press releases that we see out of Think Partnership indicate otherwise. It looks like there are so many things that are going wrong. So what’s going on?
Scott: We’ve been experiencing a few changes. We had a philosophical difference of opinion in our executive team for a while. That kind of explains some of the recent changes. There was a philosophy that the company should continue to acquire more companies. My philosophy was that we should slow down acquisitions and adjust what we’ve already purchased, integrate the businesses and try to make sense of what we’ve already acquired. It was a difference of direction.
Think Partnership now has to be a “show me” story. We have to post results, we have to show quarter over quarter revenue and EBITA growth, and that’s what our company will focus on in the future. We’re going to be much more disciplined in our acquisition process. Of course, we’re a public company, we’re going to be looking for new acquisition opportunities all the time. There’s going to be some deals that we just cannot pass down because there’s too much strategic potential and too good of a financial deal.
Adrian: A number of people I talked to, despite the varying things that they’re doing with their companies, say, “Hey, we’d all like an exit strategy, we’d like a buy out.” Given that you’re a potential buyer on a small number of select deals, what are the parameters that you look for, and then for those who are reading this interview that might fit that, how can they get in touch with you?
Scott: The deals that we’re looking at, they have to be cash flow positive, they have to have good earnings growth behind them, and they have to fit strategically within our business. We’re looking for opportunities where we can really make 1+1=5. The best way to reach me is [email protected].
Adrian: So, just in terms of the model, yours is more of a synergy model. You’re aiming to become a number one or a number two in a particular category, and then you’re integrating and taking advantage of synergies.
Scott: Yeah, exactly. We’re trying to create an operating company not a holding company.
Adrian: Since your team is very distributed, I was interested to see that Hewlett Packard is now apparently consolidating a lot of its operations and not allowing as much telecommuting. Do you have any thoughts on that?
Scott: There’s definitely value in a team being together and sharing ideas. There’s something that’s lost in the telecommuting world.
Adrian: On that model, one that was really interesting to me was talking with one of the affiliate managers from Hydramedia, and what they said is they used to be located in home offices all around Los Angeles and then after a couple of months, they combined into one office. They said that the moment when they moved from being separate to being combined into one office, their revenues doubled.
Scott: We’ve talked to them in the past, they run a great business, and we have a lot of respect for them. It seems to be a model that definitely works. But our primary business is sort of a distributed model and that’s been working for us. Very few of our employees work from home in isolations. Our employees are clustered in office locations all around the world and we collaborate between those locations on a daily basis through teleconferenced and web enabled meetings.
Adrian: Do you want to talk a little bit about Kowabunga, and what’s going on there?
Scott: When we looked at purchasing Kowabunga, we took a look at the affiliate landscape, and we thought there were two sides of the business. One was affiliate networks, which had many advertisers and many publishers, and the other was a private affiliate network, which had one advertiser, and then they try to attract many different publishers.
There has been, and will continue to be, advertisers who come online and get involved in one or more affiliate networks, realize over time that they’re always in the game of pricing out their payouts and not relationship management. Those guys over time realize that if they don’t own an affiliate network where they’re the only advertiser, and they don’t have full visibility to all the traffic that’s coming in and out of their program, then they can’t identify high performance publishers and develop a relationship. When the advertiser-publisher anonymity, which is a necessary element of an open affiliate network, goes away, then over time an advertiser is able to build up a traffic generating asset through relationship development and intelligent publisher management rather than just competing on price all the time.
Adrian: So how was the PrimaryAds acquisition decision made? How did that come together on your end?
Scott: The decision about PrimaryAds was that we wanted to be in the affiliate marketing space. We looked at the landscape and we identified two companies that we thought did a great job of covering both sides of the fence, both the network side and the private affiliate program side. PrimaryAds is a very effective CPA network. We felt that when you buy an affiliate network, you’re buying the relationships with publishers, the relationships with advertisers and the reputation that a company has built up over time and we saw significance in those value points at PrimaryAds.
Since the acquisition, we have developed a software product called MyCPANet, that PrimaryAds runs, off of the Kowabunga technology. There hasn’t been a very aggressive marketing campaign for MyCPANet but we have been assessing the opportunity of giving the software away for free and letting any network that wants to use it, use it, and then using that as a way to develop more distribution opportunities for all of our networks.
Adrian: So you’re considering effectively allowing a CPA network to start itself up for free, how would you make money out of that?
Scott: Well, we’d look at the cost as a price for increased distribution. We might require them to distribute several of our ads as their top ad in exchange for us giving them the software for free. We’re in the very early stages of doing a feasibility analysis, but we certainly think it’s an interesting enough concept to evaluate.
Adrian: So the already low barriers to entry for making a CPA network, if you do that, would make it even lower.
Scott: Exactly.
Adrian: I’d be interested on some thoughts about what’s likely to happen in the future. How do you envision Think Partnership looking in five years, and what do you see happening in the overall industry?
Scott: A five year time frame is pretty long for this industry. Five years ago, I don’t think anybody would have guessed where it was going.
I do think that Think Partnership will continue to grow. We’re going to spend the foreseeable future focusing on integrating, consolidating, leveraging synergies, growing our revenue organically and margin expansion. At some points in the future, once we have that done and we’re structured in a way that we can really take advantage of new acquisitions, then we’ll probably go out and acquire a new set of companies and then work on those companies.
Our goal is to be as flexible as possible with how the industry changes, so as you said, if the industry changes much more towards CPA than cost per click, then we want to be nimble and agile enough to take advantage of that.
A huge opportunity for our company is international expansion. We just closed on an acquisition of a company called Web Diversity. It’s located in the UK in a place called Twickenham, England which is just outside London. They’ve got a great group of very competent, highly motivated professionals, and one of the things they did is open up our first sales office in Asia which is located in Hong Kong, China.
Adrian: What are your plans out there?
Scott: We think there’s a huge opportunity for the expansion of our business in Asia. We think Hong Kong’s a great launching platform for that expansion. We look at that, the Asian interactive marketing space as trailing a little behind what we’re doing in the US, so our goal is to apply the same processes, procedures, technologies and knowledge and take advantage of that growing market.
Adrian: How does ILead Media fit in to the overall strategy?
Scott: ILead Media markets consumer offers on a regular basis and continue to develop leads for those offers. They try to make their lead acquisition profitable based on the marketing of their own products and services. Then they use those leads to market other people’s products and services in the future. So we think that there’s a lot of synergy between what ILead Media does and what Morex Marketing does. We look at both of those companies as what we consider to be direct marketing businesses that operate online. In the future, one of our goals is to create our company into divisions that make sense as verticals, and we think that one of those divisions is going to focus on online direct marketing with ILead being a big part of that.
Adrian: Is there anything else you would like to mention, things that you’re looking for?
Scott: Well we’re definitely interested in very competent executives and strong companies. We’re a public company, so we’re not turning our heads away from all acquisitions. We’re going to be much more selective than we have been in the past, and it’s going to be a longer process. We’re always interested in good business development partnership opportunities as well, and our future deal flow is more likely to come out of companies that have forged a strong and prosperous partnership with us first, rather than sourcing deals like we have traditionally done.
Adrian: Well thanks for making time for this interview.
Scott: Great. Thanks a lot, Adrian. It was a pleasure speaking with you.
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