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Aggregate, Syndicate, Dominate: How InfoSpace.com Mapped a Course to Success
OnTheInternet contributing editor Madanmohan Rao interviews Naveen Jain, CEO of InfoSpace.com
By Madanmohan Rao
madanr@planetasia.com

Staying away from the browser wars of 1997 and the portal wars of 1998, one company has been quietly sharpening its focus on the consumer Internet market in a rather novel way. Instead of bringing people to Internet content, Washington-based InfoSpace.com has been bringing online content to people no matter where they surf.

The content aggregation and redistribution company was founded in 1996 by Naveen Jain, who realized after a seven-year stint at Microsoft that the same original equipment manufacturer model for computer equipment could be extended to business information on Web sites. Naveen has a B.S. in engineering from the University of Roorkee and an M.B.A. from St. Xavier's School of Management.

What was the founding vision behind InfoSpace.com?

The founding vision was to be the leading OEM provider of real-world content on the Net. Mirroring the very successful Microsoft OEM business model for DOS and Windows, we envisioned doing the same for real-life content on the Internet for Web sites and Internet appliances.

At a time when most people were thinking about launching a site and attracting users to it, we set out to be the leading content provider to the popular portals, destination sites, and Internet appliances on the Web. It was a unique approach and one that has paid off for us. We have become the number one directory site on the Internet and are now the leading provider of private-label solutions not only for content but also for commerce and community on the Internet.

Our content offerings include business listings, regional attractions and entertainment, yellow-pages directories, five-day weather forecasts, information on local schools, area hotel and restaurant listings, maps, and directions to locations.

How have this vision and strategy evolved since founding?

We have been very successful in implementing our founding
vision of the private labeling of real-world content to some of the best-known names in the Internet industry such as AOL, Netscape NetCentre, Microsoft, Lycos, AT&T, the Wall Street Journal, ABC, CBS, NBC/SNAP, Xoom.com, and Earthlink. InfoSpace.com's affiliate network now covers more than 1,500 Web sites.

We expect to extend our relationships with our affiliates by continuing to offer new products and services that leverage the content infrastructure platform already adopted. These community solutions bring stickiness to our affiliate sites and retain growing traffic.

We have a tie-up incorporating Net2Phone, so that Net users make phone calls over the Internet simply by clicking on a phone number they've found in our directories.

As for e-commerce, Internet users are increasingly frustrated with the shopping experience on the Web because there are too many places to look and too many places that are overlooked. Our ActiveShopper will enable our network of affiliates to become the merchant themselves and will allow them to bypass e-merchants by giving them an option to directly order from the wholesalers or manufacturers.

We have created an integrated shopping solution that enables a user to research and buy a product all in one place. Web sites that implement our ActiveShopper solution will offer their users both the ability to research a product through the integration of product reviews, Usenet groups, message boards, and Web searches and the ability to find that product available on the Web and in auctions, classifieds, and over 2,000 offline catalogs.

All of this is through one integrated interface. This is a giant leap from the current generation of product comparison products that are available today.

How has the company grown-in terms of people, content, ad revenues, and alliances?

InfoSpace.com is primarily a technology and business development company. Therefore, most of our approximately 90 people work either in the sales/business development areas or in technical areas. Our content offerings have continued to expand to include news, real-time stock quotes, sports, and in-depth local content such as local events.

Our alliances are growing at an increasingly faster pace because of the demand for outsourcing content, commerce, and community solutions. That demand for outsourcing solutions has been growing for two reasons. First, time to market: the Internet is a fast-moving industry, and no one wants to be left behind. Every site needs to have basic utilitarian content to attract new users and to keep existing users on the Web site. The second reason is retention of users on the site: Web sites are finding that providing simple links to give their users basic utilitarian information merely hands their users over to other Web sites, thereby creating some of their biggest competitors. Web sites are now looking to provide unified looks and feels with private-label solution so they can keep users on their site. That's why companies like America Online, Netscape, Microsoft, and Lycos, as well as more than a thousand other sites ask InfoSpace.com to provide them with their content and commerce solutions.

From where does your aggregated data originate?

Canadian and U.S. business data is provided by infoUSA. Thomson Directories provides business data for the U.K., and data for European countries is provided by Kapitol. We also get some content from Acxiom in the U.S. and Canada and 192.com in the U.K. These data providers get their information from phone books and other public records. Data in the e-mail directory comes from various Internet service providers [ISPs] and from user submissions. Maps and directions are provided by Vicinity (http://www.vicinity.com/). This information is distributed to local, regional, and national portals, media sites, etc.

Whom do you view as your key competitor, and how do you stack up against it?

Fortunately, InfoSpace.com does not have any direct competitors. However, some companies do compete with us on different components such as directory services and classifieds. There are two main reasons why we sustain leadership in the area of private-label solutions. One, our proprietary technology allows us to integrate content from hundreds of different content providers as if the content came from a single provider, and two, we also can make our solution available on a private-label basis to Web sites and Internet appliances through tie-ups with GTE Mobilnet, Bell Atlantic/NYNEX, AT&T, and Mitsui Comtek.

Our integration technology enables us to create best-of-breed applications by providing contextually relevant information for the user.

All of this does not mean that others cannot enter this very lucrative category, but we believe we have sustained a leadership position and will be offering new products and services that will further cement our position. As outsourcing grows, so will the visibility of the private-label-solution model.

What kind of traffic does your content account for, and how has this grown?

Our private-label solution today has an unduplicated reach of over 83 percent of all Web sites. In other words, four out of five people on the Internet have access to our private-label content and commerce solutions. Traffic on the InfoSpace.com affiliate network climbed to 318 million page views for the month of December 1998, up from the 86 million page views reported during December 1997, according to Nielsen I/PRO. Additionally, at an average of 23 page views per visit for December 1998, InfoSpace.com's page views per
visit were four times the industry average of four to six.

What kind of revenues has your strategy been generating?

InfoSpace.com reported $9.4 million in revenue for calendar year 1998, and analysts are expecting us to do approximately $25 million in revenue this year. We generate revenue from a variety of streams such as advertising, licensing fees, search queries, data views, and transaction fees.

We successfully completed our initial public offering on December 15, 1998. We generated $86 million in proceeds from the sale of 5,750,000 shares of common stock.

What is your alliance strategy, and what revenue sharing agreements/formulas do you have?

Our alliance strategy is to continue to be the leader in the content-outsourcing market. We now have partnerships with independent Yellow Pages publishers, newspapers, television/radio stations, search engines, ISPs, information appliances companies, and other popular Web sites.

We share only a portion of the banner advertising revenue with our partners. Our preferred way is to get paid on a per-query or page-view basis for our solutions from our distribution partners and to let them monetize it however they want.

What is the underlying technology you are using?

We have built proprietary, patent-pending technology that enables us to provide a unique product for the Internet community and that includes a Web server, database technologies, and an advertising server.

The Web server enables us to build the dynamic Web pages that are delivered at over 200 queries per second to over 1,500 different Web sites brands, including non-PC devices. Our database technologies and advertising server let us integrate content from hundreds of sources and offer to the user contextually relevant information.

This technology is the barrier to entry in our category. The platform we have built is becoming the standard for private-label solutions in the areas of content, commerce, and community. The technology enables us to take commodity data and turn it into the Rolls Royce of core content on Web sites and Internet appliances. In addition, the platform enables us to build new services and offerings and provide a synergistic business strategy for the long-term growth of the company.

What is your international strategy, and how are your international operations faring?

We plan to expand globally by using the same technology and business model that have proved to be so successful for us in the U.S. We were able to successfully duplicate the business model in our U.K. joint venture with Thomson Directories. We also have started our international operation in Canada and are evaluating countries in Europe and Asia.

In March we launched Info-SpaceCanada.com, which will integrate Canadian content and make it available to Canadian online users and companies on a private-label basis. Canada has 6.49 million users online.

Our joint venture for the U.K. market-TDL Infospace UK-will generate over 5 million page impressions per month through our content affiliate and partner networks, which include IPC Magazines, Dennis Publishing, Electronic Telegraph, and AOL UK.

What is your vision of what the Net can offer India, and how do you plan to tap the Asian and Indian markets?

The Internet eliminates geographic and time zone barriers by bringing world-class technical expertise to the international market. An entrepreneur in India can develop the technology and distribute it through the Internet just like anybody in the U.S. can do. The Internet eliminates all barriers to developing the technology and distributing it to the end customer.

We are currently evaluating joint-venture partners that can help us launch Indian or other Asian operations. What we look for in partners is strong local presence with a brand that can be leveraged with our technology and distribution.