Advertising-Only Site Claims to Be Making a Profit By CARLOS MARTINEZ Staff Reporter Experts may complain the Internet is a terrible place to make a buck, but one Sherman Oaks-based Web site operator, Vendare Group, managed to double its revenue and post a profit last year. Vendare CEO Keith Cohn said he’s not surprised that his four Internet gaming sites pushed the company’s revenue last year to the $14 million mark, doubling the $6 million it took in a year earlier. “People love to play games, so that’s where we felt we could do some business,” said Cohn, who would not release net income figures for the privately held company. “Our plan was simple. We attract people with free games nobody bets or has to put up money and we put up ads for our customers that they can see while they play,” Cohn said. Although the company’s games often resemble Las Vegas-style gambling, the resemblance stopped there. The simple strategy free games seemed ill conceived when it started (and posted a loss) in 2000. But before long, heavy marketing on popular Web sites began attracting a larger crowd and more advertising. With an initial investment of $10 million, mostly from Pasadena’s IdeaLab!, the company was able to weather a rough first year as it developed its initial site with virtual slot machines, poker and solitaire. Henry Blodget, a Merrill Lynch & Co. analyst who covers the Internet, said Internet advertising still represents a small fraction of overall advertising sales, most sites that expected to generate income from advertising alone have failed, only a handful of sites have seen growth, and Vendare is one of them. “They’ve managed to hit upon this niche that is really working for them,” Blodget said, “and it’s not that easy to attract advertisers.” Revenue from online advertising has declined in the past two years, going from an estimated $9 billion in 2000 to $8 billion in 2001, according to Merrill Lynch. John Thompson, an independent media analyst in Los Angeles, said the firm is able to cash in on people’s interest in gambling, without letting them actually place a bet. “It’s not really gambling since no one is betting, but it’s addictive nonetheless and it seems to attract a lot of people, which is what advertisers want,” he said. Among Vendare’s advertisers are American Express Co., LL Bean, United Airlines, eBay Inc., Sprint Corp. and Nabisco. The company has grown from its initial Jackpot.com site by adding BigPrizes.com, SportSkill.com and the recently acquired Blink.com, all offering games and contests to users who must register to play. “It’s all advertising revenue. Players don’t have to pay a dime,” Cohn said. That doesn’t mean there is no value added for advertisers. Blink, for instance, offers cash, gift certificates and savings coupons to consumers who visit new sites. Altogether, the company has a database of about 18 million registered members to their Web sites, with about 300,000 new members joining each month, Cohn said. Despite a brief downturn immediately after the Sept. 11 terrorist attacks, Vendare’s Web sites have seen increased traffic and improved advertising numbers. Although the company laid off 10 of its 75 employees shortly after the attacks, it has recovered and is looking to improve upon last year’s numbers. “More people are staying at home with the family and going out less, and when they’re at home they want to go online and play games,” Cohn said. “It’s bad for the airline business, but it’s great for us.” Last year, the company signed a two-year agreement with Fox Sports Inc., a unit of Fox Broadcasting Co, to run its sports fantasy Web site where fans can coach virtual teams against other virtual teams using the records of real NFL and major league baseball players.
