Opening a Portal to Big Winnings
Bill Daugherty and I, the founders and co-CEOs of iWon.com -- close friends ever since our first day of business school -- were talking one day in January 1999 about portals, the starting points where consumers go to organize their experience on the Internet. Portals were the models that were actually working. They were a natural starting point for consumers -- portals represent seven out of the ten most trafficked Web sites, in terms of pages. And they were experiencing significant revenue growth. But, they were essentially all offering the same products and services. We thought it would be great if we -- or somebody -- could create a portal that would offer the consumer something differentiated and unique.
At the time, Bill was senior vice-president for business development at the National Basketball Association. I asked him what was the most successful promotion he had been involved in, expecting him to say something NBA-related, but he mentioned the McDonald's Monopoly campaign, which involves a sweepstakes. At that point, the proverbial light bulb went on. We said, hey, let's combine a portal with a cash giveaway! We all like getting something for nothing. It's one of the things people have in common. It's a business model that makes sense, and we wondered why nobody had thought of it before.
Bill and I didn't have a lick of technology experience between the two of us, but if you have a good head on your shoulders, you can figure it out. We became ecstatic about the idea. We did research on the people who engaged in sweepstakes and found they were very active consumers who figured favorably in terms of household income and propensity to shop. The more we learned, the more we liked. If we could aggregate content from some partners and license technology from other partners, why couldn't we put them together in a way that would be the basis for a competitive product?
Since the genesis of iWon, the business has become much bigger than we thought it would be, employing about 255 people. We have 150 to 200 partners providing both content and functionality for our Web site. Our overhead is in the sales, technology and marketing departments, with sales offices in San Francisco, Los Angeles, Chicago and New York, and headquarters in Irvington, about 30 minutes out of Manhattan.
Get In With the Right People
Of course, we needed to get somebody involved who had the relevant experience and contacts to help us transform the idea into a reality. We didn't tell anybody what distinguished our portal, we just asked a lot of people in the know, and they all came back with, "No, it can't be done, that ship has sailed -- it's impossible to integrate all the pieces, the technology's proprietary," etc. But we wouldn't take no for an answer.
Neil Austrian, former president of the NFL, and Bill were neighbors, and Bill had been using him as a sounding board and mentor. When we asked him, "Can this really be done?" Austrian said it could -- and gave us his support. He's now chairman of our board.
We had to go out in a big way, because it's a competitive market, the marketplace is crowded and it was important to have serious promotional weight behind the launch of this project. By networking, we were able to get a brief presentation -- a concept, four storyboards -- in front of Mel Karmazin and Fred Reynolds at CBS. They agreed to invest, and in April we signed a term sheet raising the first $100 million to launch iWon.
Everyone Likes It -- Why Wouldn't You?
The iWon concept, the first of its kind, is pretty revolutionary. We give out $10,000 every day, a $1 million prize each month and $10 million once a year. The chance to win is entertainment, it's fun. And it really doesn't matter who you are -- everyone likes to win. Our tag line is: Why wouldn't you? That has been our mantra for creating a great site. If you can get everything, or the vast majority of what you can get elsewhere, at iWon, why wouldn't you use our site and get a chance to win?
The big prizes are paid out over 25 years and, typically, we'll purchase an annuity on behalf of the winners. In other words, it's the obligation of a AAA-rated insurer to continue to pay out on the prizes. Once the prizes are awarded, we settle our debt and no longer have an ongoing obligation to the winner, so we don't have an ongoing liability.
We're also a loyalty-based portal: somebody rewards you for doing what you would otherwise do. Almost all our users register for prizes and return to iWon frequently, because every time they click on a page, they get a chance to win. The site has become a destination, part of people's daily routine. And, they give us valuable data about themselves when they register. There are all sorts of incentive programs, for credit cards and airlines and such, but nobody had done this combination online before.
Where the Money Comes From
iWon is one of the Internet's largest registration bases and destination sites, and we know who our users are. We know their gender, age, location, affinities and site usage, so we're very well positioned to target advertising and direct marketing that will best speak to those people.
The income comes from advertising -- broadly defined, because it's not just banners and badges, it includes sponsorship. To get an ad on our site, you pay us. We're a cash advertiser. A number of brands -- Sprint and OurHouse (an affiliate of Ace Hardware), Doc Otis (a division of Anheuser-Busch), Office Depot -- have tied into the fabric of our program as associates, through double-your-winnings and monthly-bonus prize types of programs.
When we launched, we did a significant amount of advertising on television and radio, but our efforts now are focused online. We're constantly re-evaluating the most cost-effective means of acquiring new users, and we'll be looking to expand our loyalty platform in the future. And, we'll continue to leverage the brand that we've created. That's got real equity and real extension possibilities.
Mapping the Path to Profitability
When we started, we more or less knew what we were doing, but we were venturing into the unknown. If you're launching a new business model, make sure you're adequately capitalized, because the world's an unpredictable place. You have to be armed with enough resources to make a go of it. We've got a great shareholder base, with Viacom and some very high-profile venture capitalists, so we view an IPO as just a financing event. If it makes sense at some point in the future, we'll do it, but obviously, the market isn't what it was.
Still, our revenue trajectory is very strong, so we're going to be profitable faster. Nielsen has us ranked number five in page views, and our average daily reach is in the top 10. To achieve that kind of growth, you have to be obsessed by your product! If you don't obsess about your product, well, people have adequate choice. So far, the feedback from our users has been terrific. Also, we're going to be testing something new soon. I can't go into more detail now, because we haven't launched it yet, but as a registration-based site we know we can offer more added value to online advertisers.
Bill and I see more of the roller-coaster than the employees do, because we have a bird's-eye view of the world, but there's no such thing as 100 percent success or failure. The key is to create value. We're an incredibly results-oriented, no-nonsense, get-it-done organization and if everyone's pulling on the same oars, we're going to be successful.
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