PlanetOut, in the money

Lowell Selvin, the CEO of PlanetOut Partners, tells how personal ads are helping his company become the online gateway to the global gay and lesbian market.

Jim Hu
Jim Hu Staff Writer, CNET News.com
Jim Hu
covers home broadband services and the Net's portal giants.
5 min read
Lowell Selvin thinks he's got this Internet thing all figured out--at least for now.

The CEO manages one of the few survivors of the dot-com collapse, PlanetOut.com, whose sites cater to the lesbian, gay, bisexual and transgender communities.

After watching so many other "can't miss" Internet ideas crash and burn, he's loath to claim immunity from the business cycle. Still, he believes the company's network of sites represent undeniable proof that a targeted online media business can still survive--and thrive--on the Internet.

Selvin says the privately held company earned $100,000 for the first quarter, up from a $1.2 million loss during the same period a year ago--small change compared with giants like Yahoo, but profit is still profit.

The surge was fueled by personals. Like Yahoo and Match.com, PlanetOut Partners has created a buoyant personals business--one that now contributes about 60 percent of total sales. That's a big change from two years ago when advertising accounted for 90 percent of the company's revenue.

Whatever the mix, Selvin says the sites under PlanetOut Partners' umbrella, such as PlanetOut Partners and Gay.com, are here to stay. Coinciding with Gay Pride month, Selvin spoke to News.com about the business implications of being loud and proud on the Web.

Q: Back during the dot-com heyday there was seemingly a vertical for every conceivable category. In the aftermath of the bust, did you have to make any changes to avoid going the way of a Mothernature.com?
A: First of all, we had a community that had a general affinity to be together. Second, we tried to give this community the best tools possible so our chat, IM, breaking news, daily e-mails focused on their choice of entertainment or news. And we didn't try to be in every kind of community. We tried to serve one community really, really well.

We had many VCs flooded with capital saying, 'We can't fund you because you're a gay site, you're a gay business in chat, and people might talk about--gasp--sex!'
Did you face discrimination shopping around for funding?
It was tough. Circa 1999, anyone with a domain name and 500 people on site was raising $10 million to $20 million at the drop of a hat on a PowerPoint presentation. We show up with 2 million unique users, a business model, and among the world's most powerful domain names and we had many VCs flooded with capital saying, 'We can't fund you because you're a gay site, you're a gay business in chat, and people might talk about--gasp--sex!'

We said that's a double standard. Look at Yahoo, MSN, AOL, iVillage and Talk City. All these entities had the same offerings--people talking about sex, people talking about life. And that double standard prevented us from getting easy capital. Lucky for us, we got smart capital. People who invested in our business (JP Morgan Partners, Flatiron Partners, AOL, Mayfield and IDG) were looking long term and saw an excellent demographic, that this community had real affinity, and we're actually talking budgets and EBITDA even in 1999. They're still with us today, very happy and supportive of our results.

Sixty percent of your business is online personals. Are you in danger of becoming a dating site?
Personals is an extraordinary business for us. But if you look at the larger picture, people have been chatting and interacting on Gay.com since 1995. The point I'm trying to make is that personals is really the next development of chat and people interacting online, that we're still able to grow an advertising business, grow an e-commerce business and, in fact, launch new technologies in travel. The snapshot today is that personals represent a large part of the business, but two years from now we will see other aspects of business (improve) in ways that Match.com can't.

Yahoo and Match.com are also targeting lesbian, gay, bisexual and transgender (LGBT) communities. How do you compete with such scale?
The most important thing we do is that we are all gay, all day, and we offer a safe, discrimination-free, open environment for LGBTs. Given that we're still registering roughly 8,000 people a day on our portals, it demonstrated the desire for people who identify as LGBT to be together. That's not to say a Yahoo or a USAI or an MSN can't do a good job serving the community. I'd offer we do a far better job.

Eighty percent of your clientele is "closeted." How does that factor into your personals business?
Discretion is very important to what we do, and people wanting to interact with one another find it far safer to do that online where you can see people's pictures, know who they are and eventually move to a phone call all prior to ever going on a date. As gays and lesbians, many people are afraid to come out.

Can verticals survive on advertising alone?
We don't have to survive on advertising alone.

What's the ideal percentage balance for online advertising and personals revenue for your business?
This may sound like CEO-speak, but whatever works at the time. In the future, we would definitely like to see more advertising. Yet, personals are growing at a phenomenal rate. Right now personals has that leadership position, but it's really likely that advertising and our media will scale dramatically in the next few years where they have equal share of the business. Our new travel booking engine and what we're doing in travel could scale tremendously in three to five years.

What's your corporate growth strategy?
In the past 6 months, we've added 25 people to get to 125. I expect to add 10 to 12 people in next few months. Top-line growth is well into the double digits. We're growing year over year at roughly 70 percent.

Personals is really the next development of chat and people interacting online.
Can you remain a Web company or will you have to partner with a non-Web media company?
It's fair to say we've barely scratched the surface with online. I think the smart money knows online is tomorrow. In advertising, we've just begun to break into automotive and personals. Our growth is still phenomenally different than our friends at Yahoo Personals and Match.com. Their growth rates are flattening and also the fact that we drive our personals based on community, not based on external marketing. It's a community of people interacting.

The top two print properties reach probably 150,000 and 300,000 readers. We reach millions and millions of people every month. We might look at print again, and might look at other media, but there's so much to do online with this amazing market.

Do you think you've cornered the market?
You would never hear me say that in any other business I've been in. We're running a really good race, and we'll continue to run a really good race. We intend on being the gateway to the global gay and lesbian market; I think we're leading that race and are in a very formidable position.

We only succeed if we serve the LGBT community really well. Whether it's pets, or people who love books, it was sort of about the business. As redundant as it sounds, community services need to be about the community.