With a record-setting IPO and a unique approach to
community building, theglobe.com is making cyber-history.
What do you get when you
combine a couple of bored college students, a good business idea and a booming
new electronic medium? Sprinkle in some initiative and a strong entrepreneurial
drive, and the recipe yields theglobe.com, the world’s leading
online community. With 2.3 million members and 9.3 million users in the United
States and abroad, theglobe.com is one Web-based entity that is setting the
standard for online communities by providing members with a wealth of services
and content.
Simply put, theglobe.com
presents content on 10 different themes of interest (Art, Business,
Entertainment, Life, Metro, News, Romance, Sports, Technology and Travel) to
its members, then provides each of them with what the company refers to as a
“totally interactive experience.” Members can receive the latest news,
information and real-time stock quotes, while also engaging in chat events and
discussion forums. They can also read or create personalized member pages, send
e-mail, scan classified ads and shop for bargains at the Marketplace. In
addition, the site provides members with an array of special events and
features, including pages devoted to holidays, chats with celebrities and
monthly forums covering hot topics relevant to members.
“Unlike a real-life
community, we have no national or geographical boundaries, and members around
the world are able to socialize and interact with each other without needing a
passport or plane ticket,” explains Todd Krizelman, company co-founder and
co-CEO.
Founded in 1994, long
before the Web became a hotbed of e-commerce opportunities, theglobe.com was
born out of a fundamentally simple idea: to create a one-stop Web site that
focuses on convenience, commerce and content, intertwined with personal
interaction. The company is the brainchild of two Cornell University students
who met during their junior year: Krizelman, now 24, a biology major from the
San Francisco Bay area, and Stephan Paternot, 25, a computer science major who
grew up in London and Switzerland.
After “graduating” their
business idea into a full-fledged venture through the use of a viable business
plan and hard work, theglobe.com was started with a capital investment of
$15,000, raised from the pair’s friends and families. Their first employees
were recruited by Krizelman and Paternot in the Student Union, and compensated
with pizza. Today, headed by possibly the youngest co-chief executive officers
of a public company, theglobe.com’s management team includes CBS veteran Dean
Daniels, chief operating officer, and Frank Joyce, vice president and chief
financial officer who came to theglobe.com with more than 20 years of financial
experience in publishing, motion pictures, broadcasting and advertising. The
firm, which now employs 150 people, saw revenues increase by 615 percent to
$5.5 million in 1998, versus $770,000 for 1997. The company attributes much of
the jump to an $8 million ad campaign that started in March 1998, and included
billboards, broadcast and bus ads, and even a commercial that aired in a prime
time slot – during the second to the last episode of "Seinfeld." The
advertising brought in more users, and inevitably, more advertisers. Today,
Krizelman says the company's primary revenue source is the sale of advertising,
with additional revenues generated through e-commerce arrangements and the sale
of membership subscriptions for enhanced services.
“Today, we can compensate
our staff the way most companies do, with salaries, and with a nice added perk
– stock options,” Paternot says. “Our corporate culture appears casual, and we
don't wear suits to work. But our shared philosophy is that we are committed to
the business and work closely together with all the departments to achieve
success.”
In May 1995, theglobe.com
was officially incorporated, and after several years of sweat and toil and
capital-raising, former Alamo-Rent-A-Car owner Michael Egan invested $20
million dollars in the company. That big break came in the summer of 1997, and
was the largest individual investment made to that point in a new media company. Other
notable investors at theglobe.com include David Horowitz, founder of MTV
Networks, Bob Halperin, former president of Raychem, and David Duffield, CEO of
PeopleSoft.
But those investors weren’t
easy to come by at first, and Paternot and Krizelman had to come up with some
convincing proof that their company was viable – especially back in 1997, when
the term “Internet IPO” had yet to stick on Wall Street. Paternot explains:
“One of the major challenges in the beginning was explaining the business to
potential investors. The Internet was still in its infancy and had a long way
to go before it was considered a viable business investment, especially to the
European public (referring to Krizelman's roots in Switzerland and London). We
didn't have any business experience prior to starting theglobe.com, so we
needed to have access to people who could give us the right advice and be
available to us as mentors. Our branding is also unique as we position the
company as a ‘media play,’ which is appealing to the mass-consumer audience
(not high-tech). We also believe in having a strong international push for our
branding efforts.”
In explaining “media play,”
Paternot says positioning the firm in New York City, where it would have access
to major media outlets, and attracting senior management with media experience,
was key to building both the site and the brand to the point they are at today.
For example, theglobe.com recently sponsored an international snowboarding
competition in conjunction with Nike and Swatch.
Paternot adds that, like many small companies, issues
such as sharing duties and handling a growing business also cropped up. “In the
beginning, there were only the two of us,” he explains. “As the company started
to grow, we found ourselves challenged by the prospect of creating corporate
policies including vacation time, having just graduated from college
ourselves.”
According to Krizelman,
theglobe.com is the first full-service, integrated online community that
replicates real-life communities on the Web by satisfying the personal, social
and practical needs of its growing roster of members. And while the site tends
to get lumped together with home page-building communities like Geocities,
it really is a completely different animal altogether, and emphasizes commerce,
content and user interaction. Krizelman explains: “People can read the news,
and at the same time discuss what’s going on in Serbia with other members,
while also going shopping. Visitors are at one location, and they can do it all
without having to go from site to site to find what they need.”
Theglobe.com recently
launched a completely redesigned Web site, which Krizelman says was the first
phase of creating a “richer” environment for users, thus setting the standard
for online communities. The site is designed to foster a user's creative and
interactive experience, he says, with content sources that include Reuters, E!
Online, Thomson Investors Network, SonicNet, UPI and C/NET.
“We provide members with a
wealth of services and content, but it’s distinguished by personality and
people,” adds Paternot. “Our concept was to replicate a real-world community
online, where you can shop, entertain yourself, meet people, and read the news.
At theglobe.com, we try to facilitate the social side of community – meeting
people with similar interests, while doing the things one would normally do in
the non-virtual world – all wrapped up in one location.”
But in order to make this
ambitious vision a reality, the company’s intuitive founders knew that they had
to create a site that was not only unique, but also one that would make members
want to stick around. The result? A site where member content is promoted in
every area, and integrated around an abundance of data and news. Among the
unique features, for example, is a real-time stock quote services (many online
stock quote services have 20-minute delays, says Jennifer Zwiebal, media
liaison for theglobe.com), provided by Thompson Investors Network.
With millions of cybersurfers roaming the halls of
theglobe.com at all hours, and advertisers vying for their piece of that
consumer pie, someone has to handle the traffic patrol and customer service.
According to Krizelman, such issues are handled in house. “Theglobe.com is home
to more than 9 million users, so one could imagine the importance of having a
solid system in place to respond when people need help at the site,” says
Krizelman. “Our quality-assurance department has a help desk forum where
questions are answered online, the same day queries are received (during
working hours, EST time), as well as a help desk, chat and e-mail system.”
Industry experts agree that
part of the appeal of sites like theglobe.com lies in its ability to build a
huge base of loyal customers, something which advertisers warm up to in their
never-ending quest to attract “sticky” customers. Community sites like
theglobe.com have relationships with their members and traffic, thus resulting
in the main appeal of communities: the more you know about your members, the
more you can charge advertisers. And it’s working. During the fourth quarter of
1998, the number of advertisers at theglobe.com grew 32 percent from 111 in the
third quarter, to 147 in the fourth quarter (compared to 14 advertisers in the
fourth quarter of 1997). In 1998, 68.9 percent of all the site’s advertisers
were consumer brands including Procter & Gamble, Nabisco, Lego, Schering-Plough,
Cathay Pacific, Lee Jeans, Levis and Carter Wallace.
“Knowing that there are 100
million people using or even touching the Internet today, and knowing that
there are 5 billion other people on the planet that have yet to even start
using it or even be exposed to it … that’s where the opportunity is,” says
Krizelman. “And that doesn’t affect just theglobe.com; that affects all
Internet companies.”
Right now, it’s no secret
that any ticker symbol with ending “.com” is likely to attract hordes of
investors, advocates and followers. And theglobe.com – a site that is becoming
the talk of the Internet – is no exception. With all of the attention and
support the company was receiving, an initial public offering seemed viable, so
Paternot and Krizelman decided to take the plunge. On November 13, 1998,
theglobe.com completed its offering and made stock market history. But that
IPO, and all of the success and money that followed, almost didn’t happen. In
October 1998 – when the offering was originally scheduled – the company couldn’t
complete the process and delayed it at the last minute due to global turmoil
that rocked the stock market across the world. But less than a month later,
Paternot and Krizelman found themselves on their way to their investment bank’s
New York City offices to watch the stock of their brainchild trade on NASDAQ
for the very first time. With the money raised from their company’s IPO,
Paternot and Krizelman planned to increase advertising, upgrade business
operations, and make some acquisitions.
Issued at $9 a share,
theglobe.com’s stock price rose to $97 within the first five minutes of hitting
the market. At that moment, the company had a market capitalization of over
$900 million. The IPO made Paternot and Krizelman instant millionaires. And
while the price did fall to end the day around $63 (the stock was trading
around $55 on March 11, 1999), theglobe.com become the biggest first-day gainer in
IPO history, riding a crest of an unpredictable wave of recent Internet issues
that included the likes of eBay, EarthWeb
and Broadcast.com.
And while the pair of entrepreneurs don’t have a ready explanation for why their
stock fared – and continues to fare – so well, they do attribute much of the
success to the fact that the stock market had bottomed out prior to their IPO.
From there, the market strengthened and theglobe.com – recognized as a
"strong” company – followed another Internet company, Earthweb into the
IPO limelight.
“We had no way of predicting or gauging what the
stock was going to do, and I think nobody had,” recalls Paternot. “In fact, we
had no intention of setting a record for the highest opening. It was an
eye-opening experience in terms of the sheer demand that there seems to be for
Internet companies. I think people believe in our business. We built a strong
brand, we built a strong management team, and we’ve really been hitting our
goals every quarter.”
Of theglobe.com’s 9
million regular users, about 40 percent are from outside the United States.
Domestically, theglobe.com has already linked up with large media groups such
as Fox and Reuters to supply news and other content to its site, and is now
looking past its domestic boundaries for new allies. “We’re looking for
strategic partners overseas,” says Krizelman. “One of the most critical factors
in running our business is building our brand awareness as quickly as
possible."
With Internet usage on the
rise worldwide, and with an increasing number of shoppers flocking to the World
Wide Web for everything from flowers to CDs, and computers to greeting cards,
there’s little doubt that theglobe.com is currently a major contender on this expansive
medium. But will it “stick?” Well, combine a growing interest in the Internet
by both consumers and advertisers with Paternot and Krizelman’s relentless goal
of building community and attracting a customer base that keeps coming back for
more, and it’s easy to see that these two young entrepreneurs have a winning
combination. But what does a look into the crystal ball tell them? Says
Paternot: “We can't predict the future, but we plan on continuing to grow the
company while increasing our user base, increasing revenues, capturing more
Internet users overseas, and executing our plan for profitability.”
Company: theglobe.com
URL: www.theglobe.com
Founders: Todd
Krizelman and Stephan Paternot
Industry: Internet
Location: New York
City
Employees: 150
Revenues: $5.5
million
Copyright © 2000 by Virtual
Advisor,
Inc. All rights reserved.