2003 Interview with: Craig Pisaris-Henderson, Chairman, President and CEO
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5220 Summerlin Commons Blvd.
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Phone: 239-561-7229

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Craig Pisaris-Henderson
Chairman, President and
Chief Executive Officer

Interview conducted by:
Lynn Fosse
February 2002

Bio of CEO,
Craig Pisaris-Henderson
Chairman, President and
Chief Executive Officer

Craig Pisaris-Henderson is the chairman of the board of directors, chief executive officer, and president of (NASDAQ: FWHT), a leading developer and marketer of performance-based advertising services for the Internet. From June 1999 to March 2001, he also held the position of chief technology officer.

Craig has had broad exposure to all segments of the Internet.  With his holistic perspective of the online advertising marketplace he has been at the forefront of new developments in the industry, most recently changing the rules by setting up a private label service which leverages’s strategic assets, its search engine technology and back office operations, to allow the top tier portals to brand their own keyword advertising service without incurring the time and expense of setting up and operating it themselves.

Prior to, Craig co-founded and served as vice president of’s predecessor, BeFirst Internet Corporation, a pioneering company in search engine optimization.  He also served as chairman and chief executive officer of, an Internet company primarily focused on business-to-business solutions, including multimedia Internet content, site architecture, and local content distribution services.

Craig has spoken at several industry events and serves as a resource to the Internet/tech media. He currently serves on the board of directors for, the YMCA of Lee County, and serves on the advisory board for the College of Business at Florida Gulf Coast University.

Company Profile: was formally incorporated in 1998 by the principals of BeFirst Internet Corp., a New York-based Internet marketing agency, and officially launched in September 1999. offers performance-based marketing services, giving better solutions: to advertisers seeking to be found amongst the increasing clutter of advertising on the Internet, to web "surfers" trying to quickly access specific information, and to partner websites who use keyword ads as content on their websites. They offer a lean-and-mean marketing service with no clutter, redundant information, or wasted space. That translates into highly qualified traffic delivered to advertisers’ websites, fast and relevant searches for Internet users, and a revenue stream for partners’ websites.

Performance-Driven Marketing™
The challenge for business managers is to find effective ways of driving qualified traffic to their websites. The system allows website owners to choose the most relevant keywords and keyword phrases pertaining to their particular products or services to create keyword-targeted ads, thus enabling them to reach their targeted customers more quickly and effectively. Advertisers are only charged for actual clicks, or traffic, which come to their site. They determine the per-click fee they will pay for their advertisements, which and its private-label partners such as Terra Lycos's and HotBot distribute to tens of millions of Internet users. The network alone includes hundreds of distribution partners, including search engines such as CNET's, Excite, Webcrawler, NBCi, MetaCrawler, Dogpile, and Go2Net.

Pay For Placement™ technology: uses a proprietary Pay For Placement™ technology with keyword ads ranked based upon an open bidding system, where each advertiser can bid a higher click-through fee in order for their message to be closer to the top of the results. The highest bidder's site appears first, with others ranked below, in descending order of their bids. Online advertisers can regulate their traffic by changing this amount in real time using our proprietary open and automated bidding process. And, at any time, an advertiser can pick their desired position within the results by changing their bid price as necessary to obtain that position.

Private Label Service: has developed a turnkey solution for leading Internet portals and services desiring to enter the pay-per-click advertising sector. By providing their own branded service rather than selecting an exclusive third-party provider, these sites will be able to take advantage of cross-selling opportunities, increasing their revenue potential. They can offer keyword-targeted advertisements - the fastest growing online advertising service - to their existing advertising clients, and use their branded service to attract thousands of new clients, specifically small to midsize advertisers previously too small for leading Internet sites to target. By contracting with, they avoid the complexities, resources and costs of developing and maintaining a best-of-breed, performance-based marketing solution themselves.

The turnkey solution is comprised of infrastructure and hosting, with seamless integration to support the paid advertising service, including customer service, relevancy screening, receivables management, and all other features and functionality currently available with, coupled with a hosted control panel for partner reports and administration utilities. Private label partners also benefit from the continuing product development and new features offered by

CEOCFOinterviews: Mr. Pisaris-Henderson, please give us a brief history of

Mr. Pisaris-Henderson: “We have very humble beginnings.  In fact, the company started in my home here in Fort Myers, Florida. We did not have early investors or venture capitalists. Most publicly traded companies have done large public offerings and received the capital they needed to go out into the marketplace to attempt to build their business. We never had any of that and, actually, we have done five private placements in our entire history, totaling less than 15 million dollars. Instead, the early years were funded mostly with credit cards and later funded with the few small rounds of financing, which helped to fuel the growth of what we have today—a company that is a leading developer and provider of performance-based marketing service for the Internet. 

We started with a very strong foundation and a business that was acutely focused on profitability—we had to make every dollar count. The result of that is what you see in our financials today. has increased revenue sequentially for 12 consecutive quarters, increased pre-tax diluted EPS sequentially for six consecutive quarters, and has given guidance of year-over-year revenue increase of over 100% in one of the toughest economic environments in recent history.

We are definitely not the ‘normal’ NASDAQ traded Internet company primarily because we built a viable business model first, and utilized technology effectively to support the business, as opposed to having one of those good technology ideas and trying to build a business around it later.”

CEOCFOinterviews: How did you get it right?

Mr. Pisaris-Henderson: “I think it is our business-like approach. To reiterate, we formulated a business plan that was built on common sense and a real need in the marketplace, not interesting technical ideas that had never been attempted before. What you saw in the late 90s and early 2000s were some very bright individuals that came up with some good technologies, but not necessarily good businesses, and, there is a big difference between the two.

Unfortunately, the capital marketplace that was doing most of the investing, which created the bubble, never did understand the technology well enough to say whether or not it was a good and viable business. All they understood was that technology was coming at a rapid pace and they should be part of it. Our approach was quite different; we did not go to the capital market.  We analyzed the business philosophy of what we were going to put together and made a decision as to whether or not it made sense—was it a sought after product or service. When we got to the point where we could answer “yes” to all of the questions that indicated a strong business model, we started to invest personally and later did small private rounds to fund the business to the point where we could become very profitable.

CEOCFOinterviews: What is it that you are doing for your customers that other people aren’t?

Mr. Pisaris-Henderson: “Delivering high quality traffic and a great ROI! That is the simplest way that I can put it. What you find in the marketplace is that advertisers have wanted one thing—they want people who are going to buy their product and service to find their website. Now as much as that sounds like common sense, that is really the “truth” that we have operated our business on, and this approach has put us in a position to be successful. Our performance-based service introduces people that want to buy a product or service directly to the people who are selling the product or service. It puts us in a position to deliver a high return on investments to advertisers because we are delivering those targeted clients that they are looking for directly to the advertisers’ websites.”

CEOCFOinterviews: Will you give us a sense of how it works and what the whole process is in the Pay-For-Performance advertising?

Mr. Pisaris-Henderson: “Performance-based and pay-for-performance can be taken quite literally; our advertisers pay us only when successfully perform for them, that is, when we drive traffic to their websites. In the past, people would buy an advertising campaign by impressions (cost per thousand or CPM) to get in front of the masses. Over the course of five or six years, advertisers started to realize that online advertising campaigns such as banner ads and buttons, which were based on a pay structure that requires advertisers to pay per thousand impressions regardless of whether they received a ‘click’, just were not converting very well.

Our method of online advertising is quite different, in that we only charge an advertiser if that advertiser receives a ‘click’ from an Internet user. Since the Internet it is a very trackable medium, we can actually see when someone clicks and we only charge our advertisers at that time. So the ‘click’ represents a revenue event rather than just showing an ad. A corollary to this in the offline world—it is very much like a yellow page phone book, but instead of the advertiser paying to be listed, they only pay when someone picks up the phone book and dials their number.

There are two primary elements to this process. 1) The average amount we collect per click and 2) how many clicks we record per quarter. Addressing the first, we’ve built an automated auction-based environment allowing our advertisers to bid on keywords that are relevant to the product or service that they are trying to sell. For example, if you sell bicycles, you would tell that you wanted your website to show up every time someone does a search for ‘bicycle’. If you wanted your ad to be the first ad shown, you need to be the highest bidder for the keyword ‘bicycle’.  In that scenario if there were no other advertisers bidding on ‘bicycle’, the advertiser would only need to bid one penny to be listed first. In our auction-based environment we have thousands of advertisers bidding against each other, which stimulates the bidding process. So, instead of just one person bidding one penny on a particular keyword, we have literally hundreds of people bidding for that keyword. By continuing to add new advertisers we continue to stimulate the bidding process, which increases our revenue. So one of our key metrics is our average revenue per click, which is directly related to how much the market values the traffic we deliver.

Addressing the second point, the more clicks we can deliver to our advertisers, the more revenue we produce.  That leads us to the distribution model we’ve produced. As mentioned, we built a database of thousands of advertisers who bid against one another in an auction-based environment to determine the pricing structure. Then we had to find a way to deliver Internet users to the advertisers’ websites. We had two choices.  One choice was that we could go out much like a Yahoo or an AOL and spend hundreds of millions of dollars trying to brand ourselves and get people to our website. The second approach, the one we chose, was to find a way to show our advertisers to Internet users looking for products and services on hundreds of other websites throughout the world; Internet users initiating hundreds of millions of searches every single day. So, we decided to partner with those sites that have the Internet users initiating those searches. In other words, when you do a search at any of our over 230 distribution partners’ websites, you get results. For example, you may be going to CNET’s to search, but you will get search results that show advertisers’ keyword ads. When you click on a advertiser’s ad, our advertiser pays for that click and in return, we pay the distribution partner a percentage of that payment. Not only does this model drive a large quantity of Internet users to our advertisers, but is also produces a new revenue stream for our distribution partners since we share the revenue produced from the click.”

CEOCFOinterviews: What percentage of the revenue goes to the partners?

Mr. Pisaris-Henderson: “In terms of how much we share with our distribution partners, across the board it averages 50% that goes to the distribution partner, and 50% stays with”

CEOCFOinterviews: Can smaller businesses afford to compete with larger corporations under your model?

Mr. Pisaris-Henderson: “It definitely is open to smaller businesses! Yes, we do business with Dell Computer Corporation (NASD: DELL), IBM (International Business Machine Corp – IBM) and Intel Corporation (INTC), but the real foundation of our business is built on the smaller companies. For instance, take ‘Joe’s Computer Shop’ and other similar small ‘mom and pop’ operations. Joe’s Computer Shop is bidding directly against Intel or Dell. You may wonder how Joe’s Computer Shop can compete against one of the largest corporations in the world. It goes back to our model—if Dell only has to bid twenty cents to be number one to get a targeted consumer to their website, that means Joe’s Computer Shop only has to bid twenty-one cents to out-bid Dell.

We have actually opened up the ‘universe’ of online advertising in terms of who can participate in our medium, which was one of the biggest drawbacks with online advertising in the past. For example, in the past, if you wanted to be on Yahoo, you would have to spend tens of thousands of dollars for some type of a banner campaign because that was the only method offered in the past. With you can open up an account for as little as $25.00 (all of which is applied directly to your click-throughs) and you can bid as little as one penny for each keyword. The point is: you determine the pricing structure and you only pay when it works. We have been able to expand our model of advertising to over 20,000 advertisers globally; advertisers of all shapes and sizes using our products and services to get targeted clients to their websites.”

CEOCFOinterviews: Are there other people using your same business model now, and what is to prevent a competitor from coming in and doing the same thing?

Mr. Pisaris-Henderson: “There are three primary companies in our space: Overture Services, Inc. (NASDAQ: OVER), Google Technology Inc. (private), and (NASDAQ: FWHT). What you have is a break-up of the marketplace in terms of services offered and distribution partnerships. In terms of advertisers, the advertiser only pays when something works; for them to use just one service doesn’t necessarily make sense. Of our 20,000 some advertisers, we are confident that a very high percentage use Overture and Google as well; actually, many of them tell us they do because all three services are working for them. In terms of the distribution side, we have different strategies from these two companies on how we reach the marketplace. Before I get into the strategies and the different levels in the marketplace, it is important to understand that the Internet marketplace, in terms of distribution partners, is very large with thousands of websites that generate potential leads for advertisers every single day. To date, we have signed approximately 230 distribution partners, which means there is a very large upside to the amount of new partners we can bring on in the years to come, so we are very excited about our growth potential.

With regards to strategy, Overture, with their strong financial backing, went directly to the top-tier portals such as AOL (AOL Time Warner – AOL), Yahoo! Inc. (NASD: YHOO) and MSN (Microsoft corporation – MSFT), and signed distribution deals that required millions of dollars in upfront or guaranteed payments. When you do a search of Yahoo specifically, you actually see Overture results. The reason they were able to do that is that Yahoo would demand tens of millions of dollars of up-front payment to ‘buy that real estate.’ Since did not have the same type of financial backing, we were not a heavy competitor for those listings with Yahoo. Our approach was to attack the smaller players in the marketplace, and more of them. While our approach has taken longer—achieving a high traffic network with many distribution partners, we have formed a solid and defensible position in that we are not dependant on specific partners to maintain our primary revenue sources.

The majority of the thousands of distribution partners are at the lower level; they don’t get nearly the amount of traffic that Yahoo, AOL, or MSN does. has become the dominant player at the lower level - the tier two, tier three and tier four areas. Overture has become the dominant player at the top tier area, because they did not really have a strong financial competitor for those distribution partners.  In February of 2002, Google entered the marketplace. Since then, Overture has been losing traction in the top-tier portal area to Google.

CEOCFOinterviews: Do you intend to go after the top tier business?

Mr. Pisaris-Henderson: “We have always wanted to participate at the top level. In fact, we had one top-tier player exclusively, which was ‘Excite.’ Unfortunately, they went bankrupt and had to fall back and reform themselves. Excite is still a partner today, but a smaller player in the marketplace. We have been in all the negotiations with the top tier players, but it always comes down to the dollar amount that we are able to pay them up-front.

Then, we took a step back and analyzed what performance-based advertising services meant for these top tier websites. We quickly came to the conclusion that the top portals could do this themselves. With this conclusion, in Q3 2002 we launched a private label product, where we are actually helping the top-tier portals get into our business. Some people want to know if doing this cannibalizes our business model; the answer is no! We do not currently do business with these companies and the new relationship is purely accretive, not cannibalistic.  Our first partners were (Terra Lycos – TRLY) and HotBot, launched at the beginning of November 2002.

We believe that, over time, not only are we going to continue to be the dominant player at the lower levels, but now we also have a product that is going to allow us to participate in the top-tier. We are a very different company than that of Overture and Google, and our foundation is very different. As of now, both Overture and Google are heavily dependent on those exclusive top-tier distribution partners. In fact, it has been reported that 63% of Overture’s revenue comes from two distribution partners. Losing either partner would significantly decrease the value proposition that Overture offers to advertisers or Wall Street investors. We find that not only are we not dependent on the top-tier players, but now we are actually becoming an integral part of their business because we are actually putting them in business for themselves. We believe we are seriously changing the rules of the game and the make-up of our industry sector over 2003-2004, with our new private label product.”

CEOCFOinterviews: What are the barriers to entry for someone that comes along and wants to do what you do?

Mr. Pisaris-Henderson: “There are two primary barriers to entry. First are the technological barriers. It took us several years to develop the back-end processes to be able to do what we do efficiently. You have to have leading edge filtering systems and processes because we have an auction-based system that is very competitive. As our advertisers are competing head-to-head, with everything based on a click-through, a competitor could just sit there and click on their competition until the competition runs out of money—then they take over the first position. In our years of experience, we have actually seen people try to do that. We have also seen that spiders and bots, just doing their normal days work, click on our advertisers’ links.

What we have realized is that all of our advertisers are looking for a return on their investment.  If they are getting clicks that are not converting into sales, they will not continue to spend money with the company delivering the ineffective traffic. So, over the past three or four years, we have been developing and improving back-end processes that discern whether a click that is being generated on the Internet is a legitimate click for the advertiser.  A legitimate click is one that is sending an Internet user that could potentially buy something to an advertiser’s website. The larger companies that have the traffic, such as AOL and YAHOO, have announced that they were looking strongly at coming into our industry sector. But, what they have realized is that the back-end processes are very difficult, not impossible, but difficult to create. YAHOO has plenty of resources, so surely they could overcome this.

The second barrier, and this is the one that has kept the large portals out of our marketplace, is there is a time to market issue.  It takes six months to one year to develop this process efficiently enough that it is returning high ROI back to the advertiser.  If the advertiser doesn’t see immediate results, that six to twelve months will be too long. Our private label product takes that issue out of the equation. For example, we signed a contract with LYCOS in August and six weeks later LYCOS launched their product.  So, in six weeks LYCOS was not only up and running with their keyword advertising service, but they were also effective because they were capitalizing on our years of experience in the industry sector. We are now sitting down with the top players like LYCOS.

Additionally, to be successful you have to have thousands of advertisers bidding to make sure that the amount being charged is high enough from which to make a viable revenue stream. You also need the large-scale distribution side of the business in order for this to be an effective business model. There are only a ‘hand-full’ of companies that can actually do what we do, and those are the top portals because they already have the traffic. Its just a matter for them to eliminate the time-to-market concern, which we feel we will be able to do in the years to come with our new private label product.”

CEOCFOinterviews: So you have it really ‘wrapped up’ here?

Mr. Pisaris-Henderson: “We feel we are taking the right strategic steps in building solid business partnerships with the smaller players while serving as a catalyst for the larger players. There is little doubt that our approach is very different from both Overture and Google and that some people do not understand our approach because of their desire to constantly compare us with the two largest players in the sector. However, we feel that our partnership-type approach is a better approach and puts in a stronger position long-term since our approach makes us less dependant on any one partnership to maintain our revenue streams.

CEOCFOinterviews: Are you at a point where advertisers come to you, or do you have to reach out to them and how do you do that?

Mr. Pisaris-Henderson: “The majority of our advertisers, upwards of 85%, come to directly, set up their account, deposit their money in a totally automated format, and have never had human contact with us. We have built a very intuitive back-end system, which allows people to deposit funds via credit cards and manage their accounts, in fact, doing everything on their own if they so desire. From day one, we knew that we would have to develop this intuitive backend system that would allow thousands of advertisers to manage their own accounts. The only other option was to continue to add additional human representatives as we serviced more and more advertisers, and that quite frankly, is not a scalable model. But with this said, we do have a small, focused sales team that targets the larger companies.

As part of our ongoing effort to bring even more large companies into the fold, we have hired a vice president of sales that is developing yet another small, focused team to target large agency accounts out of our New York office. In 2003, we are going to be very proactive in going after agencies and large companies in terms of them participating in our network.”

CEOCFOinterviews: Are your clients mostly United States companies?

Mr. Pisaris-Henderson: “Most of our clients are U.S. companies. I do not know the exact ratio of US vs. global, but I can tell you that we have a strong awareness in Canada, the U.K. and Germany as well. With that said, we do have advertisers from many other countries but for the time being we are focused on the US market.”

CEOCFOinterviews: Is that an area you would like to build out?

Mr. Pisaris-Henderson: “We have international aspirations, but it is important to do it at the right time. We do not feel that the U.S. marketplace is anywhere near saturation, therefore, we are very much focused on the United States. The awareness abroad is increasing and we will take advantage of it, but at the right time.”

CEOCFOinterviews: How would you explain your recent recognition by Deloitte and Touche “Fast 50” as a rising star among the fastest growing technology companies?

Mr. Pisaris-Henderson: “The recognition is based on percentage of growth. Over a three-year period, we grew over 24,000% or something along those lines. I think that goes back to speaking to our numbers. We were a company that didn’t have much money to start with. At the end of November, we had over 20 million in cash and short-term investments with zero debt on the balance sheets. We have raised less than 15 million dollars and we have done all this in a very short time. As of Q3 2002, we have been profitable for 6 sequential quarters, with our top line and bottom line increasing sequentially. It really boils down to a management team that executes well, with Deloitte and Touche recognizing that execution.”

CEOCFOinterviews: How do you overcome the DOT.COM stigma?

Mr. Pisaris-Henderson: “We really haven’t had too much of an issue there. I am not saying that we don’t run up against individuals that, upon hearing our name, they say things like “that’s nice” and “what’s your burn rate”. I get those comments all of the time. I, along with our board members and shareholders, enjoy telling them that we haven’t had a burn rate in well over a year-and-a-half, getting close to two years now.

It really comes down to this: we point to our numbers, our execution, and management efficiencies to tell our story—that we are not only a company that is profitable and growing, but we are a fast-growth profitable company.  And, there is a difference there. Many companies are break-even or just slightly above break-even and have been trudging along.  We have grown over 100% year-over-year during one of the toughest economic times ever. 2002 saw over 600% top-line growth and in 2003, we are giving guidance for approximately 40% top-line growth.  We also reserve the right to increase our guidance going forward. Bottom line, we are a fast growth company that is very profitable, therefore, a stigma attached to being a DOT.COM does not apply to us.”

CEOCFOinterviews: What are the biggest challenges that you face and how are you preparing?

Mr. Pisaris-Henderson: “In 2002, the biggest challenge was growth. We grew the top-line over 100%, but the real growth was internal. Early in our history we had to ‘bootstrap’ everything. We built things that were not ‘make shift’ but were on the very ‘efficient and frugal’ side of the equation, in terms of determining what we needed to be successful. In 2002, we started to build out the internal structure to be a robust global system. Now, we are a globally redundant company, serving upwards of one billion searches a month, which is one of the largest search distribution back-end systems in the world. It is quite impressive and we have done it in an efficient manner.

We have had some challenges in terms of making sure we can keep up with the right personnel and bring them in-house. I can proudly say now that we feel very comfortable with our internal architecture, in terms of personnel and our internal infrastructure in terms of technical capabilities.

Our biggest challenge going forward is diversifying the company into our different products and services. Core technology is working with the lower tier distribution companies. Our newest product is the Private Label Service, which puts the top-tier companies in business for themselves. In 2003, we are anticipating launching a couple new initiatives that are going to be very accretive to our partners and our advertisers; which will diversify our revenue stream. I think that is going to be a bit of a challenge, but it is a challenge that we are ready to face.”

CEOCFOinterviews: Will you give us some final thoughts for shareholders and investors?

Mr. Pisaris-Henderson: “I think the best advice that I could give to Wall Street right now is to take a look at the online marketing and advertising sector very closely. Over the last few years, it has taken much heat, in that the pure dollar amount that has come into our sector has decreased. What really has happened is not evidence of a weakening sector, but a paradigm shift. In days-gone-by, companies had to spend tens of thousands of dollars just to have a campaign. Now, those same companies can spend a smaller amount while producing higher returns. We are seeing products and services that work really well, such as the services offered by, taking market share.

The larger we become, the more we believe that revenue is going to continue to increase. More advertisers are coming into our sector, we believe, and that will also ‘fuel the revenue.’ The conclusion we believe one will come to is: is well positioned in the marketplace and well positioned to continue growing in a fiscally responsible manner.”

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