Entrepreneur of the Year

Last fall I named John Bates of Bigwords.com 2000’s Marketer of the Year. His company was out of business a week later.

This year’s eBusiness Report Entrepreneur of the Year recipient promised me personally that he wouldn’t be out of business when you read this. So meet Randy Conrads, who illustrates today’s most important survival strategies.

ClassMates.com, founded in 1994, was a bootstrap operation long after it was an operating concern. Conrads used his basement as an office, borrowed his lawyer’s conference room for business meetings, answered his own phone, and browbeat ad salespeople years before getting a venture capital check. (He didn’t stop being cheap after he got that check, either.)

Conrads was working at Boeing when he started ClassMates, and two years later he grossed $75,000. “My dad kept asking if I was getting paid, why I quit my good job,” he said. ClassMates turned cash-flow-positive two years later.

What makes Randy Conrads appealing to me is that he may be your worst nightmare. He spent almost nothing to produce his first banner. The woman pictured on it is his wife, the logo drawn by his 16-year-old daughter.

Even worse, from your perspective, is that Conrads buys only what he terms “remnant space.” He doesn’t want your targeted rate or even your book rate. “No one is getting more than 25 percent of their inventory sold. And page views are a perishable commodity. If they’re not sold, they’re gone.”

So Conrads buys space at the lowest price you’ll take (maybe a bit lower) in $2,000 chunks. If he doesn’t get a good rate of registrations from that $2,000, he’s gone. And forget one-month exit clauses. “You just tell ’em you want an exit clause of the same day. You have to be aggressive. It is buying Web inventory that has made us what we are. We buy cheaper than anyone,” he said.

What site works best? For Conrads it is Weather.com. “Go up, check the weather, and then what do you do?” Directories also work well for him, but your mileage may vary.

Conrads said he knew Yahoo was in trouble in December. That’s when it started running his ads.

How cheap is ClassMates? In December, AdRelevance estimated that ClassMates was the third-largest buyer of Web ads, with a $19.2 million budget, based on the book rates of the sites where he bought banners. It was actually less than one-tenth that figure, Conrads admitted.

But the proof is in the results. ClassMates now has 15 million registered users, organized mainly around high school graduation classes. (Colleges and summer camps and corporations may all come later.) Only a fraction pay for the real service, which lets you email your classmates and form a real community.

The money comes from that fraction. Memberships cost $30 per year. “In 1999 we had $3 million in business. Last year we did $15 million; this year it will be $50 million.” That’s not Web growth, it’s sales growth; and (more important) it’s profitable growth.

The lessons are clear. Don’t waste a dime. Make mistakes, and learn before you take a stranger’s investment capital. Browbeat ad salespeople, and measure constantly. Build for the long term. Wear your gray hair proudly.

Randy Conrads may scare you. But he makes money, and his bottom line will keep growing through any recession. So go to school on ClassMates.com. This is the future.