In last week’s MarketingSherpa issue, iPipe’s CEO Richard Johann told us how his multi-million dollar content distribution company does business with content owners and major portals. This week Johann tells us how he brings in profits through advertising sales, what partnerships he’s looking for and where iPipe’s going in the future.
Q: Your Intelliads division is selling 35 million online ads per month. How did that come about?
Johann: In the summer of ’98 we had a call from AdAuction [now OneMediaPlace] in San Francisco saying, “We see you’re running cartoon content for 50-55 newspaper Web sites, can you sell us ad space for our US West account?” I said, “Sure how many do you want to buy?” They wanted two million ad spaces and I had 50,000 at the time. So, I hung up the phone and said, I gotta find more space! We went to the people I already sold for and said, “Hey do you have any unsold ad space? We’ll buy it!” It grew from there. My best guess is we sold one-two billion ads over the next 12 months, mostly buying space for advertisers we already had in place.
We’re migrating to more of a pure network play now with a fixed percentage instead of a negotiated percentage. Overall the margins aren’t as good, but it’s a more constant business. We’ve got major advertisers coming in saying, “Can we run a test? I want to run three million for an auto-loan company.” It’s a whole lot easier to run these tests in a networked environment than to work with 200-300 media Web sites at a time. Intelliads optimizes by site, banner, location-giving the advertiser the most bang for their buck.
Ad sales help us monetize the content side. If you’re a hard news or cartoon publisher with a million page views a month you’re in a dilemma because generally your in-house sales staff know how to make traditional media sales -- not Internet ad sales. We’re able to come in and structure a deal with a portal, realizing what our income will be on the ad side; be comfortable with the risk; and, make a profit.
Q: How many employees do you have to handle all of this business?
Johann: We have less than 50 employees. We don’t have 50-plus people on our content distribution team selling thousands of sites -- we have two-three people selling to ten portals. To me that’s a no brainer. We have a handful of media buyers who work with several big sites and we’ll probably run 50 million ads next month.
It’s ironic, being a second-tier ad network, we ourselves spend very little on advertising. It’s a referral type of business. In general people need to make sure you’re real. That’s the advantage of the AOL deal. They say “what’s iPipe?” and you mention AOL and they go, “Oh!” and you leapfrog in front of everyone else. Most of the major agencies know who we are and we’ve got a constant flow of premium business.
Because of our positioning as a middleman, we don’t have to do Superbowl ads. The portals already know who we are. We haven’t been extravagant. There are no Ferraris in the parking lot. We try to keep both feet on the ground. We also pay our royalties on time. It’s critical in this business. There have been a lot of well- intentioned people who didn’t know what they were doing.
Q: Is there a problem with people stealing content? Do sites ever try to run comics for free?
Johann: We spend six figures a year in attorney’s fees looking at licenses because we have to be squeaky clean in everything we do. I’m not going to jeopardize a contract because we don’t own rights to something.
We also very aggressive in enforcing copyright laws. There’s always two-three college sites where somebody decides to give away cartoons for free and rip off the cartoonist. Usually when you let the state school system know about it, that stuff disappears really fast. They can’t afford copyright infringement penalties. With comics, you do have to walk a fine line though. You don’t want to discourage fan sites but you don’t want them breaking copyright.
Q: What new partnerships are you looking for now?
Johann: Nothing jumps to mind now. We’ve talked to all the major cartooning, news, soft news and editorial cartoon players in the US. There are people we’ve talked to for years now. We pitch them an idea, they say no and pitch us in return. It’s a matter of sitting back and saying “We’re going to do business somehow!” We talked with Media General for five years and we’re just doing a deal now.
Our style is to play above-board. We don’t have time to be too devious in any deal. “No” is an answer we accept all the time. That’s just life. It’s amazing six months or a year later something you thought was dead reappears. We’re always walking around with buckets of water because we don’t burn bridges.
We get about three [content distribution] proposals a day. Often our decision has nothing to do with the quality of the content. We just decide what there’s a market for. Most deals we enter into take one-two weeks to complete. AOL took seven months. A good portion of that was us and some of that was them. They called us from the Time Warner meetings and said, “Be sure to get digital and broadband rights when you do contracts.” We asked why and they said they’d call us back. That was Thursday and the next Monday I just about spilled coffee on my lap when I saw the deal announcement!
We’re getting lots of inquiries from Hollywood properties now. They call and say, “We understand film, music, video; but, we don’t know anything about the Internet and we think iPipe can save us seven figures in seven months.” You can be the best entertainment company in the country -- odds are you haven’t done a major portal deal. We talk to every major portal every week, some daily.
Q: What’s in the future?
Johann: A lot of things on the Internet are counterintuitive for me; and what’s true today turns out not to be true tomorrow. If you’d asked me a year ago I don’t think I could have envisioned how it’s worked out, how quickly it’s grown. All of the sudden we’re the investment bankers’ best friend! I started getting calls from these major firms from large Northeastern cities, “Hey I’m going to be in Richmond tomorrow. Can we meet?”
Outside of AOL, we’re probably the largest content sites in Virginia. I believe we’re one of the 50-100 top content sites on the Web. Our ad business grew about 70% this past month. This just can’t happen forever. It’s intellectually dishonest to say we’ll continue this type of geometric growth.
We’re practical about what we do well and what we don’t do well. We try to focus on making a profit, or at certain points forgo a profit in order to grow. We’re much more conservative than most of the dot-coms have been and that’s why we’re still here with money in the bank.Useful links related to this story:
Part I of this interview on iPipe: