Los Angeles-based Oversee.net (www.oversee.net) is in the business of connecting Internet users with advertisers, through a number of branded web sites, along with a domain name monetization business. Lawrence and his co-founder, Fred Hsu, bootstrapped the firm shortly out of college, and have rapidly grown the company to 150 employees and impressive revenues. The firm, which has been cash flow positive since day one, had revenues in 2006 that Lawrence tells us were well north of $100Ms, and the company has been seeing very significant growth in 2007. Ben Kuo spoke to Lawrence recently about the company and where it's headed, as well as it's plan for growth and acquisitions.
Tell us a little bit about Oversee?
Lawrence Ng: Let me just give you a sense of how I got started and how myself and my co-founder got hooked up. I started in the Internet space in 1999, at a company called Startpath. It was a traditional ad network, and went through the classic boom and bust story. That's where I met Fred, who was at UCLA, and I was at USC. We went our independent ways for a few months, then we had the crazy thought to get together and form the business. We did that, and originally started downtown in a really crummy area of LA right at the outskirts of skid row. We were in those offices for about 3 years or so, until late 03, when we hit a point where we needed more space, and after getting comments from about the fifth job interviewee figured out we needed to be in a better neighborhood. We moved here to Figueroa and 7th, which is a much more presentable area downtown, and are now at about 150 employees, and just signed a lease to move into the City National building.
The business focus is on two areas--one in domain services, the other in what we call marketing services, which is much more the lead generation businesses. We have no outside funding, and recently did a line of credit with the B of A for $60M dollars, which is basically helping us grow the business through acquisitions. We've acquired 40 domain portfolios, a mortgage lead generation business Spendonlife, which had a couple of key relationships and sales guys we wanted, and we bought a travel site called LowFares.com, just last month. In domain services, getting into some detail, there are three main components. There's our monetization platform, the DomainSponsor business; the second is our own portfolio which we acquire in the primary market--so that consists of something north of 600,000 domain names; and we also buy in the secondary market directly from domain owners.
In the marketing services area we are in mortgage--that was started in 2005--another highly competitive time, and have successfully managing being recognized as number one in terms of quality, and also in terms of quantity, recognized as being fourth and sometimes even third. That was a really proud feat that we have under our belt. That's mortgage. We also have our travel business in LowFares.com, which is a travel comparison shopping site, which has main top relationships in that space - Cendent companies, IAC travel companies, so and so forth. The difference in marketing services is we focus on all three areas of traffic, we drive direct navigation traffic, and we are very active buying in search engines, as we do a lot of display buys as well. If you were click around on any Yahoo portals, you'll probably see our ad one of six times. We're very aggressive in that space in a very competitive market.
So what do you think about people getting venture capital money to get into this game and into the same space, are you seeing lots of competition?
Lawrence Ng: Not too much. It's an execution game. We don't have a single direct competitor, I would say. We're diversified enough and are in a leading position in enough areas to where it's not so much of a concern. I'll give you an example, in our domain acquisition and secondary markets, we have relationships in this space and a presence in this space that money can't buy. That's one area where it doesn't matter how much money a company has. Domainers are perceived as "selling out" when they sell to one of the newer financial guys. But for them to sell to use they're leaving it "in the family". I'll give you an example. In many, many cases, we have domainers telling us that we'll sell to you guys for less because we like you, we like to work with you, they don't trust the finance guys. That's a common theme we hear. A good story is Domainfest, our event for Domainers, which we started as regional events. The first one was in Barcelona, the second one was in LA. We started promoting the LA Domainfest site when we did the LA event, and a domainer said "I actually own the Domainfest.com site, do you want it?" and we said sure--how much? She said take it, it's free--just to show they were supportive of us as a company. Those are just two examples.
A lot of people ask us what we think about Demand Media. Smart guys -- Richard did a great job at MySpace, and will continue to do a great job at Demand--but I just think we're traveling two different routes. We see ourselves as between prime time and late night television, and I think Richard's company sees themselves much more in the prime time television market, where the effort is much more in repeat users and eyeballs--which is great. That's just an area we don't focus in.
How did the domainers business get to become such a big business. People tell me they look at the domain name business and saying--wow--there is so much business here that no one really knew about. Is this something recent or has it just been getting big and no one has noticed?
Lawrence Ng: It's all of the above. I'd say that traffic has always been there, and it's grown obviously. What has changed is that there is an influx of advertisers, and paid search has really helped the industry. A domain name is very much like a search in the address bar. Paid search has been pivotal in its growth. No one is going to buy that land if they can't monetize it, though sometimes people do, mainly speculators. What we did when we entered the space in 2001, we gave the domain owners the ability to monetize that land, which had the effect that they bought more land. It's grown because people have been buying more of that real estate, and that really is the result of the monetization ability. If you think about any land--say they have a parcel of land in the desert, and they tell you it's only $10,000 -- you'd probably say --what am I going to do with it? But if I told you -- I've got this company that will help you make money off that land, because I have 100,000 advertisers looking to buy billboard space on desert land near freeways, you'll start to ask "how much money can I make off that land?" A good example is the Figueroa hotel, where they don't make any money off the hotel--they make all their money off their advertising space.
Talk a little bit about your sites--your travel site, LowFares--I guess that fits into your lead gen--and you've also got LiveDigital. What are you doing there and how do they fit into the mix?Lawrence Ng: With respect to lead gen, we view the world in two ways. There's traffic, and there's ways to monetize that traffic, as with any other media company. For us, lead generation is a way to monetize the user directly, and we want to be as direct as possible to the advertiser. In the infomercial analogy, that's asking the user to pick up the phone and convert into some sort of monetization unit. For LiveDigital, it's eyeballs--it's an experiment for us, it's not as large of an effort for us--it's there to attract users, and it's also there to sell advertising. That part of the equation that is the same. There are aspects of LiveDigital that are very different and needed in the space. For example, we find there are more and more users who are less interested in viewing two dimensional video, video, after video. We're aiming for a market of user interested in an individual channel, look and feel, and navigation, etc.We've built a platform that allows channel operators---or really, any individual--to create their own channels. We had in mind--if someone wanted to build their own Collegehumor, or StupidVideos, or Break.com--that was the hat that we wore when we launched the platform recently. On the monetization front, we have a contest we launched in February which incentivizes the the top channel operators to create enticing channels, and draw traffic to those channels. They will take part in a pool of money, rather than other companies where it's more straight CPM. It's much more competitive, more of a game feel than an independent business.
Where do you see yourself going--I would imagine with the domain name business you would think every domain in the world worth some money would be swallowed up by now. Where do your elves going, where do you think the mix will be in the future?
Lawrence Ng: We're continuing to grow in the domain name space, it's an area we have lots of traction in and we'll continue to out-compete. There is also a large area of growth for us is the marketing service division, the lead generation business. I am incredibly active in looking at additional acquisition opportunities. We recently acquired the travel business, we'll scale and grow that. We will apply that same formula and continue to grow. It's buying underdeveloped lemonade stands, and building them into convenience stores, if you will.