VendareNetblue -- Part 1 -- History of Vendare

Almost reminiscent of movie releases where studios carefully plan out their launch dates to maximize their exposure, you can almost imagine the behind the scenes dialogue of this week’s Internet studio blockbuster. Last week, news came out of 180 Solutions’ merger with Hotbar. This week two veterans of the performance marketing space announced their merger, a deal that feels more like the indie movie of the two even though VendareNetblue dwarfs the newly enlarged Zango. For this week’s Digital Trends, we take a look at the history of the two companies that find themselves newly joined. Part 1, focuses on the first half of the new company, the idealab backed Vendare Media.

Hard to believe that the company that brought the Internet world GoTo (Overture) and at one point thought about sending people to the moon, also brought the world Jackpot.com. Started as Fifty-Fifty, Jackpot began at the tail end of when eyeballs mattered most in online advertising, focusing less on the free lotto approach and more on providing a platform for playing games, namely the million dollar slot machine and solitaire. Having come on board late in the CPM game, they barely hit their stride before the rug was pulled out from under them in 2001 along with so many others.

Jackpot had one asset that ended up becoming the sustenance for the company and basis for much of the company’s future business, an email list. The company smartly realized the value and profitability of email and switched their business to acquiring and monetizing users, not simply growing the number of people who played at the site. Helping them with this was Brett Cravatt, former Stanford Volleyball player not to mention JD/MBA candidate of the same university. Jackpot acquired his SportSkill.com business bringing on board partner and classmate Thomas Bruck, who would become a well recognized face of the Internet advertising industry.

Then CEO Keith Cohn, who ran the company from early on in the Jackpot days until early 2006 had connections within Fox, which made the acquisition of SportSkill appealing; Jackpot could connect the platform with the brand and take a piece of the burgeoning world of subscription revenue. The vision didn’t play out into reality as Fox did not actively promote their SportSkill powered fantasy sport site. That left Jackpot with a great brand association but the full burden of scaling out the audience. To make any money it had to scale, since they paid Fox a flat fee for licensing. After doing their best, they closed down the SportSkill division to focus on the growth, email.

For a company that had little money in the bank, Vendare managed to grow through acquisition better than many more capable companies could have. This included the 2002 acquisition of Blink.com, a money losing business that had some cash in the bank but no way to stop from burning through it. They parlayed this into several future acquisitions including two well known ones – Flipside and Traffic Market Place. Both took place in 2003, the former including three brands – online gaming sites Uproar.com and VirtualVegas.com along with cash gaming site iWin.com which Jackpot sold off in a separate deal.

At some point during its growth Jackpot changed its name to the Vendare Group, a move that made sense as it acquired more and disparate businesses, one of which was the aforementioned Traffic Market Place. In an interesting twist, the company purchased both TMP and Flipside from Vivendi Universal, who in 2003 had a fire sale on many of its Internet assets. Vendare very cleverly managed to purchase TMP which gave them a foothold into an area that they didn’t currently have, display media. At that time, the company did have a growing presence in internally owned email through its Jackpot and Uproar businesses.

Thomas Bruck and Brett Cravatt expanded on the internal email success using some of the clients to launch eMarketMakers – the company’s CPA, and to some extent CPC network. Much like the earlier days of Azoogle, the internal traffic gave them a good test bed and good rates with which to attack the outside market. Success came down to simply scaling sales more or less, i.e., finding offers and publishers. Traffic Market Place, the display ad network on the other hard, required a solid technology infrastructure to make it work, and again, with Brett playing a role, Vendare saw a great ramp up in sales and ended up making its money back on the deal quite quickly.

As 2003 turned into 2004, Vendare was turning into a sizeable force in the online space. They continued their growth in email and display, but the kink in the armor started to appear later in the year. The email businesses started to take a beating as delivery became tougher. Higher margin dollars became replaced by higher top-line but lower bottom line ones, and the company made, what in hindsight might be some operational mistakes. It moved its offices from Sherman Oaks to El Segundo (which won’t mean much to non-SoCal I-405 fearing people), due to predicted size constraints of the existing office space. This left 90% of the staff with a less desirable commute and materially altered the culture. It did have space, though, so the company began beefing up its hiring considerably, most likely as a result of the late stage investment into it by Insight Venture Partners.

Just before Vendare took in the funding but after it moved, they purchased fellow idealab company New.Net. Itself a fascinating story, not the least of which because the company transitioned from being an alternate domain name extension company into a domain portfolio owner, Vendare knew of them in many ways by chance. The two occupied space together in their old (idealab) building. The fit made sense for Vendare as it gave them a great source on inventory for their offers, and in theory it meant Vendare could help distribute the New.net toolbar. Vendare seems to have received the better end of that deal, though.

At a time when things should have continued strong, they didn’t. Vendare had a tough 2005, despite the solid top-line growth. Three rounds of layoffs took place to right the expenses of overstaffing. Certain members of management lost sight of the day to day focusing on a potential exist, and morale hit a new low, but there were some bright spots including two new business lines – list management and lead generation which included the well-known Vonage deal. Unfortunately, the two weren’t enough even with the name change to Vendare Media from the Vendare Group.

The other units had hit a cap and even saw some decline which directly or indirectly led to this year’s biggest news, the early February departure of long-time CEO Keith Cohn. Not long after Keith left, and with new, very different leadership in place, Vendare saw their superstar Brett Cravatt resign. His departure began a sizable exodus of their core talent, much to the benefit of certain startups. Potentially needing something to happen, the two largest corporate shareholders – idealab and Insight approved the merger with star of Part 2, Netblue. (Part 2 on DMConfidential.com. I will post it here shortly.)

Comments

[Ex-Vendare]

Pretty much right on. Good recap. Also, the whole Carolee Reiling debacle could be a movie in and of itself too.......

[MediaBuyer]

Last I heard, Netblue shut down Vendare email. This is big. Jay? another post please?

[Vendare Email]

I can confirm, email was shutdown.

[Phil from Phoenix]

and uproar.com is going away

ATTENTION UPROAR.COM USERS:
As of 11:59pm Eastern Time on September 30, 2006, uproar.com will no longer be an active web site and participation in the uproar.com games will no longer be available. All iCoins must be used before 11:59pm Eastern Time on September 20, 2006. After that date, all unused iCoins will become invalid and may not be redeemed for entries into sweepstakes. We thank you for your participation in and support of uproar.com.

[Mike Polk]

Jay - Nice beard man ;-)