Start Me Up
How two very different brothers teamed up to launch one very hot e-company
Baltimore magazine, January, 2001
Scott Ferber was in his glory. With a fresh master's degree in economic engineering from Stanford University and an impressive financial job in northern Virginia, the clean-cut young man was the star of the Ferber Thanksgiving, 1997. Sitting around the table after dinner at his parents' Owings Mills rancher, Scott excitedly told his family what he was learning in the business world—how direct marketing worked and how companies companies could create and staff whole new divisions in a matter of months.
Scott's younger brother, John, listened with polite interest. He had graduated from Towson University the previous December, but had drifted back to living in his parents' basement family room--“The Greg Brady room,” as Scott called it—and spending a lot of time on computer games. Like Scott and their older brother, Larry, John had a knack for computers. Like them, the long-haired young man was clever and outgoing. But unlike his brothers, an econ whiz and a future M.D., John wasn’t comfortable in the traditional professional world.
At the table, John kept fairly quiet until the discussion took a technical turn. Scott’s firm, Capital One, was known for its skill using direct marketing to target potential credit-card users. And lately, Scott said, the company had been studying the “evolution of the Internet” and its marketing potential.
Suddenly, it was John’s turn to shine.
“Let me show you what I’ve been up to,” he slyly told his brothers
Three short years later, John, 27, and Scott, 31, were jointly named the Maryland Ernst & Young e-business Entrepreneur of the Year. The business they built together, Advertising.com, employs about 320 people. The company occupies 29,000 square feet of space at Locust Point’s redeveloped Tide Point complex and also has offices in New York, San Francisco and Mountain View, California, and London.
With their odd-couple personalities John, the jeans-wearing clubber and Scott, the buttoned-down go-getter the Ferber brothers are typical of the people who are driving Baltimore’s Internet boom. The Ferbers are charming, energetic risk-takers. John's a great programmer; Scott’s a great motivator. And they are willing to go for broke, investing their boundless energy (and a whole lot of other people’s money) in pursuit of a gigantic payoff down the line. The Ferbers expect Advertising.com to become a major player in what is projected to be a $15-billion Internet advertising industry by 2003. That is, if the industry itself can survive.
John led Scott away from the table and down to his basement lair. To Scott, the place looked like a mad scientist’s lab Computer parts, wires, and papers littered the floor, and manuals were piled precariously high.
John had been collaborating with another programmer on an Internet multi-player game called HoverRace. But there was a problem with cash flow. Players enjoyed the free version of the game, but they were not willing to paid for an enhanced registered version.
To generate income, John tried selling ad space on the game’s website. With nothing to use as a model, he wrote a program to deliver banner ads to the site based on each user’s history and interests. And that program is what he showed his brother.
John hadn’t had much success selling advertisements The audience was too small to make it worth anyone's while. But when ad-agency people saw his ad-delivery application, their eyes lit up. It seemed as if they all needed such a program but no one knew how to get one. Scott saw that his brother had created a rudimentary solution to a problem his own Fortune-500 employer had just begun to wrestle with. The brothers began talking about starting their own business.
Following that Thanksgiving, Scott monitored his brother’s programming progress. A friend, knowing of Scott’s growing interest in the field, sent him a copy of an S-1 form, a Securities and Exchange Commission disclosure for a company about to issue stock. When Scott saw the company’s line of work posting banner ads on web-sites-—he knew it was time to act.
That S-1 was for DoubleClick, which is now the largest banner-ad company in the industry. But what spurred Scott to action was a single strategy he saw in the company’s setup. “I said `0K. They’re not doing it right,'” Scott recalls now.
DoubleClick’s plan was similar to the one that Scott and John had been talking about. But DoubleClick charged clients for each time a person saw a particular banner ad. John’s software, by comparison, would charge the client only when a person actually clicked on the ad to view the advertising page behind it
Scott knew the advertising industry would prefer his brother’s approach.
“That’s what emboldened me,” he recalls. “Here they were, a company going public, and they missed the boat, totally missed the boat.”
Scott rushed over to the Ferber homestead, where John agreed with his assessment of the competition.
“Okay, John, how are we going to do this?” Scott asked. And then he answered his own question: “We have to build a big company; it’s not just working with five people. We’ve got to be big. We have to seek funding, and we’re going to have to change the way we operate. You laugh at me with the suit and tie, well, we’re going to need to do that.”
John agreed, and the two started making the plans. They called their father, a tax attorney and C.P.A., downstairs to explain how to start a company.
Within a week, Scott threw his belongings into his car and, with his futon tied to the roof, left his Northern Virginia rental and headed back north. The brothers moved into a townhouse in Towson and established the worldwide headquarters of Advertising.com, complete with two computers and two mixed-breed dogs (Scott’s Lucy and John’s Cody).
Scott settled into the role of chief executive officer the enthusiastic leader, the guy who will practically lunge at you just to shake your hand.
He adopted a grueling travel schedule to meet potential clients and funders, wherever they were, whenever they were available.
John became the chief Internet officer, in charge of divining which technologies the market would adopt and masterminding the code to supply that market with ads as well as maintaining the computers that would deliver them.
By August 1999, the company had secured $11.7 million in investment funding from two area venture capital firms, New Associates and Grotech Capital Group. “The technology was mature, but they needed to put the sales and marketing force in place,” recalls Patrick Kerins, a general partner for Grotech.
The hiring happened fast, John says: “In a period of about six months, we went from two people to about 75.” The company moved into a HarborView Marina Facility on Key Highway and started to outgrow that, as well.
In those halcyon days before the March 2000 Nasdaq crash, sales took off immediately. New employees found plenty of websites that wanted advertising and enough advertisers to fill them with ads. A bigger round of financing followed, spearheaded by the Reuters Group. Totaling around $57 million, it included such partners as America Online and WPP Group, one of the world's largest marketing services.
Ironically, this vote of confidence came, in part, because of growing doubts about Internet advertising. “[The Ferbers] came along at a time when the industry was starting to question whether or not it got results,” explains Grotech’s Patrick Kerins. Up until then, most advertisers just placed banner ads on popular websites and hoped for the best. “Advertising. com demonstrated a more sophisticated model, one where it wouldn’t be paid unless the desired results occurred,” Kerins says.
Today, there is pressure on Advertising.com to produce some results itself. No doubt, Reuters Group put some tough metrics in place to get a return on its investment. But the company is mum as to what those goals are and how well it is meeting them. Six months ago, Advertising.com was crowing that revenues had grown 70 percent from the last quarter of 1999 to the first of 2000. Rumors abounded of an initial public offering. But the New Economy’s rocky ride through 2000 has taken its toll; such rumors have dried up, as has boasting about growth.
It could be worse, though. Unlike many dot-coms, Advertising.com takes in real revenue about $5 million a month. The company has about 300 advertisers that spread out over 5,000 websites. But the survival of Scott and John’s enterprise depends on grabbing a piece of the much-larger Internet ad market projected for the future, if those projections prove true.
To diversify, the company is dipping its toe into the uncharted waters of serving ads to cell phones and other wireless devices. It’s an area of great promise, but of great peril as well.
If the Ferber brothers are nervous, their actions don’t show it. In November, Advertising.com moved again, into Tide Point on the south side of the harbor. The new facility holds hundreds of Advertising.com sales, marketing, and engineering work stations and numerous conference rooms.
During a recent tour of his company’s sleek new office space, with its track lighting and its “alchemy” metal reception counter, John seems quite the titan the slouchy servant-leader of an army of young techies. He’s only 20 miles from his parents’ basement, but he’s light years away.
A visitor who knows the company’s history asks about John’s mood. The space; the payroll; the expectations:
Isn’t it all a bit intimidating?
“Yes,” John answers, laughing. “I try not to think about it.”
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