SearchMe's plan to break even, raise $30 mln

CEO Randy Adams on SearchMe's distribution plans and AdView adoption

This is the second segment of a two-part interview with Bambi Francisco and Randy Adams, CEO of SearchMe, a site that turns browsing the Web into the same experience as flipping through a magazine. In the first part of this interview, Adams said it would take at least a million searches a day for SearchMe to break even. In this interview, Adams talks about how SearchMe plans to get distribution to drives those searches, how its AdView advertising is being adopted and his efforts to raise $25 million to $30 million in funding, on top of $43 million already raised.

BF: So to get to a million searches a day, you need to have deals to get distribution, right?

RA: Well one of the ways Google became successful is they made a deal with Yahoo to power search for them. They also built a brand and then broke off and started doing their own search engine. But by that time they had significant traffic to reach critical mass, and significant advertising to actually cover the cost. So we're looking for those kinds of deals. And I think that big sites that have a lot of traffic do deals with Google. Google might sell advertising to them. We're not looking for those kinds of deals but smaller sites that want to share revenue with us as well as want an alternative to Google.

BF: So you're looking to power search for companies?

RA: If you have a portal and you want to have a Web search on your portal, we have a variety of options available to you and some are embedded options where the servge engine results stay on your portal and they do not disappear. They are still on the site and other options that enable us to provide a full search site, Web, and video search as well.

BF: So we should see a number of distribution deals?

RA: We have a number of distribution deals we are doing with people right now and hope to do many in the future.

BF: What percentages of the searches come from the downloads?

RA: You mean toolbars. When you download a program, you might be offered to download a SearchMe toolbar. Once downloaded, it installs in your browser and you can directly go to your browser by typing in the search. So we're seeing about 30% of our searches coming from toolbars. We expect that to increase because that's one of the best ways to get distribution for our search engine.

BF: Are you working on a deal to get more downloads?

RA: We have deals that are in the works that will get us hundreds of thousands of downloads on a monthly basis.

BF: What are the economics behind these downloads?

RA: We usually pay a bounty for these downloads. When someone downloads the toolbar, the provider of the person who offers the toolbar to them gets a bounty. And on average, you don't want to pay a bounty that you don't actually see revenue returns on. So several months by usage of the toolbar we can break even from the advertising.

BF: Let's talk about the advertising. You launched AdView in beta three months ago. How many advertisers do you have now and how much does it cost to advertise?

RA: We've limited the number of advertisers in a beta test to 500 and brought in an extra 100. We were actually at ad capacity in about a day and a half. People are always interested in trying out new ad platforms. Our ad platform is quite different because it offers the branded nature of a graphical display ad with the measurabiltiy of a CPC click through ad because you don't get charged until someone clicks through your ad and yet we show more than just the title and the description. We show the Web page or a video splash page that points to your site.

BF: For instance, when you typed in diamond, I saw that there was an ad that was the very first result.

RA: Right. We have advertisers that bought the keyword diamond for 25 cents since that is our initial bid price right now. As more and more people use us, the competition will drive the price up because it's an auction system.

BF: What are you doing to get more advertisers on your site?

RA: They are coming to us. We have more advertisers than we can actually serve ads for at this point in time. The agencies are interested in measurable ads that do branding. You'll see Yahoo and Google talk about those kinds of things and some brands that are appearing that are keyword based. But really, we are the only system out there where you can say, "I want this picture to appear on your search site whenever anyone types in the word diamonds." Nobody else is showing picture ads based on the keyword search. We've signed up 15 agencies and we have 20 or 30 brands that want to advertise on us. Now it's a matter of getting more traffic so we can get revenue in.

BF: You've raised $43 million dollars in the last several rounds and the last time funds came in was last year. You're fundraising again. What are you looking for and where are you going to put that money?

RA: Right now we are expanding. We need traffic to do these kinds of toolbar deals and increase our marketing so we can increase our users and get the word out so that people will use us. So we're actually looking at people that are strategic partners and have a lot of traffic. People who can benefit by investing in us, giving us the traffic, and then having their investment go up.

BF: What are you looking for?

RA: We're trying to raise about $25 to $30 million this time.

BF: You raised your last round when NASDAQ was 40% higher so are you being realistic?

RA: This is a tough time to be raising money. We are fortunate enough to have a great product which resonates with people so we have a lot of interest to get the people to invest but they are not going to invest at the last "round" price because that was a year ago and it was a totally different market then. So we expect the private sector will correct.

BF: Randy, thanks very much. If you haven't checked out SearchMe, you should because it is a great way to search the Web.