Alex Algard was still a student when he had the idea to create a web version of the old white pages. He only had $1,100 in the bank, but because it was 1996, even the domainer who owned WhitePages didn’t realize how valuable the domain was. So Alex was able to negotiate a price of just $900 for it.
He didn’t have the infrastructure to find, store and serve up data on his new site, but he found a way around it. He made a deal with another web site to allow him to pull their data in real-time. His next challenge was bring in users, but the great domain name helped with that. For revenue, he used a freelance salesman. Mostly, the business was just a hobby. He didn’t even incorporate until 2000, around the time he made his first million dollars. Today, the company makes about that much in sales every week.
Along the way, Alex has launched the top car social network and has invested in tech startups. At this point, you probably want details. They’re in the interview. Listen and tell me what you think.
Andrew: Alright before we get started, I think the best way to introduce you to my new sponsor Wufoo is to show you how I use Wufoo to get feedback from audiences like you, on my work. So here’s a blank form on Wufoo and I can customize it. So what I’ll do is I’ll make the form name into, “Rate today’s interview.” I don’t want a description underneath it, so I’ll get rid of that. I’m going to go into “Add a field,” and I want a multiple choice field, but I can add all kinds of other fields and what I’ll do is, I want people to rate my work from 1 to 10, so let’s do that. First field is 1, second is 2, give it a third.. let’s see. Let’s add a bunch of these, so people can rate a 4, 5, 6, 7, 8, 9, and hopefully a lot of people will be rating it a 10. Now I like it displayed all in one row, so let’s do that side by side and there it is. I can take this form, embed it in my website, make it look like my site, and start getting feedback from you on what I can do to improve my work. In fact I could also add a field that says, let’s do that, “What can I do to improve? How would you make this better?” “How would you improve this interview?” Just like that, I have another field on my form, and I can take this whole form embed it in the interview you just saw, and get feedback froown store online, and start to bring in some revenue with your website.
I’m also sponsored by Grasshopper. Grasshopper is the virtual phone system that entrepreneurs love, because we can use our current phones with it, and we can manage the whole thing online, on the web.
Thank you Shopafy. Thank you Grasshopper. And thank you Wufoo, for sponsoring my work. Here’s the interview:
Andrew: Hey everyone it’s Andrew Warner. I’m the founder of Mixergy.com home of the ambitious upstart, and today’s guest is Alex Algard, the founder of one of the biggest sites you’ve probably never heard of, or never think about, WhitePages, the people directory that he founded in his dorm room, and today, according to ComScore, is the 39th most visited site on the internet. He’s also the founder of Cardomain.com, the leading social network for car enthusiasts. And he invests in startups including DanceJam and the company behind ICanHasCheezburger? Alex, that’s a lot of background. How did I do with that intro?
Interviewee: I think you did fine.
Interviewee: We, I think I take a little of exception as far as the largest website you have never heard of, because obviously we get a lot of people visiting our website, but you know we haven’t necessarily gone out and promoted ourselves too much, I guess.
Andrew: Well tell me about it, because you know what all I hear about everyday is Twitter and Facebook and, and some of the hotter sites, some of the sexier sites. I don’t hear people talk about Whitepages. I don’t remember when I went on Whitepages, or refered Whitepages to somebody else, but obviously a lot of people are on the site. What am I missing here?
Interviewee: For one thing I think we do a good job in catering to what the typical American needs, as far as content information goes. A lot of our friends, I think, tend to be a little bit more focused on, you know, what’s hot in the Bay area and so forth. So I think it’s very important that we, every once in awhile, pinch ourselves and remind ourselves that not everyone in the world, or in the US, is necessarily living on Twitter, or quite yet on the social network. Certainly that’s the way things are moving, but I think we’re doing a good job on addressing Americans’ needs as of the here and now. Like I said, I’m a here and now kind of guy. I think that’s also how our company thinks.
Andrew: So tell me about the here and now. Can you describe, and we’re going to go over biography, I want to know how started the company in your dorm, how it grew, how you ended up running a few other companies, and one other company at least that people in the chat room were telling me about, and investing in all these other businesses that I brought up in the intro, but tell me about the typical user of Whitepages.
Interviewee: Sure, I really don’t think there is any one typical user of Whitepages. I think once you cross a certain traffic threshold and if you have a general, a broad enough use-case, or service site you offer, people have all sorts of use-cases they may apply it to. But I think our core demographic tends to be 25 to 50 year old people in America, predominantly, and basically people are looking for content information, for any whatsoever purpose. Obviously a lot of our users are interested in making phone calls, as for like the ultimate action. But, we have people that use the site for work, for tracking down individuals, for doing validation of content information to make sure the person is who they claim to be and so forth. Those are not core use cases, those are more abuse cases.
Interviewee: We have others, for example, during the holiday season we see a big spike up in traffic because people want to send each other holiday cards. Or there’s other instances… Like Valentine’s Day we see a smaller bump up as people…
Andrew: So if I’m somebody Middle America, I’m not on the edges of technology. I’m the average user. I need an address for a friend so I can send him a greeting card for the holidays, I go to whitepages dot com to look for his address? Or does a typical user find you through Google by typing in a friend’s name and then landing on whitepages dot com?
Interviewee: No, overwhelmingly the typical user finds us — or finds the information — by going directly to whitepages. I think for most of our audience we are the first destination that they go to. And I think as a roll over destination certainly if users can’t find who they’re looking for on our website, we provide links to third party sites. And sometimes they may also go out to the website engines. But certainly we’re seeing traffic coming in from the search engines as well. Obviously, there’s a lot of the power in the long tail of the search; the long tail of key words and we’re seeing a lot of people arrive on our website by entering in, for example, someone’s first and last name and then arriving on our website that way too.
Andrew: Okay. I saw that I typed in a few family names before this interview and I was directed to sponsor links. In fact, even though I’m pretty savvy online, I didn’t recognize that they were sponsor links and until I was popped over.That’s where the revenue comes from, from those links on the site, right?
Interviewee: No, that’s a small…certainly, yes. We do get revenue from those links but that’s a minority of our revenue. And I do think some of the terminology that you used there, “sponsored links” and that you were “popped over to another website”; that’s exactly how we would like our users to perceive the experience. Because we make it very clear, if you actually look at those ads, that they are sponsored links and we also pop up new windows to make it even clearer to our users that they’re third parties. But the reason we do this is just because we want to be really transparent about what is a whitepages service and what’s a third party service so we don’t confuse our users at all. We absolutely believe in choice. And to the extent that our users choose to pay for content information because they can’t find it on our website, we think it’s the best users experience to give them a lot of options to be able to find the content information through third parties as well.
Andrew: Okay. Fair enough. They were labeled; I have to say that I didn’t notice it at first but I can see how people would…that people can see clearly that it says “Sponsored Links” or something like that. One more question before we go back in history? Sales, last year, 2009. How much?
Interviewee: 57 million.
Andrew: You guys are a private company, by the way, and you’re still willing to come here to Mixergy and reveal that you made $57 million last year. Why?
Interviewee: Just for you because I like you a lot! Yeah, we are a private company. I think in some ways we want to…we don’t have anything to hide and we like to share some statistics with the world because we’ve become such a broadly used website. We don’t have a whole lot of secrets. I think one figure that we don’t typically share is our profitability but we’re pretty transparent when it comes to traffic and revenues and so forth.
Interviewee: Why not? We’ve had a fair amount of success and we want to be transparent with the world about the fact that we’re a strong, viable business and you know, we’re going to be around for a while.
Andrew: Gotcha. But you won’t say the exact number of…as we discussed before the interview, you won’t talk about how much profits that you are making but you will say that you’re profitable, right?
Andrew: Can we say that your net margins are bigger than 50%?
Interviewee: I don’t comment on the percentage of net margins. And I think if I answer that question you’ll probably ask another follow up question to even further triangulate the numbers so that’s why I usually stay away from that.
Andrew: All right, fair enough. Let’s go over to…and yes, I would ask another question just to get a sense of it. We’re not saying…
Interviewee: If not, there’s probably another four interviews I’ve done where people asked another percentage. It’d be pretty easy to triangulate based on those interviews what our actual net line is worth. But suffice it to say that we’re a very healthy company. I think it’s also fair to say that we don’t have any imminent plans to go public or anything of that nature but if we were a public company most investors would look at us as a company with very strong financials.
Andrew: Well, here’s the interesting thing, Alex. A company that has…let me see what I read. Raised $45 million? Is my data right on that?
Interviewee: Yeah, we had a $45 million investment from two funds.
Andrew: So you raised $45 million. Companies like that aren’t looking for profits. They don’t want to pay taxes on profits, they want growth so that they could pay…what am I thinking of? What’s the other tax? Capital gains tax. They want capital gains, right? They don’t want income tax, right? So why aren’t they pushing you to plow your profits back in the business?
Interviewee: I can’t really comment on…I’m sorry. Our investors’ tax strategies. That’s just not something I normally think of even.
Andrew: So, you raised 45 million dollars? Companies like that aren’t looking for — aren’t looking for profits. They don’t want to pay taxes on profits, the want growth so that they can — so that they — so that they could pay — what am I thinking of, what’s the tax, capital gains tax. They want capital gains, they don’t want income tax, right? So, why are they pushing you to plough your profits back in the business?
Interviewee: I — I can’t really comment on — I’m sorry, our investors’ tax priorities?
Interviewee: I — that’s not something I only think of even our investors’ tax priorities I can’t really — I —
Andrew: I mean they’re — they’re looking for a sale of the business. They’re not looking to just keep taking profits off year after year. I mean — yeah —
Interviewee: No, our investors are very much aligned with — with the company and — and shareholders and option holders importantly too around some sort of like creditor around — down the road, absolutely.
Andrew: Okay. All right, let’s go back in time then. You are a student at Stanford –
Andrew: — in 19 — well, why don’t you tell the story of when you started instead of me telling you? When —
Interviewee: All right. So, gosh, it was back in 1996. I was doing an internship on Sand Hill Road for Morgan Stanley Hi Tech Banking. And, you know, I got my first taste of hi-tech start ups and so forth and I came up with an idea just based on that exposure that would be pretty cool to start an email — sort of like an email directory like, kind of service. And I went online the next day I went somewhere but for, you know website domains or websites to buy potentially. I came across WhitePages, which was essentially owned by this domain squatter. And I think I had $1,100.00 in my bank accounts at the time and –and I called the — the seller up and I said hey, I’m interest in buying the website, how much do you want for and he said a couple of thousand dollars. And I said, well, you know, are you going to negotiate and he said yeah maybe. So I, I — you know, just for the heck I flew down to LA anyway. And, on the way to, you know, get the first down to what I actually have in the bank. If you would have stuck with, you know $2,000.00 or whatever then I would never been able to buy the — the website. And — and then from there on, in the early days, basically, very quickly came to the realization that starting an email directory would be very difficult because obviously emails — emails, in general are tucked with license or to source and both. And there was a little bit of a checking I might have problem of, you know, needing to have a — a broad database to start with. So very quickly, more of the business problems and more of a directory assistance like type of service. So, I bought the website in ‘96. I finished school, actually decide to get onto — I did like hi-tech investment banking so much I have to decide to do that in any case and I worked on Wall Street for Goldman Sachs in their hi-tech banking group for a year. You know, in the meantime with my very, very limited spare time, I had a few hours a week to play around with the websi
te and so that the traffic was taking off and that made it easy enough for me to — to commit myself to do it full-time.
Andrew: Okay, let’s — let’s go slowly through that story to understand that early evolution. So, you come up with this idea for WhitePages that was going to be the WhitePages of — that was going to be WhitePages Online, right?
Interviewee: That’s right.
Andrew: And did you have an initial strategy for how you are going to get people’s addresses and phone numbers and everything else it’s in the WhitePages Online?
Interviewee: I was actually hoping to do some sort of crowd sourcing and, you know I was a college student at the time [xx] it would be kind of cool to even start with some sort of calls directory. Definitely one used case I could relate to very much was trying to keep tabs on your classmates as you were graduating and leaving school. But I just didn’t have a time or resources at the time to — to pursue that type of model.
So, really what I morphed the website into was, was a business that was based largely on license data. And even that was a pretty big hurdle for me at the time too because, you know, keep in mind that I just used up all my savings and buying the website itself. So, I think, you know I was lucky to be able to do a deal with a large company to essentially crawl their website on a live basis. Basically kind of, you know, extract search results on a live basis from this other website. I think they are called Information Business USA or something like that, but it had a very good directory assistance website. They — they later on sold to InfoUSA.
And I basically bought rights to extract data from their website on a live basis and —
Andrew: How? I mean, you just spent all the money that you had. How did you — how did you get the money to buy the data from them?
Interviewee: Well, I — I was trying to make a little bit of money on Wall Street in my entry level job. So, I think – basically, I have two deals painted on my wall at home. One is the actual domain acquisition for $900.00 and the other one is — is this deal I did with — with this larger company to license our data for $10,000.00 and I basically got the rights to be able to on a live basis to query their website for lookups and then represent that data on WhitePages because obviously a very huge hurdle for me otherwise at the time was to go and license you know, Oracle Database and license a complete database of telco information and so forth that would add up to hundreds of thousands of dollars of start-up expense which I didn’t have. So —
Andrew: So, the way it worked out was, a user would come to your website, type in a name like, Andrew Warner, WhitePages would then query the other site live and then pass the data to white — and then grab the data displayed on WhitePages and that’s the way the user would see it, I see. And that’s why you wouldn’t have to pay for a database, that’s why you didn’t have to have the infrastructure. All you had to do was query them live and display the data quickly.
Interviewee: That’s right. And I think the company was called AVI, now that I think about it. And actually we did — we did a few steps better than that or as I said I did, I had a contract programmer help me out. Most of the services at the time did not do Nationwide Directory Assistance lookups. If I was like in Florida wondering about you know what states you’re living and I’ll have to do literally 50 lookups for every state to find you with — with certainty. So, we actually just end up doing 50 background queries against this website for every search that took place on WhitePages and they were finding with it apparently.
Andrew: Okay, let me see —
Interviewee: So, yeah —
Andrew: I want to dig in even deeper and understand the early days.
Andrew: All right. Now we know where you are getting the data. What about the revenue? Where was that going to come in?
Interviewee: We actually had banner ads on the website from — from pretty much day one. You know, these were days when — when I was getting insane CPM. So I remember I was getting like 50 to $60.00 CPM for 468 by 60 Banner. Obviously that was unsustainable. But I think you know, I was always pretty strapped in terms of finding you know, some advertising deal by making sums for the company. So, from day one, I had advertising running on the website.
Andrew: You sold the ads yourself?
Interviewee: Actually, I used a third-party in the very early days, I can’t remember his name. But he was basically a full-time — full-time contractor who worked out of, I think North Carolina.
Andrew: So, full-time working for you.
Interviewee: He was doing ad wrapping full-time and one of the websites he represented was WhitePages.
Andrew: Okay. What about the users? How did you get users to come to WhitePages back then?
Interviewee: Well, I mean first of all, let me just clarify here. At the — at the time, in the very, very early days, I was — I did have a full-time job first of all as a full-time student and I had a full-time job on Wall Street. So I didn’t have a whole ton of time to — to devise and execute on user sourcing strategies. Most of my time back then, I spent making sure that we provided a good user experience, some better than what you could find elsewhere. And part of it was just, you know, Nationwide Directory Assistance solution. The other part I focus on was making sure that I had enough money to pay the bills in lump sum. I think users came to our website because they found that — that they had a better user experience on WhitePages based on what I just told you about for example. And also of course, the domain was very memorable and recognizable. I think that prove a lot of repeat users too.
Andrew: Okay. Actually, now that I think of it, I don’t remember being on the site in the early days and for some reason, it was one those sites that I just went to and I remember when I saw it, it blew my mind. I said this is the future. I didn’t think that — I just thought that — the internet will just making data like this available to us. I didn’t realize all the other things like video that it was going to bring to us. But this blew my mind at the time. I think also at the time, you guys displayed people’s email addresses. And if I typed in a random or a common last name like Smith, if I — if I remember right, couldn’t I get all the local Smiths in the city and scrape email addresses?
Interviewee: I think your memory is good but it’s not that great because we never provided that service. You know, just philosophically as a company, we have never displayed email addresses –
Interviewee: — in clear text to our users because that poses a pretty serious privacy issue as far as market is potentially —
Andrew: So you’re saying that you weren’t spending…. that you had somebody who was doing the advertising for you. You weren’t spending much time on user acquisition… they were coming because you had a good name.
Interviewee: A good service.
Andrew: And a good service. What made the service good back then? What helped it stand out?
Interviewee: I think we had a cleaner user experience it wasn’t as heavily bombarded by clutter as some of our direct competitors at the time. Which would, gosh, it’s been a long time I guess it included four11.com which also ran rocketmail which became hotmail later on. Switchboard, Whowhere.com, these are all companies, I’m really stretching my memory here. Most of these websites had a really cluttered user experience. And there were just a lot of small little things at the time that we did they hadn’t thought of. In hindsight this seemed trivial and obvious but for some reason some of these websites were not doing intelligent nickname substitution. So if I searched on Andrew we would substitute in rew for example and we had these dictionaries of hundreds of nicknames of matching on.
Andrew: How did you, you built that yourself?
Interviewee: Yeah, I mean that was pretty simple to do based on the queries that were running on their website. You know, common typos, you wouldn’t believe how many people can’t spell Philadelphia for example. A lot of little things like that that each incrimentally maybe improved the user search experience by fractions of percentage. That when you add everything together it made a much bigger impact.
Andrew: Okay. Alright so we got the expenses which was the data we got the revenue which was advertising that you were getting about fifty dollars per cpm which is incredible. We understand that the users were coming in because you had an uncluttered design and because you had a catchy name. You told us that at some point you decided to focus on this full-time. What was that point like and what did the business look like at that time?
Interviewee: Gosh, I can’t remember the exact revenue numbers. I do remember what I was making as a first year analyst at Goldman, which not including bonuses was in the 40′s. You know, 40,000 plus range. I think since then salaries have gone up even first year salaries for analysts have gone way up and I just did the math and I figured gosh, there were many weeks where I was working literally 80-100 hours per week. As first year analysists we were keeping tabs on how many hours we were working. Maybe it was sort of like a bizarrely friendly competition and I did the math and I figured that, I could make just as much money flipping burgers somewhere as I was at the time doing this job. And then I juxtaposed out with the math how much i was making on an hourly basis literally just a couple hours a week doing a little bit of maintenance and some very basic buildout of whitefears.com and the math became pretty compelling that I need to do this fulltime. I was also compelled I guess or inspired I should say by the huge success that some of the clients that we represent at Goldman Sachs had achieved and I kind of figured to myself gosh, I know a little bit of coding and I understand the web business and I should try to do this myself if I can do it.
Andrew: From what I read in preparation for this interview you didn’t incorporate until the year 2000. You were still bringing in revenue, you were working in Goldman, you went to Stanford. You have a good business background, why did you wait so long to incorporate?
Interviewee: Well, basically I was running the thing I was more or less a one person business. And I had some contractors here and there who helped.. There wasn’t any impotence to do that until I hired fulltime employees. So I didn’t actually start hiring fulltime employees until 2000. I actually recruited my attorney as the first employee and he was very button up about these things so he made sure we got incorporated right away. And I think we got incorporated in May or June of 2000 which was a pretty interesting time to incorporate a web startup.
Andrew: Actually, you’re right so let’s spend a little bit of time on that. The downturn happened. How did your business get impacted?
Interviewee: You know, it’s interesting. I think if you believe the media chronicles of the dot com growth and implosion and so forth you’d expect a crazy rollercoaster as far as traffic, growth, just any type of business growth metric revenues etc.. But if you want to track the white pages revenue growth all along, which I think is one of the important part of metrics besides from profitability.
You would see a very steady progression year over year all the way from 1997 all the way up through the present in terms of revenue growth.
Andrew: So your sales…I experienced it. I was there. We went from earnings millions a month to earning hundreds of thousands a month in sales. Your business didn’t have that kind of dip? The sales continued to go up even while everyone else was going down?
Interviewee: If anything, maybe I was under-monetizing the website, I suppose in the pre-bust days, in the late 90’s. On the other hand I would also posit that relative to some other companies, in like the whole dot com hype, they probably had unprofitable revenues so I think the question there is how much of the revenues were actually are sustainable. And the Whitepages dot com revenues were always sustainable because we were always profitable. I think that was one of the distinguishing things about our website relative to some of the other late 1990’s era online companies.
Andrew: Why did your ads work so well back then? Even before the bubble burst?
Interviewee: Gosh, I can only speculate on that because keep in mind, again, that I had very limited time just by analyzing why the deals worked never mind just getting some deals in place in the first place. I suppose we had a fairly uncluttered user experience, especially back then. Now maybe that was a function of the fact that I couldn’t actually close as many deals as I would have wanted to but the few deals I did close were fairly profitable, and generally, again, very high CPM’s. So I’m actually not sure exactly what…I could speculate: maybe it was a clean…
Andrew: Can I speculate and tell me if I’m wrong on this? Part of the reason that a lot of those other companies lost revenue is because they had brand advertising. And brand advertising started receding from the internet at the time. Another reason why they…And you didn’t have brand advertising. Another reason why I think they were suffering was that they were selling to other internet companies that were hoping to grow and go public and your ads were advertisers who were monetizing within a page or two of getting a click. So you’d send a click the way you do now, to a website that would do a people search. For every people search that was done…well, those people searches converted into paying members monthly or per instance, no?
Interviewee: I think part of it is true and that is I get the sense, whenever we’ve talked to our advertisers, whether it’s today or in the past, I’ve always found the sense that they’re very focused on making sure that their campaigns work. We don’t have a whole lot of dumb advertisers. They’re very analytical and driven by conversions, ultimately. But if you look at the advertiser mix, actually a large percentage of our revenue does come from brand advertisers and it has ever since the early days too. So I don’t think it’s fair to say necessarily that we are…I don’t think it’s accurate to say that we’ve been heavily driven by lead-gen type of advertising. And that’s true today and that was true back then as well.
Andrew: So brand advertising is big on Whitepages dot com?
Interviewee: Yeah, as a matter of fact I think it’s differentiating part of our monetization strategy is that we’ve always probably been more focused on brand and display advertising than most other online properties, just in general.
Andrew: What share of your revenue comes from brand versus those link ads?
Interviewee: We don’t disclose our revenue contribution but it’s a significant part of our overall revenues.
Andrew: Significant meaning more than 20%?
Interviewee: Significant meaning significant.
Andrew: I’m intentionally going with a small percentage; I just want to…in my mind, I always thought it was those clicks that translated into paying customers within a page view or two that set you guys apart but you’re saying no? It’s that close brand advertisers?
Interviewee: I’m definitely saying no to that. And yeah, 20% would be a very small number. I think that’s right.
Andrew: And Alex, by the way, I am curious about revenue and I do want to get a good understanding of the business but the last thing I want to do here is to trick you or to get you to say a number that you’re not happy with. If you look back at my past interviews, some people have asked have said, “Andrew, I revealed a number that I’m not comfortable with. Can you wipe it out?” And I’ve gone back in and I wiped it out. I can’t do that anymore because we’re doing live but it shows you the spirit that I’m coming in these interviews with. So absolutely not trying to trap you here, just trying to learn as much as possible.
Andrew: Okay. All right. So down comes. You survive it because you had healthy advertisers and because you were doing a better job of monetizing. Let’s…let me understand…how about this? We talked at the beginning about how last year you guys brought in $57 million.
Let’s go a little smaller. Do you remember the first million that you earned in the business?
Interviewee: Gosh, yeah, that was back in the…right after the dot com bust. And I’m not sure exactly where it happened. Again, we had a pretty steady progression all along but I think it would have been right around the 2000-2001 timeframe. Something like that.
Andrew: So how did that feel? Looking at the end of the year and seeing that number? Maybe mid-year you looked down and you say, “Wait. We crossed a major threshold here.”
Interviewee: It felt awesome. It felt especially awesome because you know, relatively speaking when you compared our performance to the rest of the online space, it was pretty spectacular. And I think it brought a lot of confidence…about our confidence that we were doing something right. And I guess I never got ultra-swayed by the media accounts…how they got so incredibly pessimistic on the web in general, any type of internet business model. So I felt a fair amount of confident that we could do something different and that there was actually some real sustainable value in building our web business. I mean, you have to remember, this was at a time when anything web, anything dot com was like nuclear waste. I mean, people wouldn’t touch you with a ten foot pole. We had trouble recruiting because we’re a web company and all sorts of things. But at the end of the day, the traffic numbers and the revenue metrics weren’t lying and they indicated that we had a business model that was sustainable.
Andrew: All right. I’ve got one other area to ask questions about with regards to Whitepages dot com and then I want to move to the other businesses. And also I’ll take some from the questions from the audience, including the one that I see Icy typed in there. My question is, you’re profitable from the beginning, right? Year one you’re already profitable. You’ve got a growing business. Why did you take investment money? Why get 57 million – I’m sorry. Not 57 million. You raised 45 million. Why raise that much money?
Interviewee: Well, it’s really…at the time we had been approached by a few companies about M&A. I think that was really what drove it initially. We weren’t particularly motivated to shop the company around or anything but we had a couple of companies that knocked on our door. And so it motivated me to retain some investment bankers to help think through our alternatives. And one thing that they mentioned was it that, as opposed to selling the whole business, it might benefit shareholders to take some chips off the table, so to speak, and retain a good stake in the company and still swing for the fences for the big win down the road. So that’s what I ended up doing.
Andrew: I see, to take some money off the table? I see, okay. And we’ve got the question from Icy is how much of a threat is Google in this space?
Interviewee: I think Google’s…of course, Google’s a threat to everybody in their web space to some extent. And I sup pose that anybody could dream up some sort of nightmare scenario where the whole might of Google pursues you as an individual business and then it’s game over. But that…I think every entrepreneur lives under that sort of potential threat. We don’t lose a whole lot of sleep over it because our focus, we think, would take an immense – and the investment that we made in our business – I think would take an immense amount of effort for someone to replicate and improve upon. I actually tend to think more of Google as a great growth opportunity as far as driving more traffic into Whitepages. As they improve their search engine algorithms and, for example, like you search on a person’s name as they get smarter about making sure that they provide in the top ten results, the most relevant unduplicated results for a person…we think that there’s a lot of information that we can provide about people that currently don’t float up into the top ten results. So we view that as a good growth opportunity as a matter of fact.
Andrew: And actually the person who introduced us is Neil Patel and Neil Patel, I guess, is doing some kind of consulting work for you. But he is known for helping companies get, I guess, for search engine optimization. And I don’t know specifically what he’s doing for you guys. It’s interesting. Neil Patel will talk about himself non-stop and give you all kinds of details about the stuff that he does but when you ask him about Ike and [INAUDIBLE] Cheeseburger, you ask him about Whitepages…Just big smile. “I can’t say anything Andrew.”
Interviewee: You know, I’m amazed by him. He’s even got a fan page group on Facebook.
Andrew: I know and I’m one of the fans. But I can see why because he’s introduced me here to some incredible entrepreneurs that I wouldn’t have had access to before. You and I never would have met if not for him.
Interviewee: Yeah, he’s a great networker and he’s got a ton of, ton of expertise on SEO space. So, I highly recommend him to anyone else who wants to go through SEO, as long as it doesn’t get to the point that it takes away time for him at WhitePages.
Andrew: [laughs] Alright, one more question from the audience. Moses, aka monocat, is saying that when he was with AT&T, he paid them to opt out of having his information and phone numbers. To opt out of having that information sold to sites like WhitePages. So, he’s asking, Where do you guys, Alex, get your data and can people opt out permanently, if they want to?
Interviewee: Yeah, first of all, the second question is really easy. Of course, yeah, you can absolutely opt out and, unlike some other companies, we don’t have a revenue model around, as far as making money off of people. It’s free and it’s instant. As far as the sources of data, it’s multifold. Part of the data that we get is from the telcos. So, the same type of data that you might find in directory assistance, 411 directory assistance, or the telephone books. Some of the rest of the data that we get is from various marketing sources and a lot of data, actually, we’re getting, an increasing amount of data, we’re getting directly from our users. So that’s a more recent issue over the last few years. But, we’re building all sorts of incentives for users to want to contribute their information so they can be reached in a privacy protected manner and make themselves reachable to people that they care about through WhitePages. So, those are the three general buckets of sources that we’re getting information from.
Andrew: OK, I see in the chat, I’m glad that I’ve got people like Icy, here, in the audience. Icy came back with a follow up question or follow up information. He’s saying, Specifically, Andrew, Google is providing phone number listings, today. For many people it’s providing those before the search listing, so, you get a phone number and then you get links over to other sites. How do you guys deal with that?
Interviewee: I think Google’s been doing that for a very limited data set, by the way. For probably five or six years. It’s been a long, long time. But if, actually, you play around with that, it’s very limited data sets and, obviously, hasn’t made much of an impact on our business.
Andrew: OK, alright. Fair enough. Let’s move on.
Interviewee: It’s extremely limited.
Andrew: OK, alright. And let’s hope it stays that way. Let’s move on, now, to the second business. Most people, Alex, can’t start one successful business, can’t run one successful business once they’ve gotten that one going, can’t make it profitable. Here you are, you’ve got WhitePages, we talked about how successful it was and profitable from the beginning. Then you’re running a second site? How does CarDomain fit? How did you get involved with CarDomain? And then I want to figure out how you’re running both businesses and keeping them going so well.
Interviewee: Well, first of all, I’m no exception to the rule that … I can’t run two businesses successfully, either. So, I’ve always been very clear about committing myself 100% to either CarDomain or WhitePages. I’ve been back here at WhitePages, now, for the last, approximately, three years. And during the time when I was not at WhitePages, or at the time now, that I’m not at CarDomain, I’ve always made it a focus of mine to make sure the company has great management and great CEO in place. So, I’m no exception to that rule. I’m very much a believer doing a few things, or one thing, on the we especially, really, really well. As opposed to diluting my efforts and spreading myself thin across the board. I’m kind of passionate about that. You know, whether it comes to how I spend my time, or how the company spends its time. Because, obviously, being a web business, if you’re number two … Being number two, online, just plain sucks. Website users are very efficient about going to the best service of some type. So, there’s a huge difference between number one and number two. So, we always try to do fewer things, but to do them really, really well. And that also goes for my management philosophy or how I spend my time.
Andrew: OK, let’s dig into this, then. Cardomain.com, and apparently it’s got a lot of fans, here, in the audience. Cardomain.com, I introduced earlier as the leading social network for car enthusiasts. You actually are number one and you bought number two and combined them into what’s now the power house. How did the site launch?
Interviewee: Gosh, originally, myself and my high school buddy, Simon, my co-founder, we wanted to start some sort of car retail store. So, we started out selling basic car stereos, on our website and, this is back when both of us were doing a lot of coding and
Interviewee: I pulled an all-nighter one night and came up with this idea for: Hey, what if we allow our users to contribute pictures of what they’ve done to their cars, including once they’ve bought the car stereo. Instead of losing touch with the user from thereon, this could be a great marketing retention vehicle to allow users to post pictures of what they’ve done to their cars.
So, one morning he came back to my house. I was incubating the business in my basement, and I showed him this concept and he got really excited about it. And for a long time sort of the community aspect, where people can post pictures and write up about what they’ve done to their cars, was very much a secondary focus, and part of me really got started as an eCommerce business.
Over time, the community account took on a life of its own, and it became the differentiating and really the core focus of the company, which brought it to the point where it is today when it’s entirely an online community type of website. And we don’t actually do eCommerce ourselves anymore.
Andrew: What year was it that you were coding it up?
Interviewee: I was doing coding ’98 all the way through to probably about 2002-2003 at which point our actual full-time employees were not letting me into the code anywhere anymore so they, more or less, shut me out.
Andrew: OK. So, what you’re saying is ’98 to 2002 or 2003, while you were still working–were you still working at WhitePages?
Interviewee: At that point, no. I went back to CarMan from about 2003 to 2006.
Andrew: Oh OK, but you were still coding CarDomain while you were working at White Pages. But was White Pages just kind of growing on its own?
Interviewee: White Pages was, yeah, I mean, we were fortunate to get a lot of traffic go through there, and we had a team in place. And I’d hire some employees and, basically, let them run the business by itself.
Andrew: I thought that, so 2000 you hired the first employee, right?
Interviewee: That’s right.
Andrew: At what point was that employee and the other employees at the company able to run the business themselves?
Interviewee: They pretty much ran the business themselves from about 2000-ish to 2000… I’m real bad with my timeline here, but roughly from 2000 to 2002. Then, I came back for a little bit and helped out for probably about a year and a half, hired in our CEO, felt really good about that and then went back to CarMan for another few years. And then went back to White Pages for the last few years. This is where I intend to remain.
Andrew: I see, at White Pages. How did they run the company by themselves without you there? How’d you hire people so quickly and get them to run the business by themselves so quickly? I feel like I’m missing that piece.
Interviewee: I think I was fortunate to get some great employees in place, and we set the bar really, really high from day one. I think we were, or I should say I was lucky to hire highly complimentary people in the sense that they covered all the bases really well. I think a common mistake for startups is they attempt to hire people, maybe, in their own image, or they attempt to hire people with a very common and overlapping skill set.
I was lucky to be able to hire people with very non-overlapping but complimentary skill sets, i.e. covering the operational side of the company, covering ad sales and covering technology really well.
Andrew: How did you find so many people so quickly? Did you tell friends? Did you have another option?
Interviewee: I actually don’t think we found that many people. What I remember was there was a real challenge to found great people. It’s always been a challenge to find great people, but back in that day there was a lot of advertising on job boards and so forth. We don’t source as many employees through those means anymore, but a lot of job board advertising.
And also, this was a time when a lot of people were, frankly, in the tech sector not employed because the web companies that they used to work for went belly up. So, I think that made the labor pool a little bit bigger.
Andrew: OK. All right.
Interviewee: I had my challenge to convince people to go in a Dotcom.
Andrew: I remember, actually. Back then, suddenly, nobody wanted to work at a Dotcom after the whole world wanted to.
Interviewee: That’s right.
Andrew: Can you talk about the revenues of that business?
Interviewee: I’m sorry, which business?
Andrew: At CarDomain.
[Transcript for minute 45 is below this line]
Interviewee: Oh, CarDomain. So, CarDomain, I think it’s a similar story in the sense that we boosted up that business to success, and we were lucky to not have to take on VC funding, not by design. Actually, my intent was always to take on VC funding after a certain amount of time. But my goal was to try and grow the business as much as possible before we had to take on ? maximize valuation, and then it just turned out that we reached escape velocity so to speak, without having to take ? funding on.
I think the difference between ? and Carmen, is there was a period between 2004 and 2005, when I sensed a renewed optimism in the wild, Google was preparing for its ? and so forth. Myself and my co-founder Simon decided let’s swing to the fences, let’s dip the company into the red and forego short-term profitability make this company much larger. In retrospect I think that was a mistake, up to that point. And we started adding a lot of people, adding a lot of expenses and the company dipped into the red for a few years after that as there was a necessary traffic growth mode.
Andrew: profitability last year?
Interviewee: It was back to profitability as of a few months ago, yes.
Andrew: And I’m not going to ask because annual revenues are?
Interviewee: I don’t think we not disclose that actually.
Andrew: Can you say it’s over a certain number
Interviewee: triangulation but it’s a healthy number. Nevertheless, frankly the largest media outlet for car enthusiasts. And I think it’s still only scratching the surface as far as how large the revenue could be based on go-to destination for ideas about how you can accessorize your car, about video, blog, reading about what’s going on in the automotive sector. It’s pretty formidable but it’s
Andrew: Before we move on to your Angel investments, let me see if I have my facts right. It cost you $900 for the domain, but you said you had $1100 to your name, right?
Andrew: The headline I can see for this proposal is, “A kid how he built it up into a 57 million dollar a year business.”
How were you able to do that? an idea in your dorm, build it up to something that was 57 million dollars last year. Obviously there’s no easy answer, but is there something that sticks out to you, that says “Yes, that’s the thing that really helped me seperate myself from the others, this is what got me here.”
Interviewee: I think in retrospect, being very focused around what users are looking for, providing a relevant service, trying to put myself in the users’ shoes. In the White Pages doing a better job than anyone else help our users find the contact information that they’re looking for. That more than anything has helped our success. Maybe that seems obvious, but if you think about all the distractions along the way in the post blow-up. Still remaining very focused on the app-based revenue model on a free website took a fair amount of courage. Some of which is warranted noise, some of which is unwarranted noise. Even today it takes a fair amount of conviction Being focused on content information more than anyone else
Andrew: We have a few minutes laft. Tech Holdings, Inked. How do you decide what companies to invest in?
Interviewee: I think that the number one passion of the entrepeneur, him or herself starting the business.
And what specific are they passionate about. Are they passionate about building a business that can solve a real customer pain point that others just haven’t quite realized themselves. That’s something that appeals to me. There’s many other things to entrepreneurs that they might be passionate about, about a big exit opportunity or stuff like that, I’m not usually as interested in.
Andrew: So Ben Huh of Pet Holdings, of I Can Has Cheezburger, Failblog and all the others, what was it about him? He wasn’t solving really a pain point, was he?
interviewee: I think in retrospect, it was. I actually got introduced to Ben through a mutual friend of ours, Andy Lew.
Andrew: Who I interviewed here.
interviewee: Ok. And I think I actually didn’t meet Ben until later on, so I was really riding the wave of enthusiasm that Andy had for Ben. And to be honest, I was a little bit skeptical about how far it could really go in the very very early stage, but then I pretty quickly became convinced that there was something repeatable in terms of the growth. Because I think the reaction a lot of people might have is “How far could a cat blog really go?”. But it was pretty amazing how far they’ve taken that whole genre.
Andrew: What size investments do you make?
interviewee: They tend to be one hundred thousand or below.
Andrew: Ok. And what I’m noticing as I look through the companies that you’ve invested in, is it’s clustered around this Andy Lew founders co-op network, that it’s a bunch of friends who pretty much invest in the same businesses and are all in it together. Is that characterizing it properly?
interviewee: Yeah, not by design, but probably more by coincidence, if anything. I think quite often what happens is myself or some of my friends might vet a business and we all get equally excited about it and we’re looking at the business from different perspectives, complementary perspectives and also by way of how I find out about the businesses, quite often I get introduced to them through people that I know. That tends to be the most successful way to get my attention, through a strong introduction by someone that I know.
Andrew: I told the audience when Andy Lew was on that they should find a way to know Andy Lew, and I’m gonna keep saying that because he introduces people to entrepreneurs like you, to investors like you. One question from the audience and then one from me. Casey Allen has a few questions about Seattle. Let me sum them all up in this: “Instead of working out of Silicone Valley, why are you working out of Seattle?”
interviewee: Actually, I had a choice when I moved out from Wall Street to locate pretty much anywhere in the country, and I guess maybe Silicone Valley would have been the more natural destination, given the fact that I had spent five years there before. But I chose Seattle partly for personal reasons because I grew up in DC, but also because there was a thriving community here, with obvious names, of course. But I’ve also found and I’ve come to realize and appreciate this even further with the years, that Seattle has a very balanced perspective on things, and there has been all sorts of blog contention over the balanced lifestlye of Seattle versus the all-out lifestyle in the Bay Area, but that’s not what I’m referring to, I’m talking about a balanced perspective on what the tipical on-line user wants. So I think Seattle has the best of both worlds, as far as having a great, talented workforce and certainly to get us tapped into the on-line community on the latest and greatest innovation as we need to, but at the same time I think we’re grounded enough that we can still relate to what the typical user wants and we don’t get caught up in trying to figure out what his reality is, like “This looks like a cool thing that I could take up” versus “What does most of America actually want today?”
Andrew: That makes a lot of sense. Here is my final question, and it’s based on what people in the audience have been saying. Apparently you own an Aston Martin and people are talking about that in the chat and I can see how that would be fun, but what I’d like to know is what is the best part of having made it? You worked hard, you came up with the ideas, you stuck with it, you survived the dot-com bust, you survived the hype and didn’t get carried away with it, you’re here. What’s the best part of it?
interviewee: I don’t feel like we’ve or I’ve really made it.
Andrew: To the degree that you have. What’s the best part of this?
interviewee: I think the best part of it is that I get to experiment with a lot of ideas, I have the luxury of being able to come into work in the morning and, as opposed to trying to forget how to get the space heater running, or various things that we had to contend with when we were in the very very early days.