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[Business Development/Marketing and Sales]
Who's Hot: eUniverse.com
Hed: Conquering the Galaxy
Deck: Growing a Niche Web Site by Word of Mouth.
Summary: EUniverse averages more than 15 million unique visitors a month. After two
years of trial and error -- and some quick changes in its business model -- the portal wants
to let the rest of the e-world know that it has arrived.
Pull quote: "Our challenge now is to let advertisers know we exist. It's not rocket science –
it's a matter of knocking on doors and getting the word out." – Brad D. Greenspan,
president and founder, eUniverse
If you're not one of its 15 million monthly visitors, you've probably never heard of
eUniverse, perhaps the largest and least-known gateway on the Internet. The 20-plus sites
of this interactive entertainment network include fun pages and jokes, greeting cards and email, newsletters and games. Most interesting, eUniverse has built its hefty market share
spending zilch on advertising; instead, it has expanded by acquiring small sites with loyal
viewers.
"I doubt Yahoo knows who eUniverse is," says 28-year-old Brad D. Greenspan, the
company's founder and president. However, Nielsen//NetRatings is well aware of the
company, consistently listing eUniverse in or near its Top 10 Web Properties, ranked by
the number of unique visitors.
Why so obscure? Greenspan, who raised $7 million to start the venture, believes his frugal
approach to advertising kept it below the media's radar. But after two years the sleeping
giant is ready to rise. "Our challenge now is to let advertisers know we exist," he says. "It's
not rocket science – it's a matter of knocking on doors and getting the word out."
Ride 'Em Cowboy
While e-commerce was bucking like a rodeo bronco, eUniverse stayed in the saddle by
shifting with each bounce. Greenspan says learning when and how to make changes in eUniverse's business model has been the most challenging lesson. "We've had to be willing
and ready to adapt to the Internet. From real-time experience, business models can go
south quickly. If something doesn't work, it's better to jump quickly than waste resources,
focus and mindshare trying to fix it."
Starting with its $4.5 million acquisition of CD Universe in 1999, eUniverse targeted male
Gen-Xers with game-related content and a catalog of music, movies and games. Last fall
eUniverse's e-tailing became history when it sold CD Universe to CLBL Inc. for $1 million
and a stream of advertising revenue. Why? "We found out we didn't want to be that type of
company," says Greenspan. "The margins were low, we couldn't differentiate in that space,
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and it was tough to grow market share. We stuck longer than we should have because we
thought we could turn it around. If we'd let it go sooner, it would have taken fewer years
off my life."
Young males, still consistent visitors, now comprise a mere 20 percent of eUniverse's
market, as content has been refocused to also attract women aged 25 to 45. That new
demographic currently accounts for 65 percent of traffic.
Craig J. Conroy, media authority from Conroy Research in Gibsonia, Pa., is "very
optimistic" about eUniverse, and says its separation from CD Universe bodes well for its
future. "One problem typical in e-ventures, one that has been the demise of many, is that
the management can get so bonded to a business model they won't change," says Conroy.
"eUniverse seems to have the wisdom for movement at strategic times."
A Lean, Mean Business Model
"We've stayed lean," says Greenspan, "Our business model hasn't had the heavy costs of
marketing most other companies have." In fact, eUniverse shunned high-priced
advertising, increasing viewership almost exclusively through acquisition (or partnership)
of sites comprising its network. "We may have spent $100,000 on Internet ads," says
Greenspan, "but nothing by way of TV or other off-Web media."
"Acquisition of niche specialties is a proven method to build brand identity, brand value,
and a specialized customer base," says Conroy. For example, he cites MSN's acquisition of
Hotmail.com, which plugged an 8-million-visitor base directly into MSN advertisements.
Likewise, eUniverse's acquisitions for targeted audiences is a smart way to enter
specialized niches, he says. "Why advertise in traditional media when the goal is to reach
computer users?"
"We haven't signed big content deals with Hollywood's 'A-List' writers," says Greenspan.
"We just added small sites that had interesting content but were missing other ingredients
-- like management, technical resources and traffic. By plugging them into eUniverse we
were able to take them to the next level." Of the sites now hooked into the network, about
80 percent were acquired by the company; the rest were added through partnerships.
Bottom line, says Greenspan: "While other companies were spending the big bucks on
advertising, we were building infrastructure."
A Mixed Source of Advertising Dollars
Steve Weinstein, VP and research analyst with Pacific Crest Securities in Portland, Ore.,
says difficulties in the online advertising environment are expected to continue, with flat to
single-digit growth projected for 2001. "Traditional advertisers are taking a more cautious
approach to the Web," says Weinstein. "They're focusing on big-brand sites that have
achieved critical mass, and vertical markets like Yahoo and CNet. Companies are looking
for a full suite of advertising options – banner ads, e-mail, partnerships. That's where the
advertising dollars will be going."
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Along with selling banner advertising and providing direct marketing for clients such as
Citibank credit cards, Greenspan has focused on generating streams of recurring revenue.
Thanks to eUniverse's consistently high traffic, top-notch alliances have been forthcoming.
In September, eUniverse entered a marketing alliance with Sony Music Entertainment, a
subsidiary of Sony Corporation of America in New York. EUniverse will run e-mail
campaigns, opt-ins, and banner ads on its network to bring its users such SME sites as
Emazing and InfoBeat.
Then, in December, Kick Media in Culver City, Calif., hooked up with eUniverse to build
exposure for its online versions of Movieline and Teen Magazine. "EUniverse has
incredible demographic reach," says Kick Media co-CEO Joseph Shak, "and its ability to
distribute newsletters directly to our target market is what attracted us to the company."
Another partnership consummated in January was with Pagoo, of Dublin, Calif., a provider
of IP-based voice applications. Together, the duo will deliver Internet call-waiting service,
much like an answering machine, to eUniverse's users. Under the terms of this agreement,
a co-branded "softphone'' will give both companies significant presence on users' desktops.
The Payoff
EUniverse, which lost $2.7 million in its third fiscal quarter of 1999, recently announced
that it had achieved a small operating profit for the first time in third quarter 2000. That
profit was only $147,000, but considering how poorly many e-commerce entities are
faring, Greenspan is pleased with the results after only seven quarters of operation as a
public company.
In February, Joe Varraveto joined eUniverse as its new executive VP and CFO. Varraveto,
most recently with eMemories, was previously president of finance and COO at Frito Lay.
eUniverse's ability to attract better management, as well as quality partnerships and
alliances, at this point in the game is another factor in Craig Conroy's favorable opinion of
eUniverse's future.
"At some point we will look at advertising our site, but probably along the lines of barter
arrangements for swapping mindshare," says Greenspan. "We're placing a big emphasis on
generating long-term revenue streams. We're looking at venues like travel clubs and diet
offers for our members." He expects partnerships to fuel further growth.
Now that eUniverse has developed traffic to noteworthy numbers, Greenspan says it will
begin aggressively knocking on the doors of more traditional advertisers, informing them
of eUniverse's existence and the opportunities its users offer.
Then it's on to the global marketplace, using the same business model – unless, of course,
eUniverse shifts to a better one first.
At A Glance
Name: eUniverse
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URL: www.euniverse.com
Location: Los Angeles, Calif.
Founder: Brad Greenspan
Founded: 1999
Industry: Internet diversionary content portal
Employees: 85
Revenue: $4.6 million fiscal third quarter ending 12/31/00
Related Links
<a href="http://www.euniverse.com"> eUniverse.com </a>
<a href="http://www.yahoo.com"> Yahoo.com </a>
<a href="http://www.nielsen-netratings.com"> Nielsen//NetRatings </a>
<a href="http://www.cduniverse.com/asp/cdu_main.asp "> CD Universe </a>
<a href="http://www.nauticom.net/www/ptwo/conroy/home.htm"> Conroy Research </a>
<a href="http://lc1.law13.hotmail.passport.com/cgi-bin/login"> Hotmail.com <a/>
<a href="http://www.sonymusic.com"> Sony Music Entertainment </a>
<a href="http://www.emazing.com"> EMAZING </a>
<a href="http://www.infobeat.com/cgi-bin/WebObjects/IBFrontEnd.woa.com"> InfoBeat
</a>
<a href="http://www.pacificcrestsecurities.com"> Pacific Crest Securities </a>
<a href="http://www.cnet.com"> CNET </a>
<a href="http://www.zdnet.com"> ZDNet </a>
<a href="http://www.kickmedia.com"> Kick Media </a>
<a href="http://www.movieline.com"> Movieline </a>
<a href="http://www.teenmagazine.com"> Teen Magazine </a>
<a href="http://www.flowgo.com"> Flowgo.com </a>
SOURCES:
Brad D. Greenspan
CEO and Chairman of the Board
EUniverse Inc.
6300 Wilshire Blvd., Suite 1700
Los Angeles, CA 90048
(323) 658-9089
(323) 658-5414 (fax)
Joseph Shak, co-CEO
Kick Media Corporation
3542 Hayden Avenue
Culver City, CA 90232-2413
(310) 280-5400
Steve Weinstein (he prefers “Steve”)
Vice president and research analyst
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Pacific Crest Securities
111 SW Fifth Avenue, 42nd Floor
Portland, OR 97204
(503) 248-0721 (or 800-341-9837)
Companies followed include: eBay, Avenue A, Double Click, Media Plex, 24/7, AOL, CNet, Amazon, Travelocity, Yahoo
Craig Conroy, President
Conroy Group (Internet analyst)
2925 East Bardonner Road
Gibsonia, PA 15044
Phone: 800-344-1492
Fax: 724-443-6614
E-mail Address: craigconroy@hotmail.com