Practical Ecommerce

MIVA CEO Craig Pisaris-Henderson

The concept is as old as sales itself. Somebody delivers qualified customer leads to you and you pay them for each lead. It is up to you to convert that lead into a sale. It’s not too hard to comprehend. Prior to the mid-90s, in the normal sales world, lead generation was done with door-to-door calls, telephone cold calls, direct mail, and word-of-mouth. When folks started selling things on the Internet, in the early 90s, getting qualified customers to come to your online store presented pretty much the same marketing test that the so-called brick and mortar stores had: Getting sales leads or customers through the door or past a mouse click required work. And it was not an exact science. Rudimentary search engine ‘bots crawled around the web gathering information on what was out there on the ‘Net. You put “socks” in the search term and you got a few thousand pages about everything from baseball teams to cute kittens to, sometimes, footwear. Then in late 90’s two companies changed the way leads were generated on the Internet forever. Goto.com, which launched in 1998, and Findwhat.com, which started in 1996, entered the marketplace with pay-per-click search advertising. Findwhat was the brainchild of Craig Pisaris-Henderson, who started the company in his bedroom. That’s right, this is another started-in-the-bedroom.com story. Only this story doesn’t end with that dot-com crash. It actually just begins there.

PISARIS-HENDERSON:The search engine optimization (“SEO”) market and pay-per-click (“PPC”) advertising model have been around for a while. Early on there weren’t very many companies providing SEO services. None of us had a clear picture on how the final business model would work. In fact, in the beginning our revenue model was that our companies (clients) didn’t pay us unless they got to the number one position on 6 of the TOP 10 search engines. Obviously that evolved into our pay-per-click system, where advertisers pay us for every click that we generate on one of their listings, but it was still based on SEO work. That worked for a while. But in 1998, with search engine algorithms becoming more complex and the market continuing to expand, we took a step back realizing this was not the best approach to the market. We wanted a scalable service but what we had in the early days was manually intensive and not scalable. So we looked around the marketplace to see if anyone had that scalable model that would fit our capabilities and what we had already developed.

By the end of 1998 we had a firm direction of what we needed to do to develop a scalable system for our pay-per-click model. At the end of ’99 we launched our automated payper- click network, capitalizing on everything we had developed previously and creating an intuitive single interface where the pay-per-click model worked for thousands rather than for hundreds. We were the second to launch a system like this, with Goto (which became Overture and now Yahoo!) being the first, launching in 1998. But we are a very different company (from them). We funded the company ourselves, never raising any seed money or venture capital. We did end up going public; we merged into an already-public company and simultaneously raised $2.5 million dollars, which was the first capital money we brought in. This is very different than most Internet companies, especially in the late ‘90s, but we thought it was the best thing for us to do. We wanted to concentrate on producing a good product and ensuring our profitability. Over the next 1 1/2 years we raised an additional $6 million ourselves and became the first pay-per-click search company to turn profitable in 2001 and we’ve never looked back.

PeC: It is hard enough for most business people to develop a simple, tangible concept like a store, let along thinking about something as esoteric as a search engine market model. How did you develop a clear picture of the model that became FindWhat.com and now has become MIVA, Inc?

PISARIS-HENDERSON: I would love to tell you that it was the result of extensive market research and viability studies of where the marketplace is going and how people would interact with the model, but that just wouldn’t be factual. Sure, we use those tools today but that is not what happened back then. In 1996, I started using email and I had some exposure to the Internet and it became obvious that the Internet was a medium that had very low distribution costs and yet our audience or reach was unlimited. The potential was limited only on how fast that industry was growing. To me it was only common sense; you had an industry that was growing at a ridiculous rate.

Because of the micro-economics trends we were seeing in our original locally focused products, and people’s desires to be on line, we felt confident this was going to be a very good national and global opportunity.

PeC: You have come a few years down the road and your hunch was quite correct. You also have some more competitors now and the market is an even more complex place. It appears, however, that you are not sitting on your hands, having acquired MIVA Small Business. What was your thinking in that acquisition?

PISARIS-HENDERSON: The logic was pretty simple. The original Miva Corp. was servicing tens of thousands of small and medium sized companies, which we believe are the bread and butter of our core product. Don’t get me wrong; we do work with the Fortune 500 companies. But we started looking at the “supply chain” or what happens or must happen for an online user to actually purchase a product. So, on behalf of the online merchant we had to, a) provide traffic to merchants; and b) we had to have a mechanism where the merchant who paid us for that traffic made sales.

For a long time our business, and Yahoo’s business, was all about the click. We were pretty much the first company to realize that we needed to provide the post-click analytics and the information that would raise the conversion rate for our merchants. We were actually the first paid listings network to launch a post-click analytic tool. We also realized that we would have better visibility into the quality of our traffic if we were working directly with the merchants on post-click analytics – we could see which partners converted and which did not. MIVA Small Business had that connection to tens of thousands of merchants who had online stores and used the MIVA shopping cart software. The merchants were trying to sell something, so they needed traffic and we had traffic. But from a strategic perspective, it is about understanding some of the nuances in that supply chain. For example, post-click analysis can tell merchants, here is your exposure and your ranking, but did you know your drop off rate is X or Y under these conditions. With this knowledge, we could start developing tools to help merchants understand their traffic patterns and allow them to change their methods to address their issues. So, the acquisition (of MIVA Small Business) made sense for everybody.

PeC: As your system evolves in the new company structure as MIVA, Inc., you and your competitors have brought pay-per-click well into the 21st century, both in lead generation and sales for the merchant. With that in mind, where do you see the PPC industry, say, a year down the road? Will it continue to be an integral part of ecommerce?

PISARIS-HENDERSON: Oh absolutely it will, for one simple reason: It works. What is changing rapidly is that merchants and advertisers are learning to base their bids on conversions or return on investment (ROI) rather than simply being listed high in the results with the highest bid. What’s unique about our industry is that it is accountable; it is measurable. It’s not like having a billboard with thousands of cars driving by and you have to guesstimate how many people see your ad. The challenge in our industry, since 1999 or 2000 has been educating the users on how our tools work and how to best advertise their products and services. MIVA, like other leading companies in our sector, is working every day on developing new ways to leverage technology. My point on this is that over the next year and into the future, you’re going to see conversion rate metrics driving pay-per-click bids rather than just advertisers’ desires to be highly listed. It has already started to happen and it will happen more as the users become smarter and that’s what we’re in business to do— help them work smarter. The next step for MIVA is to provide an intuitive behavioral platform for our users.

PeC: There are plenty of newcomers in the ecommerce world who are hungry for nuggets of knowledge that will allow them to leapfrog, if you will, from a cold start to a viable business. You’ve been through it all, what would your best advice be to a new merchant?

PISARIS-HENDERSON: From a marketing perspective my best advice for a new merchant is test and measure, test and measure and then test and measure a little more. We have found, for example, that for some verticals MIVA may not supply a high enough conversion ratio for an advertiser to justify the amount they need to bid to acquire traffic from our network. Now, that doesn’t sound like a good remark about our network, but it is factual. The same can be said for the other two large networks in our space as well (Yahoo and Google). What I don’t want to happen is to have advertisers use our network and not receive the conversion ratio that makes their advertising dollars work for them. To this point, we suggest all advertisers to test, test Google, test Yahoo, test MIVA and measure the results. Not all networks are going to deliver the same audience and the same results.

PeC: Is there anything new on the horizon for MIVA Corp that you can tell us about?

PISARIS-HENDERSON: Actually there is. Starting with our MIVA Small Business division, in an effort to address a segment of the market that would like a “lighter” version of our shopping cart, we’ve been working on providing a lite version of our core industrial strength shopping cart product. We want to be able to fulfill the needs of merchants of all sizes. Our team members in San Diego have done a great job of looking at ways to simplify our product and make it more useful to more people. Within the media division, the pay-per-click side of our company, we have been heavily focusing on the algorithmic, contextual, and behavioral marketplace. In fact, in 2005 we invested approximately $10 million in that area of our business in an effort to help our partners continue expanding their businesses and drive additional revenue for all involved.

PeC: Your company has been in the news lately, with the announcement that you hired Deutsche Bank to help you explore organizational and expansion opportunities. Can you comment on that?

PISARIS-HENDERSON: Yes, we have a relationship with Deutsche Bank helping us validate and/or explore options for the company. The range of options is pretty much across the board, from acquisitions to partnerships that would best benefit our shareholders. Nothing may come from the exercise, but we wanted to explore this path on behalf of our shareholders to have a clear picture of what the options are for MIVA.

Michael A. Cox

Michael A. Cox

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