PETER CHRISTOTHOULOU: The company is basically a restart. Back in '08-'09, we realized that with the businesses that we were in at that time -- a combination of things focused on advertising --- we really weren’t claiming leadership in any one spot.
We had bought VoiceStar, a call-tracking company, in 2008 and national and local businesses were provisioning phone numbers at a very fast rate, and putting them into ads. They liked search and they liked digital, but they really want to generate a phone call. So our insight was that if there's this huge bucket of demand from both national businesses and local businesses to connect with consumers over the phone -- mobile was really starting to emerge as the start of an advertising platform -- we thought that there would be an opportunity to leverage that inventory naturally against phone calls given the form factor.
The second level was, if that’s the case and the market is going to go that way, we need to provide deep analytics and measurement. What am I getting for what am I spending? Who are these users? In mobile in a call, how do you know if it was a good call? A cookie doesn't solve that.
We spent a lot of money and energy building as a foundational unit our call-analytics platform, which effectively lets businesses understand whether their mobile marketing is driving conversions or not. Which source is driving conversion? What is being said on the call? How is the interaction between the consumer and my business looking? Did you have a good experience? Did you convert? Why didn’t you convert? How did the call center treat you? How is the call center treating you relative to other companies in the same category?
The way to think about our business is: There are two products, the call-analytics part and then the pay-per-call business, which sits on top of our call-analytics product. In our pay-per-call business, we go let people connect with more customers over the phone where they can pay us $10, $20, $40, $50 per call to connect.
You start by selling the analytics and then upselling the network?
We sell both products separately and now they're starting to cross-pollinate. If you're a pay-per-call customer and you see our analytics because we provide all the data, many of them say, "Well, I have all these other channels that I want to use your analytics in, how best can I do that?" Sixty percent of our top 20 use both products today.
Describe the top 20.
Our business is 50% national, 50% local. We're at about a $150 million run rate.
The national businesses look like Allstate, ADT Security Systems, DirecTV -- service-based businesses whose lifeblood is connecting with customers over the phone. They have big call centers. And travel companies -- Holiday Inn, Hilton, Starwood, people like that.
On the local side, we don't go direct to the local businesses ourselves. We work with partners who have a large collection of local businesses, for example Zillow. Zillow is a big platform company in the real estate category, but they work with 30,000 agents. They use our analytics to help power their mobile products.
Who is in the competitive set?
We hate to say nobody, but right now we haven’t seen anyone that's focused on calls the way that we have and mobile the way that we have, and the reason is this. To do this well you need a lot of money and a lot of time, so we spent about $120 million to $130 million on a platform. You need to understand telephony first. You need to build on top of that telephony infrastructure. The people that you need to do this aren't traditional ad people. The people that understand back-end call center technology -- they understand audio signal processing and voice algorithms. The guy who runs our analytics platform built Expedia's global call center. The person that works for him was the lead for Microsoft's Xbox Kinect around voice.
There are people that have call tracking -- like Telemetrics or Mongoose. We say "call analytics" specifically because call tracking has been about how many people call this number and how long was the call. We've taken it to what's actually happening on the call, are conversions occurring or not. We let the piping exist on its own, but then we try to build a bunch of applications on top of it that are really interesting.
On the network side, we haven't really seen any direct computer. Google is offering click-to-call obviously, and we actually use Google's network as one of our sources of distribution, but we haven't seen anyone come out with pay-per-call network like ours.
How much have you raised so far and do you plan to raise more money?
Over the years we've raised about a quarter-billion dollars, and that was prior to this focus. We're profitable, we've always been profitable, so we don't need the money, but we think the space will consolidate, and there are interesting assets.
Are you hinting at building more of a call-based stack?
Well, we think we're pretty good on the analytics stack, but what does it look like for us to move international? Are there foundational pieces that make sense? It's just hard to go international unless you have local expertise. Trust me, we tried it a long time ago. Learning from that, there are small companies that have expertise in local markets and they make sense for us over time. There's nothing super huge on the horizon. We're pretty focused on just growing our business organically.
For example, on national we just hired Clark Kokich, who is a friend of ours. He has a ton of expertise on national, with agencies and direct brands through Razorfish, a $600 million global business. We're looking for people like that to help build up the team and help us scale to the next point.
What do you think about the recent and upcoming IPOs?
Scary or exciting -- a little of both. There is a handful of businesses at the scale point, where you deserve to be out there. I think there are others that are probably less so. I care less about who's out and what's happening and more about the quality of the company. The thing that bothers me is that there is no path to profitability for many of these businesses. Everyone says that if they weren't spending money they can turn on profitability in a second. What I would focus on is as they progress every quarter, is there proof of leverage in their model, and if there is then they deserve to be public and can scale.
Most of these companies haven’t shown that leverage, although Rocket Fuel has shown leverage in its business … I know they're hiring a lot, but outside of Rocket Fuel? Probably a few others, but it's a little thin, I think.
Is there is a risk to your business in the phone number-based system being replaced by app-enabled connections for consumers -- rather than a number?
I don't think there's a risk, no.
If you need to buy auto insurance, you're going to get on the phone with someone, for lots of things you're going to get on the phone. Even travel… I was at Starwood a while ago and they basically said, "Look, we invested away from the call center, but like it or not we're getting more calls than ever now because of mobile," so they were investing back into the call center.