building strategic relationships in the digital world
In the digital world, it's not a question of whether your business will form partnerships, simply how and with whom. As Glenda Dorchak, President and COO of Value America puts it, "You'll have to co-exist to be able to exist on the Internet." At this Morino Institute Netpreneur Program Coffee & DoughNets meeting, held July 22, 1999, Ms. Dorchak was joined by Gary LaFever, womenCONNECT.com Senior Vice President, to discuss many of the considerations in forming successful alliances between Net-based businesses.
Good morning. I'm Mary MacPherson with the Morino Institute's Netpreneur Program. It's the middle of July and it looks like we have almost outgrown this space!
Thank you all for coming this morning. We've got a great program, and we are very fortunate to have with us Glenda Dorchak from Value America and Gary LaFever from womenCONNECT.com in the discussion to be moderated by someone we all know very well, Esther Smith.
It's my great pleasure to introduce, Esther. She is really one of the "mothers" of the technology community in this region. Currently, a principal with the investor relations firm The Poretz Group, Esther was the recipient of the prestigious 1999 Earle C. Williams award for leadership in technology. She also founded the Washington Business Journal, and was the publisher of Washington Technology. She was a founder of the Northern Virginia Technology Council and a champion for the organization Women In Technology which has grown to prominence across the country.
One of our favorite of Esther's roles is as advisor to the Netpreneur Program, where she can always be counted on to ask the hard questions and to offer us solid advice and counsel.
ESTHER SMITH: "Favorite Aunt," Maybe?
I definitely like "older sister" better than "mother of the technology community," but whatever. I love the Netpreneur Program as you all know.
It's great to be here today and to have two people on our panel who not only know a lot about partnerships, but have actually done a partnership with each other. I'm going to introduce Gary LaFever first. He will make some remarks, and then I'll introduce Glenda Dorchak who will also speak. After that, we'll open it up for questions.
Gary LaFever is not only a recovering consultant, he is also a recovering lawyer. He has touched all the bases, including being an entrepreneur in a start up environment, and he is the co-entrepreneur with Susan DeFife of womenCONNECT.com. Once Susan had gotten womenCONNECT.com to the point she could see that it was going to become a company, Gary came in and helped her do it. They have been one of the region's most interesting and exciting content plays.
Gary wears many hats over at womenCONNECT.com, including a little marketing, a little deal-making, a little lawyering, a little CFO-ing.
Gary has a lot of insight into doing partnerships because womenCONNECT.com has built its whole position on the idea of connections. Here is Gary.
GARY LAFEVER: Know Your Metrics
Thank you, Esther.
I'd like to start with three quick points. First, I want to thank Mario Morino and the Netpreneur Program team. The Netpreneur Program has a lot to do with the success of womenCONNECT.com. We may not be as visible at the meetings as we once were, but that's because we are implementing all the things we learned at the meetings we went to. If you can't make it here in another six months because things are cranking so much that you don't have time, that's okay, just so long as you come back a little later on and give back to the community. I would like to ask, if you would, to give a round of applause for an incredible team and a great contribution.
Second, I'd like say a personal thank you to Glenda Dorchak and her team who woke up at an awfully early hour to get here from Charlottesville. They are a great team of people and we have enjoyed working with them. We very much appreciate you contributing to this event. Third, I want to point out to the members of my team that the old-fashioned DayTimer can be used for notes for a speech. Can your Palm Pilot do that? I get abused at work because I haven't surrendered to the Palm Pilots. They keep saying, "You know, it only costs $499 at Value America."
C'mon In, The Water's Fine
I was a partner at the largest law firm in Washington, DC. How the heck did I join up with Susan DeFife in the back of her house to work for six months with no pay? I didn't have the guts to do that in one step. I had an interim opportunity with a company that had everything—backed by Kleiner Perkins and a great management team. I was going in to help take them public, then move into business development. On my eight-week anniversary, I was told they were moving back to France. You want to move? No? Well, you don't have a job.
Having made the jump to what appeared to be a safe entrepreneurial environment, I would not have gone back into the protective womb of a law firm for anything. So the message is, if you are thinking about jumping into the netpreneur community, you may not be as fortunate as I was to get pushed into the water, but dive in because it's worth it. It's a lot of fun. It's a lot of work, but I wouldn't change a thing. If you really are thinking about doing it, think harder and do it.
I am supposed to speak briefly about who we are and what we do at womenCONNECT.com. Ironically we are not a technology company. I'd go so far as to say we are not even an Internet company. We are a demographic company that uses the Internet, because it is the cheapest means of infrastructure and delivery to our audience and our constituency. This year you will see us moving into alternate media. We have had magazine partners in the past, and we are putting in place new magazine partners. We have deals in place with broadcast partners. We will have our first conference series this fall. What we do, what we know, is the demographic—high-end women in business, who either own or manage businesses.
Yes, I do realize I'm male, but I like to think that, despite the deficiency of my gender, I can contribute. It's a fascinating company to be with. There are more males than just me in the organization, but I will say it's certainly still primarily women and that means I don't get a break. I grew up as the youngest child with three older sisters. I have a wife and two daughters. The only way I get testosterone in my house is with two male German Shepherds, and my wife made me get them fixed.
All right, why are partners important to us? Because of what we are. As a demographic play, we have a huge opportunity, but we don't have the time to develop the infrastructure we need to execute on our business model. We look for people and companies that have a like end-game. They either want to sell into our audience, or they want to prove that their technology infrastructure or business model works with our kind of community. We cannot suffer the time and expense necessary to build everything that we need, so we look for partners who have an objective that's very consistent with ours whom we can work with. One of the beauties of the Net is that it's very collaborative, so that's why we live and die with partnerships.
Traffic, Revenue, Branding and Effort
I'm going to give you two acronyms. If nothing else, if I lose my place, you can give me the next acronym letter and I'll know where to pick up. The first acronym is TRBE. I know this one much better than the second one because I just made it up. The next one is CTYAW.
TRBE. The essential message here is to know your metrics. Don't allow them to be diluted because you're talking to some gee-whiz, hot shot corporation. Figure out what will define whether or not a partnership is a success. Come up with something that you can keep burned in your mind, and any time a partnership opportunity crosses the threshold, evaluate it on that criteria. For us, that's TRBE: Traffic, Revenue, Branding and Effort. Depending upon where we are in our business model maturation, certain of those are more important than others.
Right now, E, Effort, is the big one for us. We have 20 people going flat out. We have between three and six new partnership opportunities a day coming over the transom. Why? Because we learned all that great stuff at the Netpreneur Program and we are doing it right. I don't have enough people to execute on all of these opportunities, so the first filter I put into place is, "How much of this are you, my potential partner, going to do and how much am I going to do? How can you make me more successful, at the same time making yourself successful, and what's the impact on my staffing paradigm?" It's a good situation to be in, but, as you know, it's tough to get new people. Yes, we are always hiring—you can see me later.
E is big for us, but T, Traffic, is big as well. Branding is key, not only in how we get our name out, but who our name is associated with. We have worked very hard to develop a strong, credible brand in this demographic. The logos I put next to ours are important because I want to add to, not detract from, what we have worked so hard to develop. Branding is always key for us, but, at different times, you either look down the food chain, meaning someone who is a little less mature than you are, because they can get you on the road and get started earlier, or you look up the food chain at someone who is a little more established and can give you some extra oomph. You have to know what you are looking for and why.
So the message is: know your metrics. Come up with something which you can use any time you are looking at a partnership so you can quickly say, "This works, that doesn't." Do a weighted average if you want.
How Can I Help You?
The next acronym deals with some dos and don'ts from my personal experience, CTYAW: Competition, Technology, You, Angry, Work it.
The first don't is the biggest, and it's something I used to do myself—C for Competition. Don't lead with, "If you don't do this deal with me, I'm going to do it with your competitor." It ticks me off. I used to think it was a great way to drive someone to closure until it started ticking me off and I realized that it doesn't make any sense. You want to identify and demonstrate that you know the potential partner and their competitors, but you do that by showing them how this deal is best for them or most consistent with their business model, because the other business models are so diametrically different. That subtle difference shows that you have done your homework, that you know the competition and that you could do business with them. Don't push for the close with that. You would be surprised that I hear it more times than not. They say, "Look, I'm talking to all of your competitors and do you want to do the deal?" Okay, you just finished the deal. I'm not doing the deal with you. So don't lead by hitting someone over the head with their competitors. Do show the other party that you know who their competitors are, that you're savvy enough to know how they're different and why they're the better pick.
Next is T for Technology. We are not a technology company, so don't sell me on your technology. We are a demographic community company. Yes, I know I'm saying "we" and different companies have different focuses, but I'm using these terms loosely. The point is: know what is important to your prospective partner and speak to it. I must have six calendar software proposals on my desk and all I hear is, "I have the fastest this, I have the best that." I don't care. I'm not a tech guy. But if you can tell me how this is going to help build my community, how it is going to increase my stickiness, my repeat visitors or my ability to garner a higher advertising rate, now I'll talk to you. Don't use ‘yourspeak.’ Figure out what's important to them and put it in their words.
The Y is You. Guess what, I know you think that you are the most important person in the world, but I happen to have the same opinion, so talk about me, not you. I don't want to hear about your company's most revolutionary whatever to hit the Web. It's Marketing 101, but you would not believe the number of people who start off with, "We have the greatest thing ever." You are a lot better off saying, "We think you have done a great job. We think you are doing all these things right. Here's how we would like to help you be successful." It's common sense, but it's rarely said that way. Maybe it's because there is so much activity, so many people getting into business development and marketing positions who don't necessarily have the formal training, but it's just interpersonal relationships. Everyone likes to think that they are the most important person in the world, so let them think it. You know they are wrong and you are the most important one, but you don't have to let them know that.
Next is A, Angry. I have had so many people get mad at me recently because I told them I can't look at a deal for three to six months. Why? Even though this is Internet speed and Internet time, you should simply say, "Look, I understand where you are and how much you have going on. Do you mind if I keep in touch? I'd like to send you some materials." Even in the Internet space, relationships are still built one step at a time. You may get lucky and hit somebody who wants what you're offering at the time you call, but, if not, don't tick them off. I had a guy actually yelling at me. I have only done it twice in my life, but I hung up on him because he kept yelling. I can go places where I get paid to be yelled at, so why am I going do it for free? Don't get upset. Try to understand. The most effective technique that was used on me, and I try to remember it, is, "I understand that this doesn't work for you now, can you just help me understand how I could make you more successful? Let me go back and think that over, and when it does make sense, I'd like to talk to you." Send the materials. Ask if they would like to go to lunch sometime or have a drink or a cup of coffee. They probably don't have time, but it's a nice gesture. This is Human Relations 101. I've been shocked recently at people getting upset when I tell them that I don't have time to do something right now. It does not mean I'm not interested.
Lastly, the W, Work it. What that means is, notwithstanding all the adrenaline and the excitement and the staying up late to put out a proposal, the work doesn't start until after you issue the press release. Mary McGann, our Senior VP of Sales, has taught me this in spades. I get all pumped because we close a deal, then she says, "Okay, Gary, what do you say we put together a content person, a sales person, a tech person and go up and meet with the partner and see if we can really make this work?" It's key, but, in Internet speed, people move so quickly that it's easy to miss that. It's only when you have the partnership done that you sit down and actually work it. That's when you can realize its true potential. Look at your team, assess the strengths of the people involved and field a SWAT team to go up and work it.
We sent a team to Lycos to find out how we could help them get a higher CPM ("Cost-Per-Thousand," the rate an advertiser pays per thousand audience members. M is the Roman numeral for 1,000). We went to teach them about the uniqueness of our demographic. Do you know who buys most of the ads on our content on Lycos? iVillage and Women.com, two of our competitors. We'd prefer them to cut checks to us directly. They don't do that, yet they are advertising on our content. Are our advertisers going to bid up the CPM on our content? No. If Lycos wants to start reaching out to the higher end corporations—the automobile manufacturers, computer manufacturers, golf equipment manufacturers, whatever—that want to sell into our audience, that can drive up the CPM. By sending a team to Lycos and explaining how our female demographic is not the one with the picket fence, it's the one driving the Porsche Carrera and using the Palm Pilot, and, if they appeal to that market, we can increase Lycos' CPM. If we coordinate our editorial calendars, we can help Lycos sell sponsorships in advance.
What's the underlying current here? Our content is so good that we can help you be more successful. We are not saying that blatantly, but we are trying to make them successful. Immediately after that meeting, the relationship blossomed and we are getting a lot more traffic from Lycos. It's just compounding, so for every deal that we sign we are going to send a SWAT team out. You work so hard to get the deal, but afterwards is when the work really starts.
What Makes Success?
Very briefly I want to talk about some of our partners, as well as what works, what doesn't and why.
Our first big partnership was with IBM which, depending upon your perspective, was either a big success or a failure. We struck a deal with IBM for a co-branded ISP service. We have boxes of womenCONNECT.com/IBM sign-up disks still in the garage, if you're interested. They say, "womenCONNECT.com, the first stop for women on the Internet." You slide it in. You boot it up. It defaults to our home page. Is that a cool business model? The problem is, all of the other ISPs went to fixed pricing and our arrangement with IBM was based on payment for usage. Ah ha! No market for that. Even though the program never really had a chance to take off, the press, the credibility we got from that partnership and the relationships we made within IBM put us on a trajectory that we have never turned away from. You must understand what you mean by success. It was still of great value to us. We are now implementing a new program with IBM that we hope will be a big success.
Another partnership that, depending upon your perspective, might be considered a huge failure or a huge success was with MacDonald Communications, publishers of Working Woman and Working Mother magazines. We had a deal with them for a year in which we provided their Web presence without charge in exchange for visibility in their magazines and integration of their content in our site. They have since gotten Internet fever and have decided to try it on their own, but we also bought a one year head start in the Internet space.
I'd like to quickly identify some netpreneur companies that have been incredibly important to us. CareerBuilder has been a long-standing partner of ours and is our biggest revenue producer. Great people there. We have been working with them from the beginning, and it was the Netpreneur Program that made it possible. Proxicom, as well, from the very early stages, helped us very much with establishing the community aspect of what we are doing. Interestingly enough, Proxicom has actually weaned itself out of that area of business. They used to sell bulletin board and chat products. We were the only one using their chat product at one time and kept asking for enhancements. Finally, we had this great meeting where they basically said, "Look, we love you guys to death, but we're not going to do this anymore. Can you buy someone else's product?" They have been incredibly supportive, though, and have helped us learn. Now they have taken that expertise in community and they are bringing it into corporate intranets and other venues that they are building out. They have taken that expertise and gone one way with it; we have taken it and gone another. It has been a very, very successful partnership.
I'd also like to mention the Sapphire Group from Manassas, Virginia. Although we have a vendor/vendee relationship, they have been a big part of what we have been doing and building out the site. Those are just three companies in the region that have been instrumental in what we have accomplished, and it's why I mean it when I say that the Netpreneur Program has been a big part of our success.
Some of the big deals we have signed recently that will have a lot to do with where we are going forward include Lycos, which is a huge one. If you go to Lycos and you key in "women" or "business" or "career," guess who comes up first? Thank you very much. A year ago, iVillage paid millions of dollars for that relationship. They are paying us now, so timing is another issue. The value of content is now being recognized and we have great content, whereas iVillage was just pumping stuff up there. I don't know where they got it or why they got it, but that's what they were doing. CNNfn owns 10% of our company and it is a barter relationship. You have to think outside the box. They get an equity stake in the company for their use of content online and we have live feeds going in both directions. In addition, we are working with them for promotion on their sites and in the broadcast area.
Our deal with CompuServe has had a soft launch. I can say this even though we haven't had a press release yet because it was mentioned in an article about us in Forbes ASAP with their permission. We are very excited about CompuServe. It is our market. Their users are business owners and professionals. CompuServe is the result of probably eight months of working with our America Online contacts. We hope that it's just the beginning for relationships we can form with America Online properties.
Lastly, we have a relationship with Value America. The neat thing about Value America is that we are constantly looking for ways to extend the relationship and capitalize on the power of what we bring to the table. Sometimes the relationship you close today may not be the one you'd ultimately love or aspire to, but get it done and get it moving.