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Also, you know, I got an email recently from a well-known respected angel investor who said, “Andrew, I keep seeing these spots for Scott Edward Walker. Should I really email him? Should I really talk to him?” And I said, “Yes. Absolutely.” How do I know? Because I’ve known Scott Edward Walker for years. I’ve worked with him. He’s been great, but more importantly, I see the emails coming back from people who are telling me about their positive experiences using Scott Edward Walker, the lawyer that entrepreneurs love, especially tech startups. So, give him a call. Walker Corporate Law if you want to find more information.
Finally, a friend of mine came to me and said, “Andrew, I want to sell something online.” You know what I would do? I would send them to Shopify.com. Why? Because Shopify.com is so easy to set up they’ll never have to bug me with tech support issues and because they’re going to be so well represented online with this beautiful site that actually increases sales, that it’s just going to do wonders for my reputation to be the person who inspired that and led them to it. All that to say if you or anyone else needs to start a store online, will you please check out Shopify.com. You’re going to be grateful. You’re going to thank me, and more importantly, the people who stores get set up because of your recommendation are going to thank you. Shopify.com.
Here’s the program.
Andrew Warner: Hey everyone, my name is Andrew Warner. I’m the founder of Mixergy.com, home of the ambitious upstart and the place where you come to learn from entrepreneurs about how they built their businesses by listening to their stories.
So, in a world where everyone seems to only care about hits, how do you build a profitable ad-based business? Well, joining my today is a founder who did that three times with three separate companies. He sold the first two companies and today he’s running the third. He is Jason Cohen. His first company Wise Ads was sold to About.com, and his second company MediaWhiz was mostly sold to Lake Capital. We’ll find out what ‘mostly sold’ is later. Today he runs Centerfield which offers on-line and off-line customer acquisition programs.
Jason, welcome.
Jason Cohen: Hey, how are you, Andrew?
Andrew: So Jason, my agenda for this program is to find out how you did all this. And maybe along the way we’ll find out about how you and I, about ten years ago, apparently worked together. I want to find out what you remember.
So, first of all, I have never sold to a major company like About.com. The day you sold, what did that feel like? What was that day?
Jason: Great question. It was actually my 26th birthday, believe it or not, and sort of during the dotcom boom. It was August 2000, and it was a great experience. So if you can imagine being 26 and selling your first business on your birthday, it was an amazing feeling. The after effects of that are obviously different than selling to a big company, as you mentioned, was very different than the entrepreneurial startup, but I learned a lot through that process.
Andrew: Okay. And for people who are listening to us and don’t yet know what Centerfield is, is there a way, maybe, we can illustrate what Centerfield does, by explaining how someone in my audience could come into contact with your business?
Jason: Sure, absolutely. We own a number of proprietary websites that we help consumers, across a number of different affiliate based and lead generation based verticals, acquire customers. As an example, if you go to Google and you type in something like “dating websites” or “online sites,” we have a number of sites that rank very highly in the organic rankings of Google. When a consumer visits one of our sites, we then send traffic over to an advertiser who’s buying leads or customers from us. And advertisers are more willing to do business with us because we have extremely qualified traffic from sites that we own and operate.
Andrew: Okay. So, I would do a search for online dating, I would come across a list of pages, you’d be one of the first results, I’d click it, I’d see a list of dating sites, if I click and register for any one of those sites, like Eharmony, Adultfinder, whatever. If I register you guys make a commission and the company that I register for pays you and ends up with a new customer, which is me. True?
Jason: Correct.
Andrew: All right. I did a search before we started for online dating sites. Which of the results is yours?
Jason: We actually don’t reveal what our websites are. Just because we have a lot of proprietary techniques we utilize to help enhance the search engine position of our site. We do it in a very, very white-hat manner, but we like to keep that private. That said, it’s a great entry point for us, in working with advertisers to send them the best quality traffic, and then based on our background in utilizing other channels like email marketing, which I know your familiar with, and affiliate marketing and other venues, we can drive a high volume of customers to our advertisers, who are buying leads or customers from us.
Andrew: Okay. How old is the company?
Jason: We just actually formed the organization. I had combined my company which was mostly these proprietary websites that I had mentioned, with my business partner Brett Cravatt’s, company, a firm called WebYES!, which has been a very successful regeneration company since 2006. We joined together over the last couple of months to rebrand the firm to Centerfield Media. Although it’s, in brand, a new company both of us have been operating independently for over a year now. And the company is profitable already.
Andrew: How long did it take to hit profitability for your side of the company?
Jason: Probably about six to nine months. I’m come from a background where I really like to execute from a sales standpoint and drive revenue quickly. So there was an upstart investment over the first six to nine months, in acquiring a bunch of these proprietary websites and domains that we’ve been building out for about the last year now. But now that division of the company is profitable and the combined entity as a whole is profitable as well.
Andrew: There is a certain attitude towards revenue and profits that doesn’t seem to exist in the majority of the Internet space. I want to find out about that through this story here.
Jason: Okay.
Andrew: Why don’t I ask one more question about today, and then we go back in time to figure out how you got here, and learned everything along the way.
Jason: Sure.
Andrew: What size profits are you making?
Jason: That’s not something that I’d feel comfortable talking about at this point. We’re a private company. In my history, I’d be happy to talk about it and get into it a little bit more with you. Through each company I’ve always been profitable, pretty significantly profitable.
Andrew: What’s the most profitable that you were in the past? It’s a lot easier to talk about past than today.
Jason: Yeah, I’ve had businesses that have exceeded eight figures in profitability on an annual basis. I won’t exactly quantify that, but I’ve grown a business from, sort of zero to that point. And exactly where we want to be just yet, as this is a new startup. But very confident with each of my companies have continued to grow the revenue and grow the profitability, and pretty comfortable that we’ll get there over a reasonable period of time.
Andrew: Okay. All right. I love that attitude. How about this? Before I ask you where the idea for WiseAds, your first company, came from, I want to understand where in the timeline I fit in. And I intentionally didn’t ask you about it before the interview started. I wanted to give you room to be honest and not feel swayed by me to tell a better story about our interaction.
Jason: Sure.
Andrew: But if there was one, I’m sure the audience is curious to know if I was a scumbag back then or if there was something interesting going on.
Jason: [laughs]
Andrew: At what point did I come in and what was the connection.
Jason: So, we had done some business with Grab.com and Mailbits, when you guys were sending, what I would call, a high volume of commercial email marketing.
Andrew: We had 20 plus million email addresses at Mailbits.com, which was an email a day service, backed by Online Greeting Cards. And Grab.com which was an online free lottery site, had three million email addresses. But I don’t know how many emails we were sending out. So that’s . . .
Jason: A lot. You guys were sending a lot.
Andrew: Were we sending out a lot? Okay. All right. And what was your connection to it?
Jason: So, we were working together as a client of your. I don’t remember, exactly, which clients we were working on together, but you guys were sending email marketing, advertisements for clients that we represented. We were paying you when you generated a lead or a customer.
Andrew: Okay. And you don’t remember if I was a scumbag or a nice guy, or any of that?
Jason: I didn’t deal with you day-to-day, but we had a good experience with your company, from what I recall.
Andrew: All right. Good. So far, everyone who I’ve interviewed is . . . so far they’ve actually been very good; even the people who said we had a little bit of issues, we’re on good terms, which feels good years later.
Jason: Good.
Andrew: So, WiseAds, 1999, what makes you to decide to leave Doubleclick, where you were working before, and go launch your own business?
Jason: It’s a good question. I came into Doubleclick in ’98 and left just a year later with a business partner, and just decided, I always knew that I wanted to be in sales and wanted the capacity to earn, potentially and unlimited amount of income. Although it was at sort of the peak of the market there, had stock options, the stock was trading at over a $100 a share, I went to my boss one day and said I’m going to leave. I just had an idea and a vision that I wanted to go after. I guess when you’re younger you’re willing to take more risks, and I decided to pickup just a year after I had started working there, with a business partner and leave to form my first company.
Really had no idea what I was doing; didn’t know how to operate books, didn’t understand the difference between receivables and payables, from an accounting perspective, but just kind of learned everything in the fire. It couldn’t have been a better experience and happy that I took that risk, in hindsight obviously.
Andrew: What was the opportunity that you saw?
Jason: So the difference in what we were doing at that time [??]was both a media business and a technology business. I worked on the media side of the company. We were selling ads on websites across a wide variety of categories, everything from finance to entertainment, etc. I was working with a lot of advertisers that were big ecommerce companies, at the time, and my vision was to form more of a niche ad network. So we were one of the first niche ad networks out there, selling ad space on shopping and ecommerce websites, only.
Andrew: Why would being such a niche player within a giant company help you?
Jason: When I left Doubleclick, to be clear, the vision that we went after was to be more of a niche player.
Andrew: Oh, I see. So this is after Doubleclick. You say, “Hey if we focus on these guys, we’re going to be able to do a better job for them.”
Jason: Correct.
Andrew: Better, how?
Jason: So the value proposition to the publisher, Buy.com, uBid, shopping.com, who were all partners of ours, was . . . you know Doubleclick’s a great big organization, we as a boutique firm will focus solely on this category of sites, rather than being in 10 or 15 different media categories. And as an advertiser, the value proposition was that they were going to put their ad dollars on sites across a variety of some of the top ecommerce sites online. And again, for the sites like Buy.com, uBid, these guys, it was ancillary revenue for them at a time when a lot of these guys were losing money. It was a great incremental revenue stream for them. So CPMs were higher for our publishers and for advertisers it was more of a focused audience for where they could put their ad dollars. And the story resonated well.
Andrew: Okay. I do see here in my notes the targeting and I do see the list of companies, included uBid, Compaq, Factory Outlet, Petsmart.com. What I’m wondering is what kind of ads you were selling for them? What kind of ads were you giving them?
Jason: I was mostly banner, display ads. Very high CPMs. Again, this was sort of early days before performance marketing really took off, so we were primarily selling CPM based display banner advertising.
Andrew: Okay. So that’s how you started. It sounds like you did evolve into pay per acquisition models, and you expanded beyond the ecommerce sites, which is how you ended up doing business with us, right?
Jason: Yes, exactly.
Andrew: Tell me about that.
Jason: So after selling WiseAds to About.com, I stayed with those guys for about six months as the SVP of Sales, decided to leave, as they were selling to Prime Media and I really didn’t want to work for a magazine company. I took a little bit of time off. Hung out with my dogs and walked in Central Park for a couple of months. And got bored of that really quickly, and just started reaching back out to advertisers and people who I had conducted business with. So this is around 2001, now.
Andrew: Mm-hmm.
Jason: Started working out of the back of my father’s office supply company with my laptop and a phone and just started reaching out to companies. Companies were continually telling me that they were looking, instead of paying on a cost per thousand or cost per click basis, that they were now looking to only pay per lead. And I thought at that point this is going to be the end of my online marketing career; people don’t want to pay for impressions, they don’t want to pay for clicks, they only want to pay for leads. I said, why don’t I try marketing some of these lead generation based deals.
I started working with advertisers and publishers to help them generate leads and acting as an agency or a broker to deliver leads. And what I found, after a few different programs, is that this really where the market was shifting from not only a pay to play model, but a pay per lead model. And that’s ultimately how I started MediaWhiz in 2001.
Andrew: Okay. I want to dig in a little bit deeper into WiseAds and fully understand that, before we move on to MediaWhiz. So, WiseAds was doing well. What size revenues was it pulling in?
Jason: Sure. It was a smaller company. I think at our peak we were doing around a million a month.
Andrew: A million a month.
Jason: Yeah.
Andrew: Okay. And then what share of that was going to the bottom line?
Jason: Again, it’s probably not something I’d feel comfortable talking about, specifically.
Andrew: I don’t want to get into details that are too personal, but roughly in that space, are we talking about a space where you’re the middle man and collecting 5%? What was typical for a company your size?
Jason: Our gross margins, typically, on the ad rep. side, were actually pretty high at that point. The market was probably around a 40% to 50% revenue share on the ads sold. Obviously, we had a lot of operating expenses besides that. The ad network model has certainly shifted where the margins are smaller with the networks, than 40% to 50%, but that’s where we were back in 2001.
Andrew: So, you collect a dollar from the advertiser, you run the ad and a publisher’s site, for that dollar you keep roughly 50 cents and give 50 cents to the publisher.
Jason: Correct.
Andrew: Boom, that’s the model. We’ve found out where you’ve got the publishers and why they were interested in revenue. These were ecommerce sites that needed extra revenue at a time when the business was getting rough.
Jason: Correct.
Andrew: We understand them. What about the advertiser? Who are the advertisers and why do they want to do business with you?
Jason: Our big advertisers are some of the advertisers you mention — Compaq, Petsmart, guys like that — who were ultimately looking to place their ads on, you know, Petsmart was on Buy.com; what better audience to reach people than I site were consumers are already coming with their credit card out of their pocket. So, for people who are looking to sell non-competitive products, a great place to advertise was e-commerce sites. You’re already cutting through the clutter, people searching online too, reaching people who are already on an end destination, potentially with their credit card out of their pocket ready to buy something else.
Andrew: Okay. I’m also wondering, you were still running the company when the dotcom bubble burst? I mean, you sold in 2000. This was just after the bubble burst.
Jason: Correct.
Andrew: So, I always like to hear, how did the bubble bursting influence your company?
Jason: I think what we had, which was really unique, which was complementary at the time to About.com and we had had a lot of companies who were interested in us at that time, was our experience, myself and my partner Evan, coming from Doubleclick, having been two of the top sales guys in the company, we really had a strong sales background. And at a time where the market was at a peak, and a lot of the big dotcom companies had, anybody working for them who had six months experience and they were paying them six figures. The difference with our business is we took a lot of younger, less experienced people, taught them the business and built our formula for sales around what we had learned at Doubleclick, in being strong inside sales folks. And having that aggressive outbound sales focus and mentality was a really strong fit with About.com who didn’t have as strong of a sales force as we had. And they were also looking to expand their Luna network at the time, which was their ad network product.
So I think, regardless of the economic timing, and obviously with everything that’s been going on the economy over the last couple of years, my message would be, “If you build value and you build something that’s unique or a skill set that’s unique within your organization, that will always be attractive to a potential acquirer.”
Andrew: Okay. So, why sale then? Why not just hang on and keep building it up?
Jason: I think at the time, you know, I was 26 then I’m 36 now, I’ll be 37 soon. I think having that opportunity to take some liquidity, take some risk off the table, for me that was attractive at that point. So rather than just continuing to grow independently, we also felt like the ad network market was continue to become competitive, margins were going to come down. So not sure exactly what the 26 year old kid was thinking at that point, but I’m sure it was; take some chips off the table, have a nice exit on the business, set yourself up for the next business, and kind of move on. So I think that is probably what I was thinking at the time and I was a great learning experience.
Andrew: Yeah, it must have been. We’re talking about, in a matter of months; you launch a company, take it profitably, grow its sales, you’re saying over $10 million a year in sales, or at least based on run rate it would have been, and sell it to About.com, a major company. You want to talk about solidifying your abilities in this business, there’s prove right there of just about pretty much everything you could do, except go public.
Jason: Right.
Andrew: So, you did that. Did you get shares in the business? Or did you get cash? Was it a combination?
Jason: It was primarily a stock transaction. If your next question’s going to be, “How much did we sell it for,” I’m not going to answer the question.
Andrew: I saw that you’ve never revealed it. I’m wondering though, is how, when the market was going even further, before they sold to Prime Media, how did your life get influenced by what was going on there?
Jason: Can you be more specific with what you mean by that?
Andrew: I mean, for some people when they took shares, they will sit here and do interviews with me and say, “Andrew, everything just went to pot. I couldn’t sell the shares. I was rich on paper, but my life was in the tank and I couldn’t even afford to make a mortgage payment.” For others they ended up with some kind of solution that protected them, or the stock went up. I wondering for you, what was the experience like afterwards?
Jason: Sure. I can tell you that my personal experience was definitely a learning experience in that regard as well. I was fortunate enough to liquidate my shares and have a very profitable outcome. Not as profitable as it could have been. And the message that I would send to other entrepreneurs is, if you are going to sell on a stock based transaction, make sure that you have ways to hedge or sell your stock. The market was just so volatile and that time. I think when Prime Media was coming the Prime Media stock was at $15 and then went down to $6 and went back up to $12 or $15 within a matter of just a couple of months.
I learned a lot from that experience. It did work out well. Did it work out as well as it could have the day of the transaction? No. But again, the way I learn from these things is, you learn from each deal and you become better in not only growing your company, but when you exit, preparing to do things in the right way to have to most favorable outcome.
Andrew: That’s a great point.
Okay. Before we go on to MediaWhiz the next business; I’m wondering if in that in between period you did anything special? Like you and I talked, before the interview started, about how I took a long vacation and traveled. And sat not on the beach in Venice, but in coffee shops is how I said it.
Jason: Okay.
Andrew: What about you? What did you do in the, it was pretty much, days between these two companies?
Jason: Yeah.
Andrew: But you also had a lot of time where you were still working at About.com, where you could experience so the personal upside. What did you do?
Jason: Sure. It’s a great question. Like I said, I took a couple of months off. Was hanging out walking my dogs for a couple of months and what I quickly found, for me, and I’ve taken a couple of these mini-retirements as Tim Ferris likes to call them. What I found is that, for me personally, I fear losing my edge and being in the excitement of our business and how fast paced the business moves, I need to stay working.
So my biggest fear in between, and you had said it perfectly, there was a really short between selling WiseAds to About.com and then leaving and then starting MediaWhiz. What I found in the in-between period, which was several months, it was probably actually about six months, that honestly, during that six months period, I was kind of depressed. I really loved coming into an office, I loved having people work for me, and working with people, and just sort of challenging myself. I’m a worker. What I learned about myself through that break is that I need to be working, I need to be innovating, I need to be creating new things.
I don’t want to jump ahead too much, but after I had ended up exiting MediaWhiz, I took a couple of months off in Europe. But I think that’s my max period, because what I found after a couple month break was, I was forgetting my keys. I felt like I was just not sharp and not on-point, and losing my edge. So for me, personally, staying engaged, staying in the industry, staying up to speed, and working is something that’s really important and works for me. Taking hiatuses, while fun, probably my window is six to eight weeks, and after that I fear that I’m going to start losing my edge a little bit.
Andrew: All right. So we found out about the launch of Me-, and by the way, I agree. I actually did take a long time off and I did lose my edge and I did lose touch with what was going on in the market space and I did lose touch with the people who were in the space, which was a huge loss. You lose the connections, you lose the understanding of what’s going on. And the industry and people move so fast, that if you come back a year or two later, you’re in a completely different world and you have to regain all that knowledge, which is possible, but not as easy as staying connected.
All right. now that I’ve made my little statement here, you talked about the opportunity that you saw at MediaWhiz while you were working at the back of your dad’s office supply company.
Jason: You got it.
Andrew: You saw the opportunity, now how do you seize it? What’s the first thing that you do?
Jason: What I did, actually, for both of my businesses when I started was I self funded. I think that’s important. I never raised capital for WiseAds. I never raised capital for MediaWhiz. So leading by example and being able to generate revenue and generate profits quickly is something that I’m proud of. So how I started MediaWhiz was, I started working with performance based marketers to buy advertising and sort of generate revenues from that. Then reinvested that capital into the longer term vision of what I wanted to achieve with the business.
Dug right in when I started. Started calling advertisers and acting like an agency or a media broker in helping them secure placements, generate leads. And generating enough cash flow to then be able to hire folks, and grow the organization naturally from that point.
Andrew: Can you remember one of the first deals that you put together? Just to give us an understanding of what a typical early deal that got you started looked like.
Jason: Sure. I was doing a lot of work in the online dating business. So I did a lot of business with Spark Networks who owned American singles.com, at that time and they owned jdate. And they became a big client of mine. So they had approached me and said, ‘Hey, can you help us generates leads and customers.’
Then I was always very good at prospecting and finding good media channels to help companies acquire customers or generate traffic in a profitable manner. So I just, sort of, cold called and contacted American Singles, contacted Spark Networks and said, ‘Hey, I would love to do marketing for you. Here’s my bio, here’s what I have accomplished, here’s where we’re going with the business and I think we can do a lot of business together.’ And they said, ‘Hey, here’s our customer metric, here’s what we’re looking to achieve, and if you can help us hit those metrics, we’ll spend as much money as possible with you.’
Andrew: I think that new entrepreneurs don’t realize that ad buyers are willing to share their metrics. They’re not going to share the best prices that they give to the best sources, but they will say, ‘We are willing to pay $7 per person who gives us an email address and says that he’s a male looking for a female and is Jewish’, or whatever it is, “We are willing to pay for a customer.”
In that space, did they tell you that they wanted to pay for a lead? Or did you have to actually get a customer who pulled out a credit card and signed up with it?
Jason: That’s a great question. Most of my clients early on, and even still, are primarily paying per lead. I always felt that it’s my job to generate the interest, and bring a qualified customer to the door. Then: it’s your job to convert them and have a site that functions and performs well, and auto-responders that you’ll send to the consumer to help get them to become a paying member of your website, or take a degree online through school, or whatever the action may be on the consumer’s side. We want to send them to the door and then we typically need to rely on the advertiser to do their part in converting that into a paying customer.
Andrew: Okay. So I went back in time and I Googled you from all those different dates that we’ve been talking about. What I saw was, quotes explaining what MediaWhiz is, that started with, “MediaWhiz is rapidly growing provider of performance based online marketing services, offering an integrated suite of programs, including affiliate marketing, lead generation, email marketing, and search marketing.” That last part, that search marketing, wasn’t there in the earlier articles. It was then there afterwards and then something else happened after that. Then we’ll go into that.
Let’s talk about search marketing before we continue. At what point did search marketing get added?
Jason: Probably 2006. We had acquired a company out of Florida that was an email marketing company, and they also had a small search engine marketing practice that was working with clients on fee basis. Charging them to manage their search, or in some cases was actually, sort of, day trading, buying ad space on the search engines and only getting paid by the advertisers when they were generating leads or customers.
Andrew: Okay. So this was after 2005 when Lake Capital invested in the business? Why did you get an investment from Lake Capital if you guys were profitable so early?
Jason: Similar to what we talked about with WiseAds, in that from my perspective, I had grown the business over four years and I owned, pretty much, almost 100% of the company, had a small equity pool for other employees. And I saw that the market was going to consolidate, in the performance marketing side. I had actually looked at a lot of opportunities to merge as a private company with another private company, and the reality was, without any real capital at the table, I wasn’t able to do any of things that I wanted to do as far as growth was concerned, in potentially merging with or buying other companies.
Andrew: I see.
Jason: I’m sorry. Go ahead.
Andrew: There’s a little bit of a lag. I was just saying, “I see,” as you said that. I understand.
Jason: Okay. From my perspective, there two reasons to do that. One was, again, there was an opportunity for me to take some risk off the table and sell part of my stake in the company, and then two, having a partner who would help support some of the acquisition enhanced opportunities that I had wanted to look at over that four year period that I wasn’t able to successfully do without a significant capital partner at the table.
Andrew: I see. So you’re saying that you were able to get money off the table right away and then later on as you saw opportunities to buy other businesses, you could draw on them to help put in the cash that would help you buy those businesses?
Jason: Correct.
Andrew: I see. Interesting.
How did you even discover Lake Capital?
Jason: Because of the quick success of MediaWhiz in the business, I had a lot of companies approaching me. And since I was the largest shareholder in the company and was pretty integral to running the business day-to-day, I just didn’t have the time to field inbound inquiries. So I had spoken with a corporate finance group, KPMG. I met with them, really liked them and said, ‘Hey, you know I don’t need to sell the business, but if I find the right opportunity and the right partner that I think could help me grow this business and execute on my vision, and take some of the risks off the table for myself, as most of my net worth is tied to this business right now, that that would be great.’
And that’s exactly what I did. So KPMG came in, put together a book about the business, and sort of where we were today, where we wanted to go with the business. And that drew a lot of interest from both private equity companies as well as potential strategic buyers. So based on my first experience in selling to a large public company, in About.com, what was more enticing to me, in meeting with a lot of people and having a bunch of different options to potentially sell the business, was to partner with someone like a private equity firm that could come in and invest capital, help me take some of the risks off the table, and then go out and acquire other businesses.
So to answer your question, I had met the Lake Capital guys through my banker KPMG.
Andrew: So you go to KPMG, you say this is what I’m thinking, they put together a book, they find prospects because that’s their job, they make the introductions, show them the book, tell them about your business. If it fits, you partner up. If it doesn’t, you find somebody else.
Interesting. Since, over the years, I’ve discovered that, but I didn’t know that at the time. I didn’t realize that there were people out there that you can go to. I was shocked when a competitor of mine went to, I think it was Goldman Sachs, and he said help me find and investor. I always thought they’re the guys you go when you’re a giant, like hundreds of millions of dollars. I don’t realize that they work even with smaller guys. Well not that you guys are small or not that we’re small. I just always assumed it’s for them, for other people.
All right. So, got that.
One of the first businesses you bought, it sounds like, was this email marketing company that happened to also do a lot of search.
Jason: Yep.
Andrew: You were looking to acquire and email company though, right?
Jason: Uh-hmm.
Andrew: What’s the opportunity that, back then, you saw in email?
Jason: As you know from being in the business at that time, it was a really high margin, high volume way to acquire customers online. It took a lot of technical competency as far as delivering the mail and additionally required a lot of working with the different ISP’s as things became more challenging to get email through and making sure those emails are going to get delivered, and that you have the proper permissions. So it was a particular skill set that we didn’t have in-house, and that we saw as a big opportunity and was one of the channels that we wanted to build out to have a fully diversified solution for online marketers to generate customers across a variety of media channels.
Andrew: Very sticky also. All right I see the value of email. I see how you discovered search. Is the next big company you bought, was it Text-Link-Ads, in 2006?
Jason: Correct.
Andrew: What was the opportunity that you saw with them? Why did you decide to buy them?
Jason: It was a great business that also rounded out our search practice. So the Text-Link-Ads product was a product that helped advertisers effectively improve their search engine rankings. And the business was a continuity business. So, advertisers would come in and purchase links and each month that would be a recurring charge to the advertiser. So we saw a lot of good opportunities.
The thing that was really interesting about that business is that it was started by a great entrepreneur, but they really didn’t have a strong sales background. So we had tons of people coming to the site on a regular basis looking to purchase links from Text-Link-Ads, and effectively, if some of these signed up and wanted to buy links and we didn’t close the sale then there was no follow up. Advertisers who were coming and signing up on the site, we didn’t even have a phone number capture on there, so we weren’t even outbound calling. Some of the prospects we had as clients. So we quickly staffed up that business and was able to double the business within less than a year.
Andrew: So, I said earlier, I started to see search marketing in your description a lot over the years. The other thing I started noticing was, after 2005, a lot of acquisitions and we’ll talk about some of them. What I was wondering as I read it is, I said, ‘Why didn’t Jason and his team decide to just duplicate the businesses that they liked. Why didn’t they decide to create a Text-Link-Ads of their own and just jump into the market with muscle and experience and their money, why?
Jason: That’s a great question. I think the companies that we found had innovative technology and products that we felt were better to buy than build. We wanted to round out our service offerings to attract bigger and better clients faster. In some cases we looked at businesses and passed on them because we thought there wasn’t a lot of innovation there. I’d say in all of the time that we looked at acquiring businesses, I probably looked at 75 deals over two years and we ended up doing three major acquisitions out of that. So I think we found innovative entrepreneurs and products that combined with our already existing platform business made us more valuable. The build versus buy, the buy kind of won out in those scenarios.
Andrew: So, you’ve looked at more companies, more thoroughly, than most people in my audience, especially in this ad space. You identified one mistake that a smart entrepreneur who had a successful business made, the guy from Text-Link-Ads, he didn’t collect enough information to make outbound calls to his prospects. What other mistakes did you see over and over that maybe somebody in my audience will say, ‘Hey, I’m doing that too; this part of the interview is worth X number of dollars to me and it’s going to turn my business around, because I didn’t think of that.’
I can see the phone number capture and the outbound calling being helpful. What else is there?
Jason: That’s a great question. I think ultimately for me, it’s thinking in the shoes of an entrepreneur, I think, you really need to be the person who leading by example within your organization. I can’t think of a specific case scenario where one of our businesses was under utilizing their product. It’s more so from the execution standpoint of building a team and selling around products. Also, as an individual leader within your organization, I’ve always been of the mindset that you have to lead by example. You have to be the one that can go on the front lines and get it done and generate revenue for your company.
So that’s what’s been successful for me in organically growing two businesses. What I typically looked for was scenarios, and this actually happened with our email business as well when we acquired it, was a lot of people were coming to them for customer acquisition, right. It’s not really hard to attract customers when you’re willing to get paid when you generate a lead or a customer for somebody else. So a lot of people want to come to you and do business.
Similar to my Text-Link-Ad story, our email marketing division was a very similar situation where we had a lot of inbound leads and we were farming instead of hunting. So taking that proactive mentality, and even if you have a valuable product, not getting too cocky about it but tweaking it and optimizing it and putting an aggressive outbound sales and marketing effort behind it has worked with me across all of my businesses, and specifically in a couple of these businesses that we bought, and helped us to significantly ramp up the revenue of each of those divisions.
Andrew: I see. So earlier you were talking about how to maximize the inbound interest that was coming in, you’re saying another important thing is to grow outbound. Go out hunting, don’t just sit and farm what’s growing. What’s a good way to do that? When you’re going after new business, how do you do it?
Jason: When I look at a category that we might approach, it’s really, ‘what are the industries that we want to serve?’, and then, ‘who are the players in that industry?’ So a basic prospecting method for someone who’s looking to act as an agency, or a broker, or a lead generator for a company; you know, start at the search engines. See who’s bidding on advertising on the search engines. If you identify an industry that has a lot of opportunities; the example of the dating sites that we talked about, it’s type in some relevant key words for dating and then see who’s advertising. If there’s a solution that you can provide to a marketer that’s unique or innovative, that’s a pretty easy place to start, ‘Hey I see you’re advertising on the search engines.’ You know they’re spending money, you know they want a return on their investment. That would usually be a place that I would start.
Andrew: I see. How can you do this in an automated way and be sure that you are capturing everybody?
Jason: I don’t think there is. I mean, not that I know of. I think if you’re looking to grow a service based organization that serves marketers, you’re always going to have to have an inside and an outside sales effort. So can you build a mailing list or buy a mailing list and try to sign people up to a newsletter and engage them that way? I’ve always been a firm believer in running cold calling organizations and just aggressively prospecting advertisers to work with you. So when you’re running a service based marketing firm it’s really difficult to automate a lot of this stuff unfortunately, which is why you need to attract really good talent, people who either have an existing rolodex or, sort of, young hungry people who want to go out and aggressively prospect for new business.
Andrew: There was an ad company that brought me inside and showed me their prospecting operation. It’s just a bunch of desks of really hungry young people who eventually want to be entrepreneurs and know that this is their way of getting started. And they would just do searches and Google and see what comes up and they would guess, I think they would pretty much have a gut instinct for industries did well and who’s bidding up a lot, but there was no way for them to, in a definite way, say, ‘Adultfinder is spending three times more than Chemistry’, or, ‘this small fry is spending much more on a consistent basis.’ There’s no way to do that is there?
Jason: Not that I’m aware of. Again, I think that’s why you have to have a good sales force who is going out there and has a compelling pitch where they can extract that information from the advertisers to do a market assessment and understand what the spending potential is across the top guys you see advertising on Google or see advertising in the market place, and get that information from them. There’s no accurate way, that I’m aware of, to understand exactly what someone’s spending advertising online. That’s why you need good sales people to find that information out and extract that.
Andrew: Okay. One other question before we continue with this story, why did you decide to launch this company by yourself? Why not partner up with someone?
Jason: Are you talking about MediaWhiz?
Andrew: MediaWhiz, right. The first company, WiseAds, you had a cofounder. MediaWhiz it was just you and then eventually brought in investors, why?
Jason: My experience working with a partner was great in my first business. For me it was more of a personal challenge that I wanted to try to do it on my own. That’s really all it came down to. I felt like the experience of partnership was great, but new chapter, new opportunity, new challenge. I wanted to try to do it on my own and that was really it. It wasn’t anything more than that.
Andrew: All right. I was thinking maybe this business didn’t require a technical cofounder, maybe this was a business where you already had a team of people. Any of that?
Jason: It was just, I wanted to get my hands dirty and, sort of, prove to myself that I could do it by myself without the support of a partner and that’s what I did.
Andrew: All right. You know, actually one other question about the early days. You said that you worked out of your dad’s office supply company?
Jason: I did.
Andrew: Was your dad an entrepreneur too?
Jason: My dad was an entrepreneur. He used to be a school teacher in the South Bronx, in New York, a pretty tough neighborhood. My uncle was a wealthy man and was also in the printing and promotional marketing business. And my dad wanted to provide better for his family, so he took a sabbatical and took a year off. In his first year on his own working as a salesman in the printing and promotional marketing business he was able to, basically, achieve his salary as teacher his first year. He continued to grow and ultimately went from working for a company to working on his own.
That was definitely one of the things that inspired me to become an entrepreneur myself. I remember I wanted to go back to sleep away camp when I was about 15 or 16 and my father was making me bang to phones and cold call in his office instead of going back to sleep away camp. That was definitely a big part in shaping my entrepreneurialism and my hunger to become a sales person and ultimately not really be capped about the amount of money that I can make. So that was, kind of, my training ground, was cold calling for office supplies and printing and promotional products.
Andrew: What’s one of the big take-aways you had from that experience, from cold calling and selling over the phone?
Jason: For me, personally, the challenge of just calling someone on the phone and persuading them to purchase something from you or be excited about the opportunity is a big thrill for me. I like doing it now. I still do a lot of cold calling, even though we have a staff of about 25 people here and I have very talented sales guys, I enjoy that thrill, I enjoy presenting, I enjoy selling.
And one of the things that really intrigued me about moving from as a younger person selling something like office supplies and pencils which isn’t that exciting, to moving to selling something like Internet marketing where, honestly I think I’ve been hung up on a handful of times in the last ten years, and that’s it, calling probably thousands of different companies. So when you have something that’s valuable and interesting and you’re good at presenting it and people want to talk about it, it’s the best thing to be selling. And that’s why I love Internet marketing and I’m passionate about it. People want to talk about this stuff, people are excited about it, things are changing every day, there’s new opportunities, there’s new channels, so it’s a really exciting product to sell. That’s what excites me.
Andrew: Okay. One more company that you actually acquired but also helped launch, AuctionAds, with shoe money. Where did the idea come from for that business?
Jason: We had a pretty huge publisher base with the Text-Link-Ads publishers that we worked with. So pretty quickly what we found, across the organization at MediaWhiz, is that we could, not only for the advertisers help them advertise in bunch of different channels, but for publishers enable them to earn ancillary revenue streams. So whether they had an email list and we could help them monetize that or they had free banner space, we marketed back to that publisher base and saw that there was a quick adoption to a variety of different products and services that we had. That was, kind of, the genesis of that opportunity.
Andrew: OK. So you said, “We have these publishers. If we find new ad products to give them, they’ll probably take it up.” You tried a couple of tests. They did it, you’re saying. Why partner . . .
I’m waiting for your camera to come back on, that’s why I’m talking for so long. Okay. There we go.
Why partner with Jerome Schumacher?
Jason: Schu had the technology for the AuctionAds product, which he had built, and we had the publisher base. So we felt that it was a good marriage and a good synergy.
Andrew: Couldn’t you build the technology yourself? You guys have a tech team.
Jason: Yeah, again with a lot of the other things we had going on in the organization, it wasn’t something we wanted to endeavor to do. So we decided to, basically, partner with Schu and to do it that way.
Andrew: What else did he bring to the table beyond the technology?
Jason: That was really it. It was really the product offering that we could market to publishers.
Andrew: So you guys did the majority of the marketing? 95%?
Jason: Obviously, Schu had his publisher base coming through his site, but as far as the outbound publisher adoption, a lot of that came through the Text-Link-Ads base in combination with Schu’s high access to publishers. I’m not sure exactly what the split was, but we both contributed in that regard.
Andrew: From what I read in articles, going back to 2007; the deal was, you launched the company together, you co-owned it, but MediaWhiz could always come in and acquire it. You guys had the right to come in, and the expectation that you would come in and acquire the whole thing, right?
Jason: Yeah.
Andrew: Okay. All right. I think that’s everything around there. Let me see, you had the purchases of several companies. You had revenues of over, at your height what were the revenues?
Jason: At our peak, $130 million in revenue. So pretty significant and significantly profitable.
Andrew: Unreal. Yeah. That’s what I see over here. I wanted to hear it from you, because it just didn’t seem right to me that it was that big. Why leave?
Jason: The way that my deal was structured I had a couple of year contract after selling a big chunk of my equity. For me, at that point, the business was really mature in 2008 and I decided it was really best for me to move on. I had achieved my goals. I had learned a lot. We had acquired and integrated a bunch of successful companies. Built the business to over $100 million and brought on a lot of other senior management talent. For me, I think what I really craved was that startup environment again and really try to innovate with a smaller group of people. MediaWhiz is a great company and has continued to grow, but I was just at a different stage in my life where I wanted to take on some new challenges. So that’s what I did.
Andrew: I wondering how important the acquisitions where to the business. What size acquisitions were they? Like AuctionAds, what was the size of that acquisition?
Jason: AuctionAds was tiny. When I talk about the business I really talk about our three key acquisitions which were; a lead generation in the affiliate marketing business called Monetizeit, our email marketing platform, which is Narifortwos [sounds like] White Delivery, and the Text-Link-Ads business. So those were really what rounded out the service offerings for the business and were the primary driver of the growth.
I can’t get into any specific numbers with you, but what I can tell you is after we acquired all of these businesses our growth rate over the next 18 months, organically, was over 75%. Not only did we pick the right businesses, they continued to grow and perform after we acquired them.
Andrew: All right. Before we move on to Centerfield; there’s one big lesson that you said you took from that experience and brought to Centerfield, which is you wanted to delegate more, why? Do you have one example of a problem or a stress that happened to you before?
Jason: Can you be more specific? I’m sorry.
Andrew: Yeah, I’m wondering how non-delegating plays itself out for you. Does it play out in that you’re just in the office 24 hours a day? Or does it mean that you can’t acquire or grow beyond the business? Or does it mean something else? What did it mean for you?
Jason: Delegating meaning, delegating to other employees?
Andrew: You’re saying, I believe, the lesson that you learned from MediaWhiz was that you don’t need to do everything, and that shouldn’t do everything, and that you should give other people room to run their business, and give yourself room to separate yourself if you ever need to.
Jason: Yeah, we had talked about this before the interview. One of the key lessons I learned, that I think are valuable for other entrepreneurs is; when I started the business I was a really a single point of failure. I was a key component really heavily involved, not 24 hours a day, but a lot. What I learned from that experience is really trying early in your development, even if it means offering ownership and equity to really talented people, the best thing you can do is surround yourself with a superior management team that not only can shoulder some of the burden, but if you ever go to raise money or sell the business, that you’re not a single point of failure.
In the case of MediaWhiz, I needed to stick around for two years and I ended up staying three. If you ultimately have the goal of selling your business, the best position you can put yourself in is, frankly, being expendable in your own business. I know it sounds crazy, but the better the team you can put around you, if you ever go to sell the business or raise money, it’s less likely that you’ll be required to stick around for the long term.
For some people they love their business and they’re so passionate that they wouldn’t want that to happen. For me I really enjoy building companies and I don’t know what will happen with my current company, Centerfield. Maybe I’ll be running it for 10, 15 years, but I’m excited, because I’ve brought on a really solid, younger generation of guys, who are really motivated. I’ve told them my goal is in the coming years would love for them to take over and run the business. To me that would be a different type of success than I’ve experienced in the past.
Andrew: All right, on to Centerfied. I’ve been taking up a lot of your time. I promise we’re not going to go much longer.
Centerfield – you described one area of your business. What is another area that we can tell our audience about? What else do you guys do?
Jason: So somewhere in my background in performance marketing, having our own sites that we can generate leads or customers is really valuable in the people that we work with. But what’s also important is having the diversity of services here. So leveraging other channels to generate leads or customers, very similar to what I’d accomplished at MediaWhiz, leveraging email marketing, leveraging affiliate channels, utilizing all of the different media types to help companies acquire customers. But what we found is, the place to start in attracting and acquiring advertisers is approaching with some of the unique proprietary websites we own and operate. Because not only do those websites generate a great quality of lead, but it’s an easy starting point from an explanation standpoint to get in the door with our advertisers. So once we’re in the door and generating leads we can roll out other channels to help companies acquire more customers.
Andrew: All right. What kind of advice can you give my audience about revenue? About the need for revenue? About the importance of revenue?
Jason: Like I’ve said; I’ve never run a business without its self funding. So I think that’s really important. Other entrepreneurs have been successful in developing innovative technology that ends up selling to someone for a lot of money. I’ve always been a guy who’s operated profitable businesses and I think that’s really important. I like to prove my revenue model out in a pretty short period of time and then leverage that capital to reinvest it back into the business.
So I think it’s really important in short order unless you’re creating the next Face book and you really have an innovation that requires a ton of capital. For me, I’ve been successful in leveraging my own cash flow. Improving my own revenue model quickly and then reinvesting that into hiring good talent. If that makes sence.
Andrew: All right. There’s so much more that I want to ask, but people don’t understand that in addition to this hour that they’re probably listening to, you and I spent about half an hour before prepping and making sure that we get as much value for the audience as possible.
Jason: Right.
Andrew: It’s great for the audience, but it’s a lot of your time. So I appreciate all of the time that you’ve given us.
Jason: Thanks so much, Andrew.
Andrew: Cool. The website and the company is Centerfield. Check out centerfield.com. Jason, thank you. Every one, thanks a lot.
Jason: Thanks, Andrew.
