GoTo.com Chief Executive Ted Meisel has been in his new position for nearly three months and what a ride it’s been.

Meisel, a former executive at Citysearch Inc., had been serving as president of GoTo when company founder Jeffrey Brewer was promoted from CEO to chairman in January. Meisel stepped in as CEO at a time when the company was integrating two new acquisitions Cadabra Inc. and AuctionRover.com and moving into new Pasadena offices to accommodate its rapidly growing staff of 400 people.

As if those internal changes weren’t enough, the market then turned against tech, and most dot-com stocks plummeted. GoTo.com has been no exception; its share price was hovering around $30 last week, having plummeted from $114 last November.

Nevertheless, it was business as usual on a recent afternoon at the cavernous offices of the Idealab hatchling, which contain all the amenities you’d expect at a dot-com: a game room with a Foosball table, Ping-Pong table and bean-bag chairs, and all the free Mountain Dew a caffeine-addicted techie could possibly drink.

GoTo.com launched its search engine services in February 1998. Rather than keeping its site afloat with banner ads and sponsors, GoTo.com has each “advertiser” bid on placement in search categories. The more a company is willing to pay each time a customer clicks on a link to its site, the higher its placement will be on the list of search results. Meisel said the unusual business model gives GoTo.com a much better chance at beating profitability estimates than many of its dot-com counterparts and competitors.

Question: GoTo generated first-quarter revenue of $17.2 million, up from $13.3 million in the last quarter of 1999 and $1.5 million in the first quarter of 1999. But the company also had a net loss of $9 million. When is GoTo.com projected to be profitable?

Answer: We have said we would reach profitability in Q4 of 2001. When you give guidance to the Street, they don’t like surprises, period. So you try to be as accurate as you can. They particularly abhor downside surprises. We think there’s certainly an upside opportunity to bring profitability forward, but this (Q4 2001) is what we’ve committed to.

Q: Where are your main expenses coming from, and how does the company expect to reach profitability?

A: We have a couple of basic expenses: a relatively low cost of sales, and the cost of operating the servers. Then you also have substantial marketing expenses, which for the most part, are payments to affiliate partners for their portion of the revenue you can generate. If you know what scale is all about, as volume goes up, price comes down. That’s what a lot of these companies are waiting for, but not us, actually. GoTo’s cost is relatively flat, but the average price (that advertisers pay GoTo for higher placement on search results) goes up.

Q: Why is that?

A: People search on 30 million unique things in a month, and you really only have a market when there’s 10 or more (paid sponsors) in a certain category. And there’s only about 34,000 categories with 10 or more (sponsors). The market for mortgages (has grown to the point that sponsors are now paying more than $4 per hit for top placement on search results), as an example of a market that has taken off. There’s enormous upside, and that will continue to drive the price up.

Q: What is the relationship between GoTo.com and Idealab now that you guys are out of the nest?

A: One of the advantages is having Bill Gross and Bob Kavner serve on our board. They each bring really valuable experience. Bob’s got deep operating experience and pretty good knowledge of the Internet space. And you know about Bill. Idealab is the company’s major investor, with more than a 25 percent stake and two board seats.

And it’s a two-way street. Being one of their larger companies, we help point the way for some of their smaller firms on how to do things.

Q: How have recent market fluctuations affected what you see happening in the tech community?

A: The downside to the market correction is that employee shareholders and investors have seen (the value of) their holdings reduced, obviously including me. The upside is that a shakeout would make us a stronger company. GoTo is most valuable in a world where companies care about making money, not in a world where companies don’t care about making money. That was the world we were in, the world of nearly free equity capital. We had discussions with potential affiliate partners who would say to us, ‘We could undoubtedly offer a good product and make more money working with you, but we’re not really focused on that right now.’ We don’t hear that anymore.

Q: GoTo.com has grown so much over the past year, from 50 to 400 employees. What do you do to manage that growth?

A: We have extremely low attrition. I don’t think it’s about compensation, as much as having employees who believe they can make a difference, develop their skills, and have leadership opportunities. I took my first month on the job and led an exercise to create a company constitution. The board thought I was nuts to take that time. It involved the equivalent of 15 focus group sessions and a few company meetings to decide on it. We did that because we wanted to agree on the set of principles to follow, so when we’d bring in new people we’d ask them to follow it.

Q: Along those lines, many tech companies seem to be taking a cue from Microsoft, which many recent news articles have said inspires a “cult” mentality. Is that something we’re going to see more of as a shakeout occurs?

A: I think the cultism you see is a reflection of the fact that these companies in the past have been staffed by younger people. Call it a fraternity mentality or a cult-like mentality. I think there are people who are committed 150 percent to work, without outside lives.

At GoTo, we really plan to be a long-term play, so the idea that people wouldn’t have outside lives didn’t make sense. I think what you find here, by comparison, is that people are a little bit older, have a little more experience. It’s late 20s and 30-somethings, as opposed to five years younger. I think that helps to create more stability, certainly more maturity in the way people look at what’s happening.

Q: How wired in are you in your off time? Is there off time?

A: There is off time, certainly less than there was before. But I try to strike a balance for myself. It’s a marathon as much as it is a sprint. I tried to sprint before, and I needed to take three months off between jobs. But I do work hard and get calls on my cell phone on the weekend. In my off time, I don’t just play with gadgets. I spend time with my friends, my fiancee, and do some working out, because you’ve just got to get that going.

Q: GoTo.com recently launched a new version of its Web site incorporating search engines for shopping and auctions. How does that play into the company’s mission?

A: GoTo’s mission is to help connect goods, services and information with users of those same goods, services and information. We do that through search, a keyword mechanism, that helps link sellers with users. (By acquiring comparison-shopping services provider) Cadabra Inc. and AuctionRover.com (a search engine for online auction sites), we’re creating more depth in that relationship.

For example, if I’m looking for a digital camera, I get a list of places to get information about digital cameras or buy digital cameras or even get my digital camera serviced. What we can do now is help you understand purchasing a digital camera, hone in on a precise model, and help you buy it at a fixed price or at auction.

Q: Do you have any current plans to add additional features or make more acquisitions?

A: The thing that’s missing to add depth would be something on the service side a request-for-proposals search engine, for example.

As a user, I might want to go deeper to find, say, a Web hosting service in the same way I might search for a digital camera. I’d want to find particular attributes for Web hosting. I’d want a firm of a certain size with a certain kind of experience that provides certain other services that can be bundled. We will either partner or make an acquisition in this area. I don’t know which yet. We’re working on it now.