InfoSpace: It's a crusade

In the last few months, InfoSpace, which provides technology and services for online content and commerce, has cut 21 percent of its staff and has witnessed the departure of three of its top executives. Shares have fallen from a 52-week high of $138.50 to well under $5 as Wall Street impatiently awaits signs of revenue growth.

InfoSpace does have a plan, however. The company is cutting its reliance on its consumer business in favor of wireless and broadband initiatives because, as the immortal Willie Sutton put it, that's where the money is.

Jain recently sat down for an interview to talk about his plans and the challenges facing the company.

You had a short walk in the woods when you were bumped up to chairman. Did you miss being out of the thick of things?
While I was out of a day-to-day operational role, I really enjoyed looking out more than six months ahead to create products and services that would generate growth. (I could) figure out what it is that the company needs to do to maintain momentum.

What were you doing?
I took a team of about six or seven people with me to build a product that we will need six or seven months later--which was all about micropayments and how we can turn every cell phone into a payment device. We, in fact, built a product--and we're close to signing up customers--to allow users to order coffee from a cell phone and pick it up.

When will it be ready?
Hopefully, in the next 90 days.

Well, you're back in it now. You announced work force cuts recently. Has this been your most difficult moment as a CEO?
It is really never easy to let go anybody...but this is something we should have done six months ago. In the last 18 months, we acquired 21 companies. Just with Go2Net, we had merged two companies with different businesses and didn't find a single overlap. We didn't do anything to make sure we were optimizing and making sure that resources went to where they were needed.

Will these be the last layoffs?
I can't ever say never again. This depends on how the InfoSpace product line evolves over time. If we require different skill sets, then we'd have to evaluate what skill sets are required. In this last (round of layoffs), we de-emphasized the direct-to-consumer business, which we got with Go2Net; we're going back to an emphasis on the infrastructure (side of the business).

The layoff announcements were your first restructuring move since returning as CEO. It seems they weren't well received by investors. How do you think Wall Street will react to your announcements a couple of weeks from now?
In some sense, you can't ever get disappointed with Wall Street because Wall Street has its own way of looking at things. If you run a business based on stock price, you may as well stop running the business. You have to run the company on a longer-term basis.

Help me with the broader picture. InfoSpace has been attempting to move its business toward wireless and broadband, which is growing faster, and away from the consumer business, which is growing more slowly. Yet, the latter accounts for more than half your revenue. Where are you in that transition?
The transition is more in peoples' minds than in ours. We started InfoSpace as a wireless company on day one, when we launched our first product in 1997. The (wireless) market itself is now growing, and we are growing faster than the market growth...Our wireless business is the higher growth part. We will more than double it this year. Our commerce biz will grow at least 20 to 25 percent this year. But we've made a conscious decision to de-emphasize the direct-to-consumer business. That revenue is not scalable revenue.

If things work out according to plan, what are you shooting for in terms of a revenue split?
Looking three years down the road, we expect the majority of revenues to come from wireless, and second from broadband.

The management reorganization announced last month led to the resignation of the chief executive, chief financial officer and chief operating officer. Your shares have taken a hit since then. Do you think there's a confidence gap between management and analysts who track the company for Wall Street?
I wouldn't say that. Our current management is the management that we had nine months ago. It's not as much that we lack credibility but that Wall Street doesn't like changes. If I was doing things for Wall Street, I would have done things differently over a period of time. When it became obvious that (former CEO) Arun Sarin wouldn't work out because of his commute, I went to the management and asked if there was anyone on the team who cannot commit their ranks for next two years. If the answer is no, I said, then I would rather they leave now.

Why do you think the Street reacted the way it did--the stock fell 14 percent after the layoff announcement. Do you think they wanted greater cuts?
No, Wall Street can be at times very cynical, (saying) "What is wrong with this company that the CEO, CFO and COO are all leaving at the same time?" We did what was best for employees. I've noticed later in life that you need to do what's best for your employees because those employees will do what's best for customers--and that's best for shareholders.

InfoSpace is not a job; InfoSpace is a crusade. Wall Street will get it because we will execute, and you know what? They will say to themselves, "What were we thinking?"

You recently told analysts that InfoSpace has made "a very conscious decision to de-emphasize some of the business we acquired with Go2Net." You also paid more than $2 billion for Go2Net. In light of how things turned out, would you say the Go2Net acquisition was a mistake?
When we acquired Go2Net, there were several parts of it we really wanted. And there were parts that we acquired which we didn't really want but that came as part of the acquisition...There were parts we liked, like broadband and search technology. The part we didn't like was the direct-to-consumer business. And that's where I have to admit we completely underestimated the challenge of integrating two different business models.

Some people say you should have moved faster to return as chief executive. And they also say the company was disorganized. Do you agree?
The fact is that in some sense, hindsight is 20-20. You could argue why Microsoft didn't do certain things years ago. I wish it had happened four months ago, but it didn't. Then again, if I had returned then, we wouldn't have the system which I was building.

What's the unique value proposition InfoSpace has to offer?
We don't really have any competition. This is not about how are we better than a competitor. Our pitch is we have the underlying technology that allows our partners to generate additional revenue, that they couldn't do without us. That's our core competency.