EUniverse Model of Performance Pays Off
By CHRISTOPHER KEOUGH
Staff Reporter
Online advertising is not always a flawed foundation upon which to build an Internet company.
In less than a year, eUniverse Inc. of Los Angeles has gone from a quarterly loss of $17.2 million to a quarterly profit of nearly $1 million with more black ink on the way for the three months ended Dec. 31.
By online standards, that’s decent dough. But the real lure is a performance-based revenue model, where advertisers pay eUniverse a cut of any business steered their way through the site. That means every credit card account opened, every ink cartridge sold and every e-commerce order placed.
EUniverse also offers a couple of its own fee-based services: an online dating service called Cupid Junction, and a diet planning service called Fitness Heaven. It also puts out free online newsletters.
Each time someone signs up for one of the pay services or newsletters, or visits other areas of the site, the user is required to provide information, which eUniverse then incorporates into a database that it touts to advertisers.
“What they are able to do is get a large amount of traffic to numerous sites and find out what people are willing to pay for over the Internet, and focus in those directions,” said Mike Neihuser, equity analyst with RedChip Review in Portland, Ore.
Now eUniverse is accelerating its growth with an agreement to acquire L90 Inc. of Marina del Rey for a reported $50 million to $55 million.
“We have growing revenue and product. We were looking to make a move and take it to the next level,” said Brad Greenspan, chairman and chief executive.
Selling CDs in New England
The next level is a long way from where eUniverse started in 1999, the height of dot-com hysteria. Having graduated from UCLA in 1997, Greenspan was working as a consultant to public companies looking to raise money. Then he and Brett Brewer, a fellow Bruin alum, decided to join the entrepreneurial rush.
Their plan was to ramp up their fledgling company and take it public. In March 1999, Greenspan and Brewer closed their acquisition of CD Universe.
They next bought a handful of video gaming sites and tried to use the e-business to sell video games. Greenspan said he learned three things quickly: it’s tough to sell over the Internet, video games have thin profit margins, and the target audience male teens is not one with credit cards or much interest in clicking on ads.
Changing strategies, the budding entrepreneurs, now operating under the eUniverse name, bought FunOne.com in 1999 and switched its audience to women 25 and older “the same users that shop at Wal-Mart and Home Shopping Network,” Greenspan said.
By March of the following year, eUniverse, with content from FunOne.com, cracked Media Metrix’s list of top 20 Web sites, measured by unique monthly visitors. Soon thereafter, Greenspan took the company public, launched Flowgo (a family entertainment site) and moved the company from Connecticut to Los Angeles. A couple months later, eUniverse divested itself of CD Universe to concentrate on advertising and diversionary entertainment.
“We became a whole new business on the fly while being public and without a whole lot of money,” he said.
Off to a busy start
In spring 2001, eUniverse began distributing targeted newsletters to registered users and launched its Cupid Junction online dating service, charging users a fee of up to $30.
The pending acquisition of L-90, which promotes Web sites to potential advertisers, is a way for eUniverse to reach a greater breadth of advertisers.
“If overall media advertising picks up, Internet advertising will also,” said Luis Martins, an analyst at Taglich Brothers in New York. “If and when there’s a recovery, I’d expect their success to continue.”
