DoubleClick - Chairman & CEO - Interview
WALL STREET CORPORATE REPORTER, January 15, 1999
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
Mr. Kevin O'Connor
"I have been doing startups in the technology field for the last 15 years, and three and a-half years ago saw the Internet as being
one of the biggest trends to ever hit the world. My partner, Dwight Merriman and I took eight months off from work and spent eight
months to come up with ideas on what business to start on the Internet. We came across the concept of an advertising network,
and started DoubleClick (DCLK) in January 1996. The company was taken public in February 1998."
DoubleClick Inc.
"DoubleClick provides Internet advertising solutions to publishers and advertisers. We are making Internet advertising as efficient
and effective as it can be in two ways. One is through technology through the DART system, which dynamically delivers ads to
users and the other way is through our sales distribution network. We have sales people in 23 offices in 15 countries throughout
the world who call on advertisers and help them put together efficient, effective advertising campaigns.
"Presently, we are dealing with 4,200 sites on the Internet and 2,200 advertisers. I believe that we are dealing with more publishers
and advertisers than anyone else in the world to provide the critical infrastructure required to make this medium work. We are
running a very large service where we deliver the ads directly to the users as they visit certain web pages based on the advertiser's
criteria of who they want to reach and where they want to reach them. Last quarter we were delivered over 3.2 billion dynamically
delivered ads every single month, across 4,200 websites to 40 million users throughout the world."
Create and design the ads
"We do not create and design the ads, that is done by an agency. Once the advertisement is created, the company comes to us
and tells us the type of person they want to reach, and we help them to reach that audience."
A global company
"We have probably invested more money in international expansion than anyone else on the Internet. We saw what type of traffic
was coming from outside the United States on our own sites, and actually the day you put up a Web site is the day you go global.
It's the first truly global medium. From early on we started establishing offices and today we have operations in 15 countries."
Services offered
"DoubleClick DART is our key infrastructure. That is the technology that delivers and manages all of the advertisement for all of our
products. We also sell DART as a service to publishers who sell their own advertising space such as the Wall Street Journal, NBC
and SportsLine. They sell their own advertising space, but the technology for delivering advertisements is increasingly becoming
more sophisticated. It's more like a combination of direct marketing and broadcast. So it is very sophisticated and very expensive
database marketing.
"The DoubleClick Network, our collection Web sites that utilize the DART technology as well as sell the advertising for these
publishers. In the United States, 70 publishers are in the DoubleClick Network. DoubleClick International is where we have taken
the DoubleClick Network and established networks in individual companies, and can actually be thought of as a network of
networks.
"For example, in the United Kingdom we have 30 sites on the DoubleClick network and with DoubleClick Japan we have 35 local
Japanese sites. DoubleClick Worldwide is made up of 300 publishers where we sell and service advertising space for them.
DoubleClick Local is a new product that is only a few of months old. We have a massive amount of media from the 300 publishers,
DoubleClick Local allows us to pull local audiences and sell them to local advertisers. With that service, we know when someone
is coming in from Dallas, Texas, and rather than giving them a national ad for General Motors, we can give them an ad from a
General Motors' dealer in their local market.
"We have this massive amount of media and we pull out the audience that is most attractive to an advertiser to allow them to target
their message to the most desirable audience. For example, a user coming into AltaVista from Japan would see a Japanese ad,
and someone coming in from Boston may see a local Boston ad. Depending on the characteristic of the user, they will see
different advertisements."
Adding audio to ads
"It would be no problem to us to add audio to the ads. We look at ads as just a bunch of bytes, it is all digital whether it is audio,
digital, video or a banner, and it does not particularly matter to us. Fundamentally, what we do is take a bunch of electronic bytes,
target them at an audience, measure how that audience responds to that message and report back to the advertiser. That is the
beautiful thing about our model.
"As the pipes get bigger and we move more and more toward video and audio ads that are more like TV ads, audio will be no
problem for us."
The sales force
"We spend a tremendous amount of time on training, and our sales force has very narrow coverage so that a salesperson is able to
learn the client's business in great detail, and specialize by industry. The salesperson's primary job is to understand the client's
business as much as possible, in addition to knowing the DoubleClick Network and which media buy is going to be the most
efficient and effective for the client. Our sales force is trained through internal training and technology."
Growing the company
"We continue to introduce new products and closed loop marketing is a huge new area, which is where we have taken the DART
technology. DART was traditionally targeted at publishers, but we have gone to the other side of the coin and targeted it at
providing services to agencies and their clients to be able to deliver their own ads. This will be a very big territory for us as we go
forward.
"The interesting thing about the Web is that it is exploding, and if we just sat still, which we have absolutely no plans of doing, our
current customers would still continue to grow tremendously. However, we are not satisfied with just sitting still so we are going to
continue to introduce new products and new markets. We started out with national sales and then moved into international sales,
direct marketing and then local. So we continue to segment the market and introduce unique products that service the needs of
these advertising clients."
Targeting college students
"In some cases, an advertiser wants to recruit from a particular university and so they want to tailor their message to that particular
university, and we give the advertiser the ability to target a specific university. For example, IBM was recruiting from 300
universities and so they had 300 individually tailored messages, one for each university.
"Somebody coming in from the University of Michigan would see an ad for the University of Michigan when they came into the
DoubleClick Network, encouraging them to come and interview with IBM. If that person came in from Columbia University they
would see a different ad, so we allow people to speak directly to their audience."
Web to replace paper
"I do not think that the Internet will ever replace paper, although many paper functions will probably migrate to the Web. For
example, I can see virtually all classified advertisements moving to the Web because people are beginning to rely on the Internet
for more and more of their information, but they are still going to use newspapers. I myself read the Wall Street Journal everyday
on the subway or in a taxicab."
Selling advertising solutions
"Consumers have clearly embraced the Web with 120 to 130 million consumers throughout the world having bought computers and
connected to the Internet. Many corporations have been a little slower to embrace the Internet because they are trying to figure out
how it effects their business and how to utilize it. Companies are in different stages of development with regard to the Internet.
Some companies have totally embraced the Internet because they know it is here, real and the future of business, but for others it
is a tougher decision."
Contracts with customers
"On the publisher side, we tend to have three to 12 month relationships with our customers, and oftentimes on the Network, it is
almost exclusive relationships. On the DART side, it is a service contract. On the advertiser's side, people are typically buying
advertising space from one to 12 months in advance, so those tend to be longer term contracts."
Internet advertising for small companies
"We do not develop Web sites or advertising, but we can definitely help them reach their target audience."
Recruiting qualified personnel
"About one-third of our people are software folks and there is a huge shortage of software people, but on a relative basis I think that
we have fewer problems finding people because of our location. There is a great deal of interest to become involved with the Internet
because everyone sees the Internet as the biggest trend that has ever hit the world. They want to be involved with that, and
DoubleClick is a leading company in this area.
"So on the contrary, we have been extremely fortunate to attract some very, very high caliber people who want to create a new
industry here in New York."
Future growth strategy
"Our partners include every one of the publishers that we work with for the networks or DART, which are 800 publishers, so we
have a phenomenal number of partnerships, and that is critical to our growth. In addition, we can definitely grow the company
internally, and we have done that. We have also been presented with a lot of acquisition opportunities and always take a look at
them.
"Actually, the company was formed on a merger of a media and technology company. In fact, we have already done a couple of
small acquisitions. We have a great track record of coming up with new, strategic innovations and then bringing them to market
and executing very well on them. Acquisitions are not essential to our growth, but if an opportunity presents itself that makes
sense, then we will definitely move on it."
Cash and/or credit for future expansion
"DoubleClick has $50 million in cash, and we've announced the commencement of a public offering of 2,500,000 shares of its
common stock and that makes us feel very good. In addition, we have a currency in terms of our stock that Wall Street seems to
find very valuable, and that is a good position to have.
"People like the way that we have executed over the past three years. We are a very tight company that is professionally run, and I
give credit for that to all of the executives that we have been able to attract to the company over the past couple of years."
Uniquely positioned over the competition
"We have three huge advantages over the competition including a first mover advantage. We have created almost every aspect of
our particular category and have been the innovators in that. Secondly, we are very fortunate to have the talent base that we do at
the company, which is just incredible. Third, our critical mass is big.
"We are the dominant player in this industry; we have very smart people and are the first mover. We look forward to seeing what
our customers need and are always there to serve their needs, and we think that is a formula for success. We are very good at
attacking our own business and are always looking for better ways to do things. Given our caliber of people, we think that we have
a good view of the future."
Effects from international financial turmoil
"The financial turmoil in the international markets has effected us a little bit because we were doing an increasing amount of
business in Korea, which has fallen off, but fortunately it was not a big portion of our business. The reality is that we are not doing
business in Russia or Korea, but in countries that are doing quite well such as Europe. The Internet has taken off in each of the
countries where we have offices and there are high penetration rates in those countries."
Attracting potential investors
"From the broadest perspective, you have to be a believer in the Internet in order to want to look at our company. If you are not a
believer in the Internet, you would not be interested in investing in this company. If you look at the fundamentals of the Internet, this
is by far the biggest trend that has ever hit the world. No technology has ever effected so many people in so many business in so
many countries in such a short period of time.
"If an investor believes in the Internet, they would then want to start looking for categories and the categories of the bigger industry
that are going to be very important. Once you have identified the category, which for DoubleClick is Internet advertising and
providing the infrastructure, if you believe that is going to be important then you want to look at who is the leader and who is going
to be number one. When you take a look around, you will come to the conclusion that it is DoubleClick. We are in a great
industry, a great category, have always delivered on our promises and have been very good at executing on our business model."
Management's stake in the company
"Management controls about 35% of the company, and everybody in the company has options that are very much aligned toward
the success of the company. Every person at the executive level took a pay cut to join this company so part of their compensation
is tied to the success of the company, and it will remain that way."
Envisioning the company in the year 2000, and beyond
"I would love to see us dealing with every publisher and advertiser on the Internet over the next three years. I think that the number
of publishers will grow considerably and the number of advertisers will grow tenfold over the next few years, and that is key for us. It
is our goal to have a solution for every segment of the advertising and publishing market in the future."
Personal motivation
"When I was 12 years old, I knew that I wanted to be an engineer. I used to spend hours and hours in the basement
experimenting, coming up with new ideas and inventing new things, and that is what has always jazzed me. I love exploring new
areas and coming up with new product concepts that help people do their jobs better and make an effect on the world. It is fun. I
spend half my time in new product development and the other half talking to clients and our employees. I am very close to the
business and continually try to come up with new ways to do things better."
"DoubleClick provides Internet advertising solutions to publishers and advertisers."
"Last quarter we were delivered over 3.2 billion dynamically delivered ads every single month, across 4,200 websites to 40 million
users throughout the world."
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