Like the founders of many Web start-ups, the three twentysomething Harvard University grads who launched LinkExchange spent most of last year working from a cramped Bay area apartment.
Now, the year-old company, ensconced in warehouse offices in San Francisco's Multimedia Gulch, has emerged as the largest network providing advertising support to cash-strapped small Web sites.
With more than 100,000 members and an average of 4 million daily ad impressions, LinkExchange has found success in being what founder Ali Partovi calls "a lean, mean advertising machine."
Like most other Internet ventures, success hasn't come in the form of making money. But that's not because it can't. It's because it doesn't want to--yet.
"We think of this year as the year for sowing the seeds instead of the harvest. The big period for advertising on the Net is still to come," said Mr. Partovi.
It's an attitude that has observers dumbfounded--and investors hungry.
"They're sitting on a potential gold mine," said Bill Doyle, a senior analyst with Forrester Research. "They have no sales force that I know of, and, so far anyway, they have a take-it-or-leave-it attitude toward revenue."
The company was founded in March 1996 by President Sanjay Madan, 23, and Exec VP Tony Hsieh, 23. Mr. Partovi, 24, joined a few months later as VP-business development.
The LinkExchange formula is simple: For every two ad banners a member displays on its own site, the member can place one banner for free elsewhere on the network.
LinkExchange's depth is extraordinary: There are 5,000 sports sites alone on the network. And with every member also an advertiser, the network dwarfs all others in terms of sheer volume of active advertisers.
Company goals--listed on pieces of paper taped to office walls--include improving service, building the brand and growing the network. But as Mr. Partovi cheerfully notes, "Sales isn't even on there."
The grassroots nature of the organization belies the founders' ambitions, however. The company recently hired 11-year marketing veteran Susan Cooney as director of sales and marketing, and further expansion of the executive team is under way.
LinkExchange is also talking with venture capitalists about a new round of financing. Until now, all the company's funding has come from friends and family.
A FEW ADVERTISERS
And while LinkExchange likes to downplay its commercial interests, it's clearly hoping its tremendous reach will attract advertisers.
So far only a few, such as Microsoft Corp. and Yahoo!, have used the service. Advertisers can target more than 50 categories.
An advertiser can spend as little as $25 on the network. The most expensive monthly ad package--offering 1 million impressions to a targeted audience--is $15,000.
LinkExchange has a deal with The Web Magazine in which the publication will offer its print advertisers free banners on LinkExchange. For a full-page magazine ad, for example, advertisers get 500,000 banner impressions.
BARTERING FOR ADS
U.S. Robotics, Seagram Americas' Absolut vodka and Calvin Klein have signed on.
The company keeps costs to a minimum, partly by bartering everything they can for ads on their network. Such agreements pay for half their rent, much of their networking expenses and possibly even some salaries, pending a deal with a programming consulting group.
"These are three of the smartest guys I've ever met," said Ariel Poler, founder of Web auditing company Internet Profiles Corp., who sits on LinkExchange's board."
To an outsider, LinkExchange's attitude is refreshing, and smart.
"In some ways it seems like a naive view of the world, yet might be incredibly mature," said Mr. Doyle. "Much of that mission stuff sounds like early Yahoo!."
Copyright April 1997, Crain Communications Inc.