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Sep 20, 2000

How iPipe Built a Multimillion Dollar Content Distribution Business

SUMMARY: No summary available.
We admit it. We had never heard of iPipe before a month ago. According to CEO Richard Johann we’re not alone. iPipe is a rarity in the over-hyped world of the Internet -- an incredibly successful (and yes, profitable) company that’s focusing on building its business rather than tooting its horn. How did iPipe become one of the fastest growing content distribution players online? Well, to hear Johann tell it, he was a just a nice guy who got some lucky breaks while doing favors for a few friends ….

Q: Where did you come from and how come we just heard of you?

Johann: It’s been a very interesting journey. A lot of people think we’re an overnight success after five years of work!

We’ve been aggregating content for distribution since 1994. We started just with information for HR professionals. Even before we sent out our first mailer, Microsoft contacted us and said do you want to be in MSN? We said hey cool! So, we’d barely opened the door and Microsoft was calling us. The next thing we knew we were one of the ten most trafficked areas on MSN. It went from concept to fruition very quickly.

Later MSN didn’t see the future of the Web the way we did -- so we parted ways in early 96. At first we focused on being an independent destination on the Internet. Then a lot of content partners asked if we would carry their stuff too. We’d built infrastructure for an eight-lane highway and we had only one lane of content, so we said sure! It didn’t cost us anything to add doll collecting or whatever. So that’s why we started as a really eclectic mix of content initially -- we carried our
friends’ content for them.

Q: Now of course you’re one of the biggest, if not the biggest, online syndicator of cartoons, including King Features’. How did that get started?

Johann: I got into cartoons to do a favor for a friend I met at my daughter’s YMCA Indian Princess camp! Then in ten days we had another cartoonist, and then another, and within 3 months we had blanket agreement with National Cartoonist Society. Now we’re a mega-cartoon site. []

From early 1996 to mid ’99 we’d grown to 2-3 million monthly unique visitors. So, I hired several business development people and set about figuring out how to make more money. I wanted to jumpstart and go to the next level. We could take the mass distribution approach and syndicate our content to tens of thousands of web sites. It’s a great business model and that’s what ScreamingMedia and iSyndicate are doing. But, being lazy we said let’s just go to AOL and major portals. So we’ve become the high-end distributor. You can be a relatively small, compact company and drive large volumes of traffic with major portal deals.

Q: Are you willing to do deals with the other syndicators or smaller sites?

Johann: I anticipate our doing business with iSyndicate. I don’t know if anybody’s talked to ScreamingMedia yet. We might work out a partnering agreement with some other sites -- a private label for Salon for example. Our ego is real small when it comes to making money -- we can’t afford to let it get in the way! We do anticipate doing business with all top ten portals within a year. We’re getting unsolicited calls from them now. We have access to content they want.

Q: Everyone’s fascinated with portal deals. Can you explain how they work for you?

Johann: AOL has been reducing number of content providers. It’s less headache. The producers at major portals are under lots of pressure to perform. We make their job easier. They would look at an individual content owner and say, “Gee that’s nice but I want to pick from a menu of choices.” In fact they would rather give us the list of choices and say, “Go out and get this for us.” So we go out to the traditional media print syndicates and other content owners and say, “Here’s what we want.” If there’s something we believe in, we’ll try to interject that into the lineup also. For example we felt Kevin & Kell would fit well in AOL and it’s done fine.

AOL had a feature called Talking Heads that didn’t work for them. When they let the contact expire we thought it might be good elsewhere so we went out and signed them ourselves directly and now we’re selling it to other portals. We’re very flexible.

That’s what attractive about us. We are the people to come talk to. You’d think there wouldn’t be room for a middleman in this business, but portal producers want a broad spectrum of content from broad array of sources. One deal with iPipe accommodates that. For example AOL just came to us and asked to do some things in game area. We’ve accommodated them by signing an agreement with Stan Lee Media out of Encino to do interactive flash games.

Q: How does your deal work with the original content owner or distribution rights holder?

Johann: It varies. Usually it’s either revenue split or a minimum and we offer them an upside. Once something matures basically it’s revenue sharing. We’re liberal with that because we want to give people good reason to do business with us! AOL has to be happy and the creator has to be happy. It’s roughly a 50/50 split but it varies. We’re paying out seven figures a year for some content.

In essence the content owners look at us as being their portal solution. With almost no exceptions, the large content owners don’t want to go into AOL and pay AOL money to carry their content. It’s not their business model. They’re in a
licensing model!

Q: Is there any chance AOL will pay for content from anybody anymore? We really don’t think so, but we still get hopeful publishers asking about it.

Johann: Keep on dreaming -- it’s just not going to happen. AOL doesn’t do any deals where you don’t pay them at least seven figures a year. You’re paying them, in essence renting their audience. So you need ad component. You pay for that slot and then you hope to sell ads to pay for it!

Next week: in Part II of this exclusive interview Johann describes the other side of his business -- ad sales. Plus he’ll talk about what’s next for iPipe’s growth.
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