Interesting article/interview from Internet World magazine:
T H E I N T E R N E T W O R L D I N T E R V I E W
Scott Kurnit
About.com's CEO is running fast, making acquisitions, building revenue, and launching
new products.
But does he have a clear picture of his destination?
By Jason Black
Photos by Catrina Genovese
Scott Kurnit says there are 21 dictionary definitions for the word
"about." He ought to know. As the founder, chairman, and CEO of
About.com, Kurnit is constantly pondering the application of that
ubiquitous word to the future of his company. n Just as there are
multiple meanings for the word "about," it is difficult to stick one
descriptive label on About.com's assortment of Web sites. The
company has more than 700 topic-based sites, ranging from arts and
humanities to TV and radio, in 37 different categories. So maybe it's a
consumer content provider.
But then About.com features 250,000 timely articles written by its
independent contractors known as "guides." So maybe it's a news
publisher.
About also has more than a million links throughout its sites. So maybe
it's a search engine.
So what is About really about? "It's a network of high-quality
destination sites," Kurnit says. He describes the About network as
being both vertical and horizontal, creating a "huge platform."
Started in 1996 as The Mining Company, the site changed its name to
About.com last year and has grown quickly. It now has 520 employees, 300 of whom are based in New York. The
company's midtown Manhattan offices were filled beyond capacity when a reporter visited in early June. Many offices
intended for a single occupant had four or five people working in them. Still, the atmosphere was relaxed and jovial.
With that growth in human capital has come tremendous online growth, too. "It is one of the few bastions of heavy traffic
out there," says Michael Graham, an Internet analyst at Robertson Stephens. In May, About.com was ranked No. 7
overall in site traffic in Media Metrix's count of unique visitors. A year earlier, when About was still The Mining
Company, the same measurement put the site at No. 25.
No doubt, the site's guides draw the majority of its readers. They serve as the de facto experts for the About sites,
keeping up with the latest developments in topic areas that range from dating to political humor. This creates a real
advantage for About.com, says Patrick Winton, a research analyst at E*Offering - not only because the guides help to
keep content fresh, but also because they can serve as the eyes and ears of the company, keeping "a close watch on the
competition," he says.
Jordan Rohan, a media analyst at Wit Soundview, says About.com has been an effective brand-builder. "A lot of
companies are spending a lot more money on marketing than About that aren't doing as well," he says. "About has a very
efficient approach to generating traffic, and to monetizing traffic." The site's main revenue stream is advertising, and
revenue for the three-month period ended March 31 came to $15.8 million, up more than 560 percent from the same
period a year earlier.
This is not to say that About has no growing pains: Like a teenager faced with choosing a college major, its focus seems
scattered, and it has not defined its key interests. Nor has it declared itself a portal, which would rationalize its
everything-under-the-sun approach to content.
Not satisfied to simply offer hundreds of vertical sites backed by guides who hold the virtual hands of visitors exploring
the Web, Kurnit and his team have been busy with acquisitions and the creation of new products in the past year. In that
time, the company bought Vantage Net, which sells interactive marketing tools to Webmasters, for $2.5 million; North
Sky, which offers Web site hosting, programming, and design support, for $37.6 million; ExpertCentral, which publishes
answers to questions posted by site users, for $34.6 million; and Sombasa Media, which sells direct-marketing technology
and operates an e-commerce newsletter called BargainDog, for $37.9 million. The purchases were made with cash and
stock.
Analysts who follow About have not been put off by some of the seemingly high price tags for these acquisitions. Wit
Soundview's Rohan notes that the company's cash-burn rate is down (it was $11.7 million in Q1 of this year), and that it
has about $150 million in the bank. There is also excitement about new products About has developed and their potential
for revenue enhancement.
New products include the Luna Network, which enables the guides to develop contractual partnerships with other Web
sites that are relevant to them, and Sprinks, an auction-based online classified service for small businesses. E*Offering's
Winton says that Luna puts About in a great position to make future acquisitions, because it helps the company to identify
valuable partners. About.com is also set to launch AboutIndustry, separating out the content from About's current
Industry category, in the third quarter.
Prior to founding About, Kurnit was the CEO of MCI/News Corp.'s short-lived Internet Ventures. This came after a
stretch at Prodigy, where he was the No. 2 guy during the company's brief brush with profitability. Before that he
founded the nation's first pay-per-view network for Viacom, and served as the head of programming for Qube, an
interactive cable system run by Warner Communications.
In conversation, you would think that Kurnit, 46, has a thousand ideas a minute. He speaks rapidly and often jumps from
one idea to another. It's almost as if he is racing to keep up with his own mind. That agility is reflected in his outlook for
the company: During a presentation at a recent investor's conference, Kurnit said, "This business is a race, and our people
are prepared to run that race, certainly for the next 10 years."
The next 12 months alone will pose plenty of challenges for About.com. Along with the rest of the Internet sector, the
company's stock got plowed in the market correction this spring, plunging to $25.13 per share on April 17 from a 52-week
high of $105. It had rebounded to the mid-$30s in June. But analysts say the road to profitability is within reach - perhaps
Q2 of 2001.
On the wall next to the door of Kurnit's office are posted two daily reminders. One is the proverbial "first dollar," from the
company's earliest days. Below that is an early business card from The Mining Company with Kurnit's name on it. The
title: "Towel Boy/Toilet Attendant." A joke, perhaps, but also a reminder that even though he has come a long way in a
short time, it might not last forever.
Internet World: About.com appears to be competing with virtually everyone, including news publishers and other
content providers, ISPs, and portals on the online side, and also print and TV. How can About.com sustain that position?
Scott Kurnit: The Internet allows you to reach the customer directly, and because of that, we're able to provide a very
compelling customer proposition that allows us to "copete" effectively with folks whom you would think we are
competitors of.
IW: To "copete"?
Kurnit: Co-opetition, to compete while we cooperate. The beauty
of the Net - and I think we saw it four years ago when we started
- was that whether you liked it or not, there was going to be
minimal barriers to distribution. The main barrier would be a
relationship with the customer directly, and there were going to be
natural linkages between competitors that you wouldn't have
expected otherwise.
So, we have a million links to other resources on the Net. Those
links tend to come back at us. We have partnerships at a
more-granular-than-average level; we choose to have thousands or
even millions of distribution and customer relationships rather than
relying on two, three, four, or seven large ones.
Let's say you have a great distribution deal with Lycos, and all of a
sudden Lycos is Terra - you can get whacked if you rely too much
on a single distribution partner. We knew that early, and we made
sure we had very broad distribution relationships.
IW: There was a perfect example of the changing face of Internet
companies recently with the AOL-Time Warner merger
announcement. Is that going to affect About.com?
Kurnit: We offer a different kind of a service. Those guys are a
powerhouse - the AOL guys are fantastic at what they've done
and accomplished. I have tremendous respect for the Time Warner
assets. Those assets haven't yet been deployed on the Net as well
as I'm sure they will be over time. It speaks to our need to
continue, as we have done, to differentiate our services and the
way we produce those services. I'm comfortable that, as we have
lived handily beside the two of them, that as the two of them come
together we will continue to live very nicely alongside a larger
AOL-Time Warner.
IW: As the About.com sites become more widely used, is there
the likelihood of a backlash from other sites, such as the
withholding of listings that you criticized Yahoo about earlier this
year?
Kurnit: No. Interestingly, as we get bigger, one of our distribution strategies is clearly to have free links from other
services around the Net. If you are a directory and you don't appropriately list the specific About sites under the
appropriate categories, then you are a terrible directory. Yahoo is a very smart company, and they figured that out. It's
one thing for me to say, "Hey, you guys need to be doing this." I think actually it might not have been fully on their radar
screen, and they are correcting the situation. They have hundreds of our sites listed, and they are better because of it.
We have Yahoo links and Lycos links all over About, where it is appropriate. I think that Yahoo, like us, runs a
customer-first mentality, that you would need to actually have more than a dozen links to a Lycos or an Excite if you're
Yahoo. In our case, to do your job, you really have to have all 700. Each one of our sites is one of the Top 10 best in their
category, for wherever they sit on the Net, and to exclude them either by error or by choice is a mistake.
IW: If this sort of situation comes up again, what can you do to make sure that the About sites are treated fairly?
Kurnit: At this point, the good news is that companies that are smart treat us fairly - not because they like us, but
because it is good for their own business. If you're Yahoo or Lycos or Excite, you're not us. You've come to realize that
About.com is not a portal, it's a network of high-quality destination sites, and that you provide a better experience to your
customers if you make it available. And thus, they do, and I don't see how they wouldn't. If they don't, they very quickly
lose their utility for their own customers. And we're big enough now that if they didn't, their customers would know. We'd
make sure of it.
IW: Through public statements to them, or through polite letters?
Kurnit: The public on the Internet learns of everything very quickly.
IW: Is About.com trying to be all things to all people?
Kurnit: No. We're trying to be some things to all people. And I think there's a big difference. We do not by any means
believe that anyone in this space can be all things to all people. It's like assuming that man lives by bread alone. And he
doesn't. And women don't watch one show. And both women and men don't go to only one restaurant or read one
newspaper.
And that's the benefit: a differentiated service that gets at the quick piece of information, or the exploration of a topic -
which is really our business, differently than anybody else has got a place.
IW: Among Internet players, do you have to be the biggest to succeed?
Kurnit: You do not have to be the biggest. You need to be a leader in your space. If you're selling dog food, you cannot
be the fourth or third guy. If you are making a movie, the biggest is good, the second biggest of the summer can do fine,
the third biggest can do well, and so can the fourth and fifth. One thing that's interesting about media - and I think it is lost
on the technical industry - people have a broad appetite for media. Dozens of magazines, multiple cable channels, multiple
newspapers. If you're making a word processing program, or a presentation program, or a spreadsheet, actually if you're
not No. 1, there is no No. 2, because you have standards issues. That's the key difference.
To boil it down, in a business that is not standards-based, you don't have to be one or two. Standards-based, you'd better
be one or two. So if that's operating systems, you've got Windows, you've got Mac, and you've got some other guys, but
it's a far cry. In applications, you've got Word, and then kind of Word Perfect, but nobody else. In television, you've got
CBS, NBC, ABC, and they can come up with "Who Wants To Be a Millionaire" and all of a sudden be the No. 1 network
out of nowhere, and that's the media business. And on that level, we're a media business.
So: Be what you are, be different, be useful. On any given day you might find that your usefulness and differentiation
actually zips past the other players.
IW: Where will revenue for About.com be coming from in the next 12 to 18 months?
Kurnit: The core revenue is from advertising in multiple flavors. So the first thing to do is to take our ad revenues and
diversify them, and then look for alternative revenue streams, which would either be subscription or industrial sale of
products.
First, on the ad revenue side, there are several levels of diversification. One is the introduction of Sprinks, which we
introduced last quarter, which is an auction-buying ad system. Sprinks diversifies our number of customers, which we
think is critical, because in a downturn in the market, you want to make sure you can have many more customers
available to you, so that if a large customer chooses to pull a buy - which happens in the ad market - you're not adversely
affected. No. 2 is the direct marketing business: The acquisition of Sombasa gives us revenue on a highly targeted basis,
with very high CPMs. They had an average of 31 cents per click in the first quarter, which is a wonderful number. Then
revenue diversity is through product diversity, taking our third-quarter move into AboutIndustry, which is highly targeted
industry information in a space where we believe the revenues are substantial.
IW: B2B has become such a buzz term in the last couple of months, and various online players are trying to figure out
how to take advantage of that space. How is AboutIndustry going to differentiate itself from other players entering the
B2B space?
Kurnit: If you consider Industry sprouting above the rest of the network in terms of shareholder value, a couple of things
become clear. We have a load of traffic - we have 16 million unique customers, and that's more than anybody else who is
in the targeted vertical space thinks they're going to achieve. We have an efficiency of production systems, having
replicated our site structure 700 times. If you take a look at the exchanges or other networks of verticals, they don't have
the advantages that we do. While in some ways we are starting later than some of them, the reality is, we have the
opportunity to see where the strengths are, and then we have traffic. And traffic to our consumer service is easily moved
over to an industry service, because you say to somebody, "What do you do for a living?" and they want to tell you.
IW: With the creation of the Luna Network and Sprinks, as well as the addition of Sombasa Media, is About.com looking
to become more of an ad network than a content provider? And as you move in that direction, do you give up something
on the content side?
Kurnit: Luna started as a method of getting high-quality traffic at our niches efficiently. So we went out to sites of high
quality, as determined by our guides, and we said to them, "We'll pay you to throw us traffic, and by the way, while we're
at it, why don't we sell your ads, and why don't we do biz-dev for you, and you know we've got this Sprinks thing that
would be pretty cool on your site, and we'll pay you for that too." So you see, something that starts in distribution speaks to
the power of our platform, because we are able to do multiple things with it. I think a true test of a great business is: Can
you do something efficiently, and can you then leverage that across multiple opportunities? And you see that in Sprinks.
IW: Is Sprinks simply Net classifieds?
Kurnit: It is online classifieds with the highest bidder moving to the top of the stack. It's that simple. It's a dynamically
priced system, so if you go in and see that someone has just outbid you by two cents, you'd better get your butt in there
and bid yourself up again.
IW: It has been a year since the name change to About.com. Isn't it an expensive proposition to change a corporate
identity midstream?
Kurnit: This has been a brand based on product, which is the best kind of brand, that grows very much by itself. So if
you get the message out, and then your Web site speaks brand - if it provides the brand experience - then you don't have
to spend a lot of money.
We had to buy the URL; it was one of the bargains of a lifetime. We did spend money in the second quarter of last year
with a campaign to say, "Hey, we're changing the name." But what we've discovered in Q3, Q4, Q1, is that spending
wasn't required for us to continue to grow the business substantially. In hindsight, it cost a lot less than I thought it was
going to.
IW: About's shares have taken a beating. How do you think the overall decline among the Internet stocks is going to
affect the industry as a whole, and About.com in particular?
Kurnit: We have tended to trade at a 100 percent premium to our recent low, and it has actually made it easier for us,
because it has forced companies to come to terms with their own visibility to profitability. And who has got the cash to get
there. We've got a load more cash than we need to get to profitability.
If you did the math and saw that we had a $7.5 million burn rate in Q4, and we said we're on a road to profitability, and
you know that we have $160 million in the bank, you say, "Whoo, these guys will get to profitability with a load of cash to
spare." And that is important. Will [the market correction] suck some Net advertising out of the marketplace that would
have otherwise come our way? Absolutely. And that's why we diversify our revenue streams. |
