This just released: (12-6-00) Raging Bull's interview with INSP's Arun Sarin.
It's only a matter of time before INSP rises above all other tech companies.
This is a weekly interview that Raging Bull emails to members.
This positive article will get enormous exposure all over the message boards.
RSH
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Subj: Raging Bull's Cyber Elite - December 6
Date: 12/06/2000 5:19:11 PM Pacific Standard Time
From: ragingbull@rb.Unitymail.Net (ragingbull)
RAGING BULL'S CYBER ELITE
"Weekly Interviews With The Web's Leaders"
Wednesday, December 6, 2000
Far reaches of space:
In this day and age where broad "horizontal" Internet
strategies are no longer rewarded, but rather focused
"vertical" business models -- Yahoo! (YHOO) notwithstanding
-- it's both surprising and refreshing to find a company
that still has a multi-pronged attack on all things Web.
That would be Bellevue, Wash.-based InfoSpace (INSP), which
is sometimes referred to as a "content aggregator," but
whose business model takes it well beyond content.
One of the first:
Founded in 1996 by chairman and chief strategist Naveen
Jain, InfoSpace.com, as it was then known, started by
providing such simple services as "yellow pages"
directories, e-mail, search, and address books and
calendars. But as the Web gained more power and spread
beyond the desktop, InfoSpace.com went right along with the
flow, adopting its services and inventing new technologies
to address the burgeoning wireless and broadband movements.
As it shifted into being more of an infrastructure player,
InfoSpace.com made the decision in March of this year to
drop the ".com" attachment from its name, a move that
turned out to be prescient from an image standpoint after
the stock market tanked in April, punishing many pure-play
Internet companies.
And it was in April that 46-year-old Arun Sarin left his
post as chief executive of Vodafone's (VOD) US and Asia
Pacific regions to join InfoSpace as CEO.
Stepping it up:
Three months after coming on board, Sarin engineered the
acquisition of Web site operator Go2Net, which brought into
his stable, among other things, Silicon Investor, a
competitor of this Web site.
Sarin also kept InfoSpace on the cutting edge by snapping
up speech recognition technology firm Locus Dialogue last
month in a deal worth up to $132 million, with an eye on
incorporating Locus' voice portal and engine into
InfoSpace's wireless services in particular.
Raging Bull recently spoke with Sarin to survey the wide
landscape in which his company plays.
Cyber: Describe for us what your company does.
Sarin: What InfoSpace does is provide technology for the
Internet, whether it's the wired, wireless, or broadband
Internet, or merchants coming online using the Internet.
So we have a suite of products and applications that people
buy from us and then install in their own Web sites. So
think of us as an Internet infrastructure company.
Cyber: What are your different revenue streams?
Sarin: In every space, the revenue model is a little bit
different. In the wireless space we have roughly 88%
market share here in the United States, and we've got
customers like Verizon (VZ), AT&T Wireless (AWE),
VoiceStream (VSTR), Alltel (AT), and Cingular, which is a
joint venture between SBC (SBC) and BellSouth (BLS). The
revenue model there is basically $1 to $2 per subscriber
per month, so as the ramp-up in this whole space occurs,
our revenue model increases with that.
On the wired side, we provide all kinds of products and
services to the America Onlines (AOL), MSNs, and Lycoses of
the world, and they pay us for our products and services as
they use them.
On the broadband side, it's very similar to the wireless
side, to the extent broadband customers use our portal
services, our infrastructure services, and they pay us for
it.
And finally on the merchant side, we provide basic things
like building online shopping experiences all the way to
back-end gateway processing, where we process all the
monies for merchants, and there we typically get [paid] 1%
for the transactions that we complete.
Cyber: Now, you formed an alliance with Nortel (NT)
recently. How does a deal with a telecom equipment
provider work?
Sarin: Nortel supplies telecommunications services to
carriers around the world, and supplies gateways that bring
the Internet to their customers. What we do is sit on top
of Nortel's gateways and provide all kinds of products and
services, but principally in the wireless area. So it's
coming packaged with all these applications that you can
take to market instantaneously and have a wireless portal,
commerce, voice recognition, or any number of products.
Cyber: So if I'm a wireless carrier, for example, what
exactly are you providing for me?
Sarin: We do everything from basic content integration,
[including] one-click shopping and one-click search kind of
services. We do unified messaging and e-mail and voice
recognition. We do m-commerce (mobile commerce), we do
promotions with merchants. So there is a whole stack of
services we provide, and some customers buy the whole
stack, while others may buy half the stack depending on the
situation they find themselves in.
Cyber: Do you think there's any danger that someday the
Baby Bells and other wireless carriers will decide to
develop their own technology in-house instead of
outsourcing to you?
Sarin: Well, you know, this is the Internet business that
changes possibly every week, but certainly every other
month, and the pace of innovation here is tremendous. And
the reason people come to us is because they don't feel
that this is an area they have a lot of expertise in. Now,
will they try and develop this expertise? Yes.
On the other hand, the world is going to keep moving on, so
hopefully the products and services we provide a year from
now will be quite different from what we provide today, and
we'll keep staying on the edge. Our customers are very
happy because they get very quick time to market, they get
absolutely state-of-the-art stuff, and it helps them
compete with the big names out there so they can be
successful.
Cyber: Are you frustrated at all by the pace of wireless
development in the U.S. and the lack of a clear standard
compared to other regions of the world?
Sarin: You know, while the overall adoption of wireless is
a little bit slower than Western Europe or Asia,
principally Japan and Korea, the development of wireless
Internet is actually coming on very nicely. If you go to
Europe, you don't see some of the wireless Internet
products that we have here in the United States because
they're so happy with SMS, which stands for short message
service, where you basically send messages back and forth
to each other.
So they're actually wondering how hard to press on things
like voice recognition and unified messaging, and so forth.
They're quite happy making money the SMS way. I think what
they'll find in the next year or so is that they're falling
behind a little bit because SMS is not Internet. It
doesn't have all the beauty the Internet has in terms of
being able to get any information to the user. So they
are, I think, lulling themselves a little bit with the
success that they're having on the SMS side.
Cyber: You were one of the first companies, if not maybe
the first publicly traded one, to drop ".com" from your
name...
Sarin: Yeah, we did that even before it went out of style.
We're not a dot-com. We're not a destination. We weren't
encouraging people to come to our Web page and transact any
business. Our thing is helping our customers be
successful, so it's our customers' ".com" that should be
interesting to the end customer, not our ".com." You know,
we're an infrastructure provider, so for us to have ".com"
didn't make a lot of sense.
Cyber: You just recently acquired Locus Dialogue. What do
they bring to the table, and what is your interest in
speech recognition?
Sarin: Locus is a tremendous acquisition for us. We're
big believers that while we're all happy to see data when
we want to see data, there are many, many times when we
actually want to hear the data, or want to speak to get the
data, because it's not convenient. So for us, having a
voice portal was tremendously important.
Now, as you know, Locus is both a voice portal and a voice
engine, so it has both those components. And the reason
voice recognition hasn't taken off, in our view, is because
we don't have people who are fine-tuning the engines and
the applications and the services all in one lineup, as it
were. And when we line all of those up, we'll be able to
provide outstanding service to our carrier partners.
Cyber: But speech recognition has been so slow to develop.
You know, Internet video conferencing was supposed to be
the next big thing, and the markets sort of abandoned that.
Is there any chance of speech recognition going down that
road of obsolescence?
Sarin: Obviously anything can happen, but our view is that
voice recognition is ready for a takeoff if the
applications are right. If you have a menu situation that
is cumbersome, believe me, people won't use it. But that's
the whole reason not only to have a voice portal built into
Locus, but also the voice engine so we can actually play
with the engine, play with the portal, play with
everything, and then serve it up to our customers. And
it's that ability to go back and forth, in and out, that I
think will make us successful.
Cyber: What attracted you to Go2Net? What holes did they
fill in your product line or business model?
Sarin: They filled in many, many things. First off, from
a product and service perspective, they filled in search
technology, message board technology, games technology, and
merchant technology.
But probably the most exciting thing, from my point of
view, was just the depth of the management. We operate in
some very large markets, and to make these markets come
alive you need a very deep management team. So the
management talent was a tremendously attractive thing to
pursue.
Cyber: What kind of things can you dream about offering
now with Go2Net's help that you couldn't offer before? I
understand you're exploring gaming and interactive TV.
Sarin: Yeah, all of those things. And like I said, if we
can just pursue the four big markets we're in now with
energy and vigor in the next 12 months, I think that'll be
a fantastic win for us. And if we feel at any stage we
want to enter the enterprise market, we will absolutely
look to enter it.
Cyber: Even after being knocked down 90% from its all-time
high, your stock still has roughly a $4.4 billion market
cap despite a net loss of 79 cents per share over the
trailing four quarters. Do you feel your stock deserves
its valuation?
Sarin: Oh, yes. Like I said, we've got 88% market share
in the wireless business. We have a 90% reach in the wire
line business. We have 1.9 million merchants who we do
business with. We have some of the top layers in the
broadband business. So if you look at the technology and
the franchise that we have, that's what people are valuing.
Cyber: When do you expect to become profitable on a net
basis?
Sarin: We actually have not announced that, so that's not
something we've talked about publicly.
Cyber: Who do you view as your competitors?
Sarin: Because we participate in so many lines of
business, and because of our deep stack of products and
services, there's really no one company that competes with
us in all of these spaces. Our biggest competitors are the
IT (information technology) departments of the companies
that we deal with who say, "Hey, this is really pretty cool
technology, I'd like to try and do this myself." But
outside of that, we don't have any head-on competition in
each of the four spaces with the deep stack that we have.
Cyber: What's next for InfoSpace? What does the future
hold?
Sarin: Well, we're still very early in our life cycle in
terms of bringing these products and services to market.
We're pushing very hard in Europe, we're pushing very hard
in Asia, and as I said, if we pursue these four areas well,
we may consider getting into the enterprise market, and
those would be new things for us.
Cyber: What's the market been like for you in Asia? Is it
still very nascent?
Sarin: Oh, yes, very early stage. But you know, in the
wireless Internet business, it's coming on very strong.
Korea is very active on the Internet side, China is very
active on the Internet side. We have a presence in
Australia already, and we've got a very high-profile
customer there in Vodafone. In Europe, we just announced a
relationship with Virgin. So we've got some very marquee
names that are taking our products and services, and job
one is making sure that we do a terrific job for our
existing customers.
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