The TSC Streetside Chat: Brad Greenspan of eUniverse

Since last April, when the Internet bubble reached its peak, the world of online companies has become a veritable graveyard. Hundreds of Internet companies have gone bankrupt, while many of the survivors are still struggling to reach profitability.

There are a few heartening success stories, however. eUniverse , a small-cap company that operates several online sites with entertainment news, online games and humor content, is one of them. The company posted a profit for the first time last quarter and says it expects to deliver another profit when it reports the September quarter. For the fiscal quarter ended June 30, the company reported revenues of $5 million and income of $400,000, or 2 cents a share.

TheStreet.com spoke with eUniverse Chairman and CEO Brad Greenspan about what worked and his outlook for the Internet industry.

TSC: What do you think is working for you in terms of profitability that hasn't worked for other Internet companies?

Brad Greenspan: I think that we have a real strong management team, and we've always run the company like a business from day one. We didn't do a large IPO when we went public. We did a reverse merger. We didn't have as much cash in the bank as a lot of these other guys, so our outlook from day one was we have to become profitable at all costs very quickly. I think a lot of other businesses built themselves in a structure where they wanted to build up the infrastructure for 10 years and the costs for 10 years and they expected to be funded by the public markets until then. No one cared about anything but growth or users. They weren't really looking at the bottom line.

We are an aggressive, rapidly growing small-cap company that's profitable. We just happen to be focused in the online space with our efforts right now. We really don't consider ourselves an Internet company, because the way the other businesses are run is so different from who we are today.

We have our own services and membership programs that a user can enroll in, and then we're generating revenue, non-advertising revenue, but revenue that's long-term, more predictable and provides visibility for our earnings, such as our dating site we've launched, Cupid Junction, which is a non-advertising supported site. We have about three or four membership products we're rolling out in the coming months. People register and then they pay to use the site.

TSC: How did eUniverse get financing when the company started?

Brad Greenspan: I went to a couple of large hedge funds and institutional investors. We raised $7 million when we went public. We did a private placement simultaneously with merging into a public shell. Lehman Brothers put in $2 million of their proprietary capital. Gerard Klauer Mattison participated. They're still both big shareholders today.

TSC: When was the company created?

Brad Greenspan: April 1999. We started out as a CD/e-commerce company. CD Universe was the first company, and we realized very quickly it's a low margin business. The business plan from day one wasn't to be a CD retailer, it was to get public and get access to currency and use it to acquire content and community sites. We felt if we could acquire the right one's large, loyal audience, we would figure out high-margin items to sell to that audience. We started incubating what's now the eUniverse network on the side as we were running the CD Universe business and finally got it to a level where it was generating advertising revenue and direct marketing revenue. We were able to spin off the CD Universe business. A little over a year ago we spun off CD Universe and focused all of our efforts on the eUniverse network.

TSC: Where does the majority of your revenue come from now? You have several different kinds of sites and you have email newsletters. Which provide the most revenue and which are the most profitable?

Brad Greenspan: They're basically split down the middle. They're both profitable businesses. We see upside in both of them. The last revenue we announced we had $5 million for the quarter. We think there's still a lot of room to introduce our network to partners and generate revenue and profits from it. If we did $5 million total revenue split between the Web and email, that gives us a lot of room on the Web side to grow. On the email side, we're real excited about that, based on, unfortunately, what's been happening recently. That's going to push a lot of the traditional direct marketing companies into spending more and more money via email. We're one of the ones who will benefit from that.

TSC: Page views must still be important to advertisers. What kinds of page views are you getting?

Brad Greenspan: Flowgo.com is the largest entertainment site on the Internet most months, according to Nielsen NetRatings and that provides a large amount of our traffic and page views. The advertisers we work with are more the direct marketers, and they're more concerned with results, such as how many customers are they getting. It's not as important as how many page views you're showing, it's how you can work with these partners to deliver results.

TSC: One of the company's press releases says eUniverse hasn't been materially impacted by the slowing economy. How has it managed to avoid being hurt by the slowdown?

Brad Greenspan: The companies really getting impacted had a lot of the frothy advertising, and we really don't have much of that in our revenue mix. We're more focused on the traditional companies that need to acquire users that are always going to be willing to pay $30 or $40, like a credit card company or a financial services company. We've been able to go with the trend of the economy. An example of that is refinancing opportunities. We now are offering mortgage refinancing opportunities through our partners to our audience and are doing very well. Demand is always going to be there from the consumers to try to react to the economy.

TSC: What are your direct marketing partners asking of you?

Brad Greenspan: They're watching to make sure that we deliver customers. Whether it's someone buying something or we're generating leads for them, they can say for $1 million we're receiving 100,000 or 300,000 leads. It's a measurable response.

TSC: Has there been any impact on your business from Sept. 11? Some experts have worried that consumers would turn their attention to news and away from entertainment and games and humor.

Brad Greenspan: We've actually seen tremendous growth in our business since then, in our traffic and audience. Our content has become more relevant to what's happened. For instance, we have animated spoofs on Osama bin Laden, one of which has been seen by 7 million people over the last week or so and was featured on the front page of USA Today. So we continue on our content side to have a relationship with the American audience that's relevant. On the email side, people are tending to want to communicate via email more than ever and that really benefits our business as well.

TSC: What do you think is the future of the Internet at this point?

Brad Greenspan: Growth is going to continue in terms of more people using it. People are becoming more comfortable with using the Internet for more things, like dating and other interactive forms of communicating with other people than they may have in the past. We think it's the best medium to be able, in real time, to get information and be able to provide a relevant service to people. You just have to be a nimble company that can react quickly, and if you are, it's one of the best growth areas out there.

TSC: Do you think that growth will be capped by slow Internet connections?

Brad Greenspan: I don't think so. The smart companies are going to be able to provide products that serve both dial-up and broadband audiences. A lot of guys went out and created these 50-megabyte huge download products and wonder why people aren't watching them. It's just like a good television network. You have to know your audience and be able to serve up some content that the masses are going to enjoy consuming. At the same time, you have to be able to build niche audiences.

Editor's note: This interview was edited for clarity, style and length.