Steve Richter, Part 1
Few last names evoke the same range of reactions from those familiar with performance marketing as that of our first interviewee, Steve Richter. While the other S. Richter (Steve’s son Scott) has been much maligned by the press, Steve has been hard at work to change those perceptions. We reached out to Steve to check on an industry rumor, and what started as a quick call turned into something much more extensive and the beginning of a series. For those not familiar with Steve, he is a lawyer by trade and quite a few would credit him with the ongoing success of Media Breakaway both inside and outside of the courtroom.
In our interview, Steve responds to some of the questions on people’s minds – talks of acquisition, the name change, lawsuits, settlements, and some thoughts on keys to the future success of the industry.
Editor: Let’s start with the company name change. Many people know the company as CPA Empire, but your email address is Media Breakaway, and then there was the recent announcement of affiliate.com. How do you want to be known?
Richter: Media Breakaway is the parent company, the mothership if you will. What most people don’t know, is that the affiliate network (affiliate.com) is just one of several divisions within the company. Media Breakaway also consists of divisions that manage domain registration, domain name optimization, list management, and mobile content. Affiliate.com, the company’s largest division, has grown tremendously year after year, but our other divisions have also been developing quickly. Today, the affiliate.com division accounts for perhaps two-thirds of our revenue, whereas it was once 90%. Our affiliate marketing division was initially known as CPA Empire. During our annual Breakaway Conference last August we unveiled our affiliate marketing network’s new name, affiliate.com, and then officially transitioned from CPA Empire to affiliate.com at ad:tech New York in November.
Editor: What drove the name change?
Richter: The CPA Empire brand, while strong, was an industry brand and not entirely descriptive of what the business has evolved to currently. We wanted to showcase the maturity of the business and specifically our efforts in compliance. Simply freshening up the website wouldn’t have done all of that, and given the overall achievements of the company, we felt the best way to highlight the growth and positioning was through re-branding. At the same time, we had acquired a truly premium domain name in affiliate.com and saw this as the perfect utilization of that property.
When the company was founded, it consisted of just three people. At that point it was a business based entirely on Scott’s vision and his personality. Now, as a company of 75, it isn’t just about Scott. He is still a very important influence and our CEO, but he should not be synonymous with the brand, and frankly, we didn’t know if the CPA Empire name could be completely de-linked from Scott.
Editor: Have people started to adopt the new name, and what if any changes have you seen? What about the Under Armour gear you used to give away?
Richter: The adoption of the new name has gone even more smoothly than we anticipated. While many in the industry have a certain nostalgia for the CPA Empire name, our new name and the new look has gone over very well. We have received a tremendous amount of positive feedback from both new and old clients, who have been some of the biggest proponents for getting the new name out there.
As for the Under Armour gear program – I for one am keeping mine as it has become a collector’s item. We’ll see what we come up with as 2009 rolls along. We love seeing affiliates and advertisers wearing the shirts and jackets during trade shows, and of course all the fans at our hockey games.
Editor: Over the course of its lifetime, the company, certainly the "old" one has made a name for itself. You’ve been an easy and common target for the press, especially bloggers. How do you feel about the way the company is treated?
Richter: I would use the term “press” loosely, with respect to the online reporting. I think the emphasis for those writing about us from the blogosphere has often been on speed rather than accuracy. The offline press tends to adhere to a certain standard of accountability. They can’t afford to print something false, so they tend to do a better job of getting the facts and nuances right. They contact us before running a story, and typically say we are among the most accessible companies they write about. I try to make myself available to anyone who wants to reach me with questions or concerns. I often feel that I get too few calls from online writers taking me up on the offer to answer their questions. I really do try to call back everyone that contacts me. Our team members know to forward on press requests to my attention and our contact information is publicly listed on all of our websites. I just wish more bloggers would pick up the phone before writing a post. It’s not so much that I want to set them straight, but that I would like them to hear our take on an issue before making up their minds. To me, that is just good professional journalism. I know that the blogging community continues to struggle with a perception that they aren’t true journalists. I think that if there was more of a universal effort towards accuracy and accountability over simply being the first to get a story out there – and trust me I know there are many great bloggers who do take these steps – then it would benefit everyone in the space.
It’s also interesting to see what happens when someone gets to know us beyond the rumors and stories they have read online. Last year, we had a well known blogger who had sometimes been critical of our company, take us up on an offer to visit our offices, interview members of our team, and get to know us a bit. After meeting with us, one of his first comments was that we weren’t at all what he expected. Now we have a very positive relationship with that blogger. But, that never would have happened if he hadn’t taken the step of talking to us and getting to know what we are all about.
Editor: Speaking of potentially inaccurate stories, one that seems to come up, and the initial reason we contacted you, was to hear whether you had been acquired. Is it true? And, why do you think this rumor is so persistent?
Richter: First off, the answer is no, we haven’t been acquired, and to answer the natural follow-up, we aren’t currently involved in any talks to be acquired. As to why the rumor persists, one reason is our size. I think it’s safe to say that we are among the two or three largest CPA networks, and that makes the size of a potential acquisition quite intriguing to speculate about. It also has to do with the amount of coverage the company has received in the past. People know we’re growing, and it’s just natural for the speculation about us to shift towards acquisition talks. Then, once one person talks about it or hears something that they think warrants mention, the story spreads and stays around and then all the talk becomes "proof." It becomes a situation of “if there’s smoke, there must be fire.”
Editor: On the topic of acquisitions, in general, affiliate networks and acquisition haven’t gone hand in hand. More than one network spent 2008 actively looking for a buyer, and some of the numbers being talked about are astounding; yet, we don’t see them being snapped up. What are your thoughts on that?
Richter: The question is about sustainability. Anyone who is paying a multiple to acquire a company wants to know that they can get that money back and make a decent return on their investment. So, they will rightly want answers to a number of key questions. Where is the revenue coming from? Where has it come from in the past? Where will it come from in the future? It could be true that five or six years of 100% growth have occurred, but no company, Google included, can continue that pace indefinitely. Buyers will also ask if revenues, and just as importantly margins, are sustainable over the long haul.
Editor: Unlike many Web 2.0 companies, you didn’t start the business to become acquired. At some point though, do you start to look at the business and shape it for a potential exit?
Richter: It’s very simple. You have to show that the business model has sustainability. It’s easy to say – look at our growth over the past few years. However, a buyer also wonders where you will be in five years. When the markets were soaring, buyers could get swept up in the excitement and focus more on a company’s story or “coolness” and forget about some of their due diligence. But in today’s climate, that exuberance has been replaced with more rationality and put the burden on the seller to demonstrate present and future value. So, a company must make sure its actions focus on sustainability. These days, a buyer isn’t just going to purchase just because you’ve shown some growth in the past.
As far as our own “exit strategy,” we really don’t have any plans to sell the company at this point. We look at the current economic situation as a great opportunity to grow our business and are focused on our expansion, rather than looking for a buyer.
Editor: How do talks of acquisition affect the company’s internal dynamics and how do you keep people focused and speculation at bay?
Richter: You tell the truth and keep your team in the loop as much as possible. We don’t assume or pretend our employees haven’t read about any rumors or gossip. So, we try to approach any rumors head on. The truth may not be the comfortable or easy answer that they want to hear, but it’s better than trying to keep it under wraps. We believe in creating a culture of trust within the company, so that team members know the owners will do the right thing for the company and our employees.
Editor: For some reason that reminds me of another common rumor, the intra-network animosity that supposedly exists. There has been some mudslinging between networks in the past. Do you see the level of cooperation rising or companies becoming pure competitors?
Richter: I think there has been some of this kind of activity in the past and I’m sure some will continue in the years ahead. But, we try not to dwell on the past. Our goal is to stay positive and focus on growth. It’s too easy to get caught up in efforts that don’t drive business forward and the “mudslinging” as you call it is just a distraction from real business.
In the months and years ahead, I think there will be more cooperation among the networks that have adopted and continue to adopt a compliant business culture. Companies that make that commitment won’t want anything to do with those who are not compliant. This industry is built on “co-opetition”, where networks both compete and cooperate with each other to varying degrees. Cooperation works well. But cooperation between a compliant and non-compliant company will only hurt the one that is compliant. This is an industry where you can make money and make it compliantly.
Ready for more? Click here for Part 2 where Steve talks about the Florida Attorney General and sets the record straight on some of the past legal experiences that, for better or worse, put them on the map.
