Q: Can you give us a quick backgrounder? How did Ancestry.com start and how big are you now?

Smith: Ancestry.com had an 18-year heritage as a successful genealogy publishing business before it went online. The Web site launched in April 1996 and we started selling subscriptions around 1997.

It grew slowly from there. We tweaked it. It evolved. We hit the 200,000 active subscriber mark in August 2000. Right now we're number three as far as online subscription sellers in the world. It's WSJ.com, ConsumerReports.org and then us. We just launched an additional subscription offering (access to the US Federal Census images) in October 2000. We're now quickly approaching the 300,000 subscriber mark this month.

A quarterly subscription to everything except the Census is $19.95. You can add the census for another $19.95. If you're an annual subscriber for $59.95 you can add the Census for another $39.95. We're pretty evenly split right now between quarterly and annual as far as new subscribers. If you look at the base, 65% are annuals. Subscriptions are automatically renewed unless someone calls to cancel.

Q: How have you sold all these subscriptions?

Smith: We have various channels that we market into to build the subscription base. One is an affiliate program where we do a revenue share with other sites -- we pay them a commission anytime someone comes from their site and buys a subscription.

We also have several co-brand relationships, including ones with AOL, Excite, Compuserve and Netscape. We do get quite a bit of traffic from those sites.

We do email and newsletter sponsorship marketing to many different lists. At this point, if you're online and have a newsletter subscription, chances are you've seen our ad! We also do online ads, keyword buys and other banner placements on strategic portal sites. Plus we leverage the traffic we get from our sister sites: MyFamily.com, RootsWeb.com and ThirdAge.com.

Also, one of the biggest traffic drivers for the site are our own free newsletters. Between RootsWeb.com and Ancestry.com we have over two million email subscribers.

It's a combination of all these sources -- it takes all the components to keep us active and vibrant.

Q: Out of all those traffic generating tactics, which is the most potent?

Smith: Several of them. RootsWeb.com is obviously really targeted, so we do a really good job of converting those people. Somebody that searches on Yahoo and gets one of our keyword banners searching for family history or genealogy is pretty qualified as well.

About half of our content is free so someone can come out and just become a registered member and search the database of user-generated content. People often do family histories and post them for others to see. Also the Social Security death index is free and that's popular. You can also build a family tree and get on the message boards and lists for free.

A lot of times when the Web brings people in they get to know us through the free content. When they get a little more into the site, they realize they want access to paid databases as well. We convert some people right away. With others it might take some time. We let them opt-in to receive the newsletters. We just try to show them the value and get them to convert.

Q: What's a realistic conversion rate to expect?

Smith: It varies so much from source to source. We probably do conversion rates that are quite a bit better than the industry average. We actually look at everything more granularly than that. It all boils down to cost per action almost more than conversion rates. This game is all about CPA for us.

We haven't struggled as much as other content sites. People interested in family history research are pretty educated and well aware of what's important and valuable to them. They look at the list of databases on the site and see we have some really compelling value.

One of the things about making a compelling content site, you have to continually add value to the site to keep people renewing and subscribing. We've added at least one, but usually more like three-to-five, new databases every business day since we started selling online subscriptions. In August we were around 700 million names. Now if you include the Census we have over a billion names on our site, which is far and away higher than any competitive site.

Q: How does your revenue stream pie break down, subscriptions versus other revenues?

Smith: Subscriptions is the largest portion of revenues. We also have a publishing business with two print magazines, and usually do six-10 books a year that we sell in hard copy. The magazines have a total of about 85,000 subscribers paying between $19-$25 a year. It's a good little business.

We also published 110 CD ROM titles last year. Mostly they are just different data sets that you can find on the site; but some people decide they want to buy those. We'll probably do another 100 this year. Those sell quite well.

There's also ad sales and email newsletter sponsorships -- those are revenue vehicles we rely on as well. We're trying to do more package deals with print and Web as sales, and that seems to be going pretty well. Online ad sales took a beating last year, but we've seen some good results of late. Newsletter sponsorship sales have been good. We've been able to keep them pretty fully booked. I think advertisers are looking for companies that have diverse ways of getting to their clients. We're ideal with print, online and newsletter sponsorships.

We feel pretty good about the total revenue picture for us.

Q: How do you decide on subscription pricing; and how do you decide which content to charge for and which should be free?

Smith: I think pricing is flexible. If you can show somebody value, I don't think price is really that big of a deal. We've done a lot to keep our price integrity as well. We've done some dollars-off promotions but not a whole lot.

User-generated content will always be free. We've made a commitment to our users that any data we acquire from them -- for example if they post something -- we promise never to try to sell that back.

The other content that's free isn't exclusive. They're things you can find at other locations. The stuff we put behind the subscription wall are things that are more scarce, such as our periodical resource index. It's a database you can search to see where your ancestors were mentioned.

The Census record is another perfect example of valuable content nobody else offers. We spent a lot of money scanning every single piece of microfilm from the National Archives and digitizing the US Federal Census records. There are 450 million names in those Census years -- they take an enormous amount of digital space as you can imagine.

Q: How much bigger do you think Ancestry.com can grow?

Smith: We're actually hopeful that we can become the number one subscription site. This is the marketing guy talking!

There are more people interested in families and family history than there are people interested in stock quotes and investor information. Everybody's got a family. Not everybody has a portfolio.

We'll try to get to 500,000 first and then we'll see where we go from there.