Internet’s Bad Boy Grows Up
It’s Monday morning at an online-advertising conference, and the chief executive of AdBrite Inc. is talking about repurchase rates and average per-click costs. But he’s seriously distracted by the busty models serving beer in the booth next door.
At the first opportunity -- after getting through his sales pitch -- he reaches over for a plastic cup of Amstel Light.
Potential clients might recoil at the sight of a CEO behaving this way before lunch. But those who recognize Philip J. Kaplan would be disappointed if he didn’t. Some drop by just to pay homage to the Internet’s preeminent bad boy.
“I had to come talk to you because you’re the creator of the best website ever,” says Kevin O’Barr, a vice president for an online marketing company.
He’s not talking about AdBrite. He’s talking about Kaplan’s other business, a website that made him one of the few people to get both rich and famous from the Internet crash of 2000 -- a site with an obscene name that is a mocking twist on that of the new-media magazine Fast Company.
Five years ago this month, as a 24-year-old Web designer, Kaplan created what quickly became the Internet industry’s wailing wall, a site that used leaked information and ruthless commentary to chronicle the disintegration of hundreds of Internet companies.
To laid-off workers, he was a hero. To employers, he was a curse.
Now, instead of tearing down companies, Kaplan -- at 29 -- is building one of his own.
He persuaded Sequoia Capital, the blue-chip Silicon Valley venture capital firm that backed such companies as Google Inc. and Apple Computer Inc., to invest $4 million in his method of placing ads on websites. He moved from New York City to San Francisco with dreams of turning AdBrite into the next billion-dollar company.
In some ways, Kaplan’s story is the story of the Internet: Both worked through their youthful indiscretions and are coming back in a more sure-footed, sober way. After 10 years of booms and busts, the Internet has proved itself a medium capable of generating billions of dollars from the kinds of ads Kaplan is selling.
“C-E-O,” says Web entrepreneur Greg Tseng, as he approaches Kaplan’s booth and shakes his nametag. “Man, you’re all legit now.”
Legitimacy is something Kaplan is still coming to terms with. He says taking venture capital funding and trying to turn his tiny company into an Internet giant may be the most “punk” thing he’s ever tried.
“I knew that if I concentrated on AdBrite I could probably make a big company out of it,” he wrote in a March e-mail to followers of his old site, which he calls “FC” to get past spam filters.
“But leave my cushy life in NYC? No more waking up at noon, updating FC for an hour, and spending the rest of the day cashing FC checks and watching porn? ... It was a hard decision, but, like, I’m a man now. 29!”
Kaplan doesn’t need to look too deeply into his childhood in Chevy Chase, Md., to find the irreverence that seeded FC. With a habit of cutting school to skateboard, he was often in the principal’s office. He was expelled in fourth grade for getting in trouble too often and again in eighth grade for constantly skipping class. Slingshot target practice on the roof of a parking structure earned him a day in jail.
Six feet 4, rail-thin and into heavy-metal music, Kaplan says he had trouble making many friends in high school. But he loved computer programming and found camaraderie online.
His parents bought him a Hyundai personal computer and a phone line, and he spent most of his bar mitzvah money on a faster modem. He would often stay online until 3 a.m. or 4 a.m., with a towel stuffed under the door so his mother couldn’t see the light from his monitor.
He began running his own online bulletin board, a messaging system that predated the World Wide Web, and it quickly became a popular place for finding the latest pirated game and other software, swiped credit card numbers and directions for making free phone calls. It was a closed community with 300 members, and he was the leader.
He found his stride at Syracuse University, where he made friends, played drums in a band and taught programming courses. He graduated cum laude with a degree in information management and technology and landed a job with a management consulting firm in Virginia, creating computer programs for running businesses.
A year later, on a whim, he moved to Manhattan to try his hand at a career producing music. He lived with his grandmother. To pay the bills, he worked at a Web design firm.
It was 1998, and he quickly got his first taste of how overheated the Internet business was becoming. One time, he was asked by his bosses to estimate how much to charge for a project. It was easy work, so he said $200. By the time the bid got to the client, his bosses had tacked on two zeros: $20,000. The client signed the contract.
After his firm won a $1-million bid for a project he thought he could do for a fraction of the cost, he says, he left to start his own firm, PK Interactive, out of a rented loft. He soon had four employees and more business than he could handle, as clients desperate for websites came in promising big contracts.
“It got so ridiculous that I was like, there’s no way this is going to last,” he says.
Nasdaq hit its high in March 2000 and then began falling. Kaplan, who was constantly hatching whimsical business plans and ideas for new websites, decided to create a “dot-com dead pool,” where people could gain points predicting which Internet company would go out of business next. He spent that Memorial Day weekend building the site and told half a dozen friends to check it out, then left for a week’s vacation in Brazil.
A phone call from a reporter interrupted his vacation. He was startled to learn that 20,000 people had signed up for FC, and it was growing fast.
In the late 1990s, legions of workers seeking quick riches left good jobs to join Internet companies with no business plans, and investors were happy to foot the bill as Nasdaq soared. But when it all collapsed, workers -- instead of blaming themselves -- turned their bosses into villains.
Kaplan’s site became their megaphone. Known to his followers by his online handle, Pud, Kaplan became a champion for those facing layoffs, bitter about corporate hypocrisy or just fascinated by the spectacle of companies melting down every day.
FC “was a place where he told it like everyone knew it was,” says Kaplan pal James Hong, a founder of HotOrNot.com.
As many as 500 e-mails a day poured in from company insiders dishing about obscene executive salaries, pending layoffs and companies shutting down. The site got as many as 4 million Web surfers a month.
He would post the items with snarky introductions. To mark the closing of the online pet store Pets.com in November 2000, for example, Kaplan gleefully bashed the company and its signature image in TV ads: “Woof woof!: I’m out of dog food and my cat’s box needs new litter. I know what I’ll do: I’ll order Dog Chow and Fresh Step online from a sock puppet, and then I’ll watch the dog starve and the cat [defecate] all over the house while I wait for it to be delivered! Pets.com is over.”
Kaplan’s readers would then chime in with their own coarse and withering commentary on the site’s message boards, which he called the “Super Happy Fun Slander Corner.”
But for the executives who were trying to keep their struggling companies going, FC was a nightmare. Some blocked access to the website from work.
Others took it personally. In 2002, while speaking at an online-ad conference in New York, Kaplan was heckled by Jason Wolfe, who ran MyCoupons.com. (FC had embarrassed Wolfe that year by posting a memo in which the CEO admitted the website was losing money.) The confrontation escalated, ending only after Wolfe -- who said later that he had wanted to slug Kaplan -- was dragged away by his employees.
In spite -- or because -- of the controversy it generated, FC soon became so popular that Kaplan realized he could make money from it. He sold $75 monthly subscriptions and created a system for advertisers to quickly and easily place their text and banner ads on his site.
At the peak of FC’s success, Kaplan says, he was pulling in more than $90,000 a month from subscriptions, $10,000 from advertising and $2,000 from T-shirts, mouse pads and other merchandise.
He appeared in Rolling Stone and other magazines and on TV. Women.com named him Internet Bachelor of the Year in 2001. Simon & Schuster published his book, “F’d Companies: Spectacular Dot-Com Flameouts.” At parties, fans waved Pets.com sock puppets and asked for his autograph.
But he never stopped looking for the next business opportunity, experimenting with a pornography site and a service for posting photos taken by cellphones that became filled with nude pictures.
And when FC began to wane -- as Internet companies either shut down or started to turn around -- Kaplan began to think about building on the advertising system he had set up for the site. He began offering the do-it-yourself ad service to other websites, taking a 25% cut for each ad he placed.
Kaplan knew he was good at finding interesting ideas and generating buzz for them, but he didn’t know whether he could build a big business. He saw his chance to find out with AdBrite, and he looked to venture capital firm Sequoia to help him succeed.
The Sequoia partners knew Kaplan well -- most of them had started companies that FC ridiculed. But they liked the AdBrite idea, and they thought he was ready to build a company.
“Great people all have colorful histories,” says Sequoia partner Mark Kvamme, who now sits on AdBrite’s board. “Would I approve of everything he’s done? No. But we all learn.”
Kaplan has made smart decisions and hired talented people, Kvamme says, including a salesman from Barry Diller’s IAC/InterActiveCorp as his vice president of sales.
“He’s not just Pud,” Kvamme says. “He’s a smart, business-savvy manager.”
Kaplan is an expert in companies that have failed. That puts even more pressure on him to succeed.
He knows that on the surface, it looks like an ominously familiar story: twenty-something CEO of a fast-growing Internet company with millions of dollars in venture capital. He wears jeans, Adidas sneakers and glasses with thick green frames to work most days. He leased office space in San Francisco’s South of Market neighborhood, ground zero for the dot-com boom -- and bust.
But he’s trying to run his business correctly, like a grown-up. He has largely abandoned many of his other ventures to focus on AdBrite (he still owns FC but hired someone to write the commentary). The AdBrite office is modest, with worn blue carpeting and used furniture. A pingpong table, free food and a drum set occupying the corner of Kaplan’s office are the only nods at extravagance.
AdBrite is placing ads on more than 4,000 websites. Most are small, but it’s beginning to win more big clients, such as Priceline.com Inc. The Oakland Raiders site is among those running ads brokered by AdBrite.
Kaplan also created a separate advertising network, AVN Ads, dedicated to sex-related ads and websites, to keep AdBrite squarely in the mainstream.
Even the AdBrite logo fits the new image. It’s designed to look like a laundry detergent, as squeaky clean as the FC name was dirty.
For the most part his former victims are ready to move on, if not completely forgive.
At the online-advertising conference here, he greets a visitor to the AdBrite booth. Kaplan can’t quite place the man, until the visitor asks whether Kaplan remembers the altercation they had at the New York show three years earlier.
It’s Jason Wolfe, the CEO who almost knocked Kaplan’s block off.
The two men shake hands. Wolfe says he heard that Kaplan had received financing from Sequoia.
“I don’t know whether to congratulate you or punch you,” Wolfe says.
This time, though, the conversation stays civil.
“So it’s water under the bridge?” Kaplan asks.
He hopes for a nice response. But Wolfe just stares back and says nothing.