Internet Brands Inc., which pioneered online auto buying with CarsDirect.com, is becoming a powerhouse in all manner of content.
The company went public late last year and has since acquired a dozen Web sites. During all of 2007, it swooped up 45.
This year, Internet Brands will look to continue this pace by spending $20 million per quarter on similar acquisitions.
“We want to keep growing,” said Lisa Morita, chief operating officer. “Our only constraints are keeping up with the growth.”
The company buys up online communities with user-generated content that draws high traffic in consumer categories such as cars, home and travel. A key distinction of the sites is development of loyal communities that result in frequent visitors. Examples include
Mercedes-Benz community MBWorld.org, cycling site BikeForums.net, and home improvement site DoItYourself.com.
Each enjoys traffic of up to 1 million unique visitors every month, providing advertisers with an engaged, passionate audience willing to spend money on specialty interests.
“Internet Brands goes deep into very specific areas that are highly lucrative,” said Charlene Li, analyst at Forrester Research. She said this allows the company to sell ad space to American Airlines, for example, in one package, and the ads would run across strategically selected Internet Brands sites.
The company is an example of how Web 2.0 companies are making money: They aggregate content in a way that appeals to advertisers. With this goal, Santa Monica-based upstart Demand Media, for example, was able to raise $350 million in 18 months. Demand has so far bought 60 niche sites.
But simply acquiring Web sites isn’t enough to maintain growth, said Richard Rosenblatt, chief executive of Demand.
“What Internet Brands is going to have trouble doing is growing its inventory while trying to own and manage the Web sites,” Rosenblatt said. “At our size, for example, the next incremental one you add takes a lot of work to maintain.”
That’s why Rosenblatt’s most recent acquisition was an Internet software company with a platform that allows Demand’s content to be spread around as widgets such as question-and-answer tools on 200 media Web sites, including ones for the Washington Post and Fox.
Internet Brands also made a software acquisition last year to scale its operations. It bought V-Bulletin, with a platform that automates creation of online discussion forums on dozens of Web sites at a time, providing tools to enable social networking or streaming video.
“This allows us to integrate new sites quickly as we acquire them. The question we continually ask is ‘How do we scale our business to get more bang for our buck?'” Morita said.
Not only does the company apply V-Bulletin across its inventory of sites, it also licenses the technology to other online sites.
First drive
Internet Brands, which generated $85 million in revenues in 2006, has come a long way since its success as a lead-generation business.
It was hatched in 1998 in tech incubator Idealab of Pasadena as CarsDirect.com Inc., an online automotive brokerage service that allows consumers to use the Internet to shop for vehicles.
The company became an industry standard in online automotive purchases, as it acquired Autodata Solutions, which licensed technology to the automotive industry in 1999. Two years later, it acquired Greenlight.com, a primary competitor.
In 2004, CarsDirect began expanding beyond the automotive sector by buying mortgage and travel Web sites. The next year, the company changed its name to Internet Brands to reflect that shift.
By 2006, the company had acquired 16 Web sites for a total of $40 million, while internally developing additional sites, such as e-commerce site Autos.com and car information site Wikicars.com.
“Lead generation still remains an important part of our offering, but over the past decade, we’ve responded to the changes in online marketing,” Morita said. “The Internet is more than just a place to get more information. It’s a place to share experiences, make purchases and spend time. How often did we go to a blog to research a product 10 years ago?”
Last June, Internet Brands bought ApartmentRatings.com, a site with more than 600,000 user-generated reviews and ratings about rental housing across the country. The site attracted 1.6 million unique visitors last month, a 50 percent increase from February 2007.
Jeremy and Katie Bencken, the founders of ApartmentRatings, are now Internet Brand employees and run the site out of Austin, Texas, where they recently graduated from business school at the University of Texas. The couple founded the site in 2000 as Silicon Valley professionals, when they were moving from apartment to apartment.
The idea came one afternoon when the couple were walking out of their apartment complex and a prospective renter asked what they thought of living there.
“That day, we talked about how this would be a perfect thing to do on the Web,” said Jeremy Bencken. He was a software engineer for a startup at the time and his wife was a brand manager for Intuit Inc. “We started the site as something we wanted for ourselves. Finding a place to live in the Bay Area had been a big scramble.”
The Benckens launched ApartmentRatings.com when the tech bubble burst and wiped out the competition. They kept the site going more or less as a hobby until 2003, when it began drawing about 150,000 unique visitors every month.
Last April, the Benckens got an e-mail from Internet Brands expressing interest in the company of about six employees. Internet Brands offered to buy not only ApartmentRatings.com but its new off-shoots, TenantMarket.com and TheRentalSite.com.
Sites such as ApartmentRatings.com are the lifeblood of Internet Brands. They grow organically, driven by the free flow of user-generated content that’s proving attractive to advertisers. That attraction comes from the passion the users bring to the sites, making them prime targets for advertisers.
Also, an accumulation of the sites in a specific category makes the company an authoritative source in that sector. For example, Internet Brand boasts the world’s largest network of automotive Web sites in terms of traffic.
Morita sees Internet Brands as a quintessential new media company that pursues democratization of editorial content online, and relies on the depth and breadth of expertise from the general population, not just a handful of editors.
The company is run by seasoned media executives from the world of print journalism. Chief Executive Robert Brisco, Chief Marketing Officer Mark Hoover and Morita all have held executive positions at Los Angeles Times. Debra Domeyer, chief technology officer, was previously at Times Mirror Co., previous parent of the Times.
“Media is in our blood,” Morita said. “With that, you get a good sense of the value of content. And we know it’s not just an editor who can create valuable content.”
