Some Dot-Com Firms Found Secret to Survival

Autobytel Finds Role in Car Industry

Autobytel Inc. looked like most any faltering Web play.

It went public to great fanfare three years ago with its share price topping $40, only to see the stock nosedive as it racked up increasing revenues but growing losses as well.

But the similarity ends there. The Irvine-based site for car browsers and buyers is not only still around, but projecting profitability this year. (It says it was profitable for the first time in the fourth quarter of 2001, as measured by pro forma operating income.)

“What we have done is create a marketing niche for ourselves, and not try to buck current auto retailing, ” says Chief Executive Jeffrey Schwartz.

That means not setting out to revolutionize the world by rendering corner car dealers obsolete. Instead, the concept was to help customers through the Web and then have them buy cars through dealers.

Prospective car buyers are given access to various makes and models and when they get ready to buy, they submit information that is routed to a local dealer who contacts them with a quote. Dealers pay Autobytel a subscription fee for their service or a fee for each lead they get from the Web site.

The company has gotten a boost by rolling up competing sites to broaden its customer reach and dealer network, while at the same time lowering overhead. A key buy came last year when it purchased Autoweb.com Inc., a Santa Clara-based rival. The two companies had 420 total employees, but that’s now down to 260.

Last year, about $17 billion, or 4 percent of all U.S. car sales, resulted from customers routed through Autobytel’s Web sites. Autobytel works through a network of dealers that now approaches 9,000. Success has been reflected in the stock price, which dipped under a dollar last year but now is trading over $3.50.

Schwartz says the company plans to acquire other competitors to in order to increase profitability, since its administrative overhead is now about set. “We can ramp this up significantly,” he says.

Laurence Darmiento

Traditional Stores Joining With EStyle

Three years ago, eStyle Inc. was like so many other Internet start-ups with a gung-ho executive team and deep pockets of venture capital. But unlike many dot-coms, the online seller of maternity clothes, infant merchandise and children’s apparel used traditional retail outlets to get it through the tough times.

The strategy has worked.

The Los Angeles-based company will not disclose profit or loss, but it does have $85 million in investor backing and claims revenues have grown more than 50 percent annually since 1999, its first year of operation.

Although 70 percent of sales are generated through its Web site, the rest comes from selling merchandise through catalogs and at traditional retailers such as Bloomingdale’s. The company is looking to sell its products in stores in Asia and Europe within the next six months.

EStyle Chief Executive Laurie McCartney, who founded the company in 1998 after stints with Walt Disney Co. and Simon & Schuster Inc., said the use of traditional retailers has been a key to success.

“Although the Internet is one distribution channel for reaching our target audience, catalogs and other retail outlets are an important part of our strategy and our success to-date,” McCartney said. “I have always felt it was critical to reach out to our customer however and wherever she shopped.”

The company also has benefited from its marketing approach.

While many companies frittered away their funding on costly television advertising, eStyle tightly focused its advertising on niche publications, such as Martha Stewart Baby. Investors in eStyle, which has grown from five to 60 employees, include Zone Ventures, Microsoft Corp. co-founder Paul Allen’s Vulcan Ventures, Maveron, Goldman Sachs and Co.; and Oak Investment Partners.

Jeremiah Marquez

Neopets Invents World To Showcase Different Forum for Internet Ads

Doug Dohring has turned a goofy Web site called Neopets.com into an international phenomenon and claims he’s making a pretty penny, as well.

Dohring, who founded market research firm The Dohring Co., has coined a new term for his business model: immersive advertising. By creating games for clients and extensive product placement throughout Neopia (a virtual world where virtual pets live and can be adopted and nurtured by users of the site), Neopets has been able to attract business from Nestle, Procter & Gamble Co., Mattel Inc. and Walt Disney Co.

Dohring, who would not reveal revenue or earnings data, bought the Neopets’ site from Adam Powell and Donna Williams, two Brits living in Southern California who had created the site in 1999. It was merely a game site with no advertising.

Dohring anticipated that companies soon would be looking for a way to advertise on the Internet because pop-up ads were beginning to lose their effectiveness. He believed that immersive advertising was the answer.

“We felt the site had great potential,” Dohring said. “With all the Internet models we had looked at, it had the broadest universal appeal. It was very sticky from the beginning.”

Glendale-based Neopets.com is largely attracting kids who visit the site for as much as five hours each month to adopt and nurture virtual pets from species with names such as Krawk, JubJub, Quiggle and Tuskaninny.

Ken Bunt, vice president of new media at Buena Vista Music Group, Disney’s recorded music division, came across Neopets.com while searching for new places to advertise on the Internet. He’s been involved with the site for longer than a year and considers it a hidden gem.

For example, Bunt said he is certain Hollywood Records’ Neopia store, where teen rapper Lil’ J was promoted, is responsible for the quick start of his debut release. “I have to think it helped because he’s had limited video airplay and limited radio airplay,” Bunt said.

Bunt says the Neopia store is getting between 70,000 and 80,000 visitors each day. Among those visitors, 5 percent are clicking to one of two sites promoted at Neopets.com. That’s unheard of success, Bunt said, as banner ads average a 0.5-percent click-through rate.

Dohring recently launched Neopets Asia and a line of merchandise in 468 Limited Too stores. He also has a contract with Viacom Consumer Products to market the publishing rights to Neopia for book, video game and movie and television deals.

Christopher Keough

Tickets.com Stands Tall Against Giant

No one said it would be easy.

“People continue to say this is a small company going up against a Goliath named Ticketmaster,” said Eric Bauer, chief financial officer at Tickets.com.

They would be right.

But Costa Mesa-based Tickets.com Inc., an online seller of tickets and marketer of proprietary software for managing ticket sales, is putting up a game fight and has found believers.

The company recently struck a $20 million equity deal with investor General Atlantic Partners LLC. The group’s purchase of 1.8 million preferred shares would give it control of as much as 62 percent of the company when the shares convert to common stock in the next two years. GAP, a $4 billion asset investor in Internet, information technologies and telecommunications businesses, including E*Trade and Priceline.com, already controlled 33 percent of Tickets.com.

It also inked deals in the last few weeks with the NFL’s Buffalo Bills and baseball’s Chicago White Sox for its automated ticketing software.

In December, it brought on Ron Bension, former president and chief executive at Sega Gameworks, as its $400,000-a-year chief executive. Bension was also chairman and chief executive of Universal Studios Recreation Group.

“What has kept this company going is very solid business with respect to size of the industry. The ticket industry is a billion plus industry, a huge, huge business that has been dominated by a single company,” said Bension. “We probably have 10 to 15 percent market share. What does it take to double our business? We don’t need tremendous growth.”

Formed in 1996, Tickets.com went public in 1999. It was a typical dot-com experience.

On Nov. 4, 1999, its first day of trading, Tickets.com closed at $19.25, well above its offering price of $12.50. By the summer of 2001, the company was trading at less than a dollar and executed a reverse 8 for 1 stock split to boost its share price.

Shares of the company closed at $2.55 April 16, off its 52-week adjusted high of $4.80.

The company reported a net loss of $10.8 million for the fourth quarter ended Dec. 31, compared with a net loss of $13.8 million for the like-year earlier quarter. Fourth quarter revenues were $9.7 million, compared with $15.3 million a year earlier.

“Until you reach a point of profitability, people view you as running under the radar screen and say, ‘Once you’re profitable we’ll take a look at you again,'” Bauer said.

Jonathan Diamond, Jennifer Bellantonio