Incorporated: 1996 as InfoSpace.com, Inc.
NAIC: 518210 Data Processing, Hosting, and Related Services
SIC: 7374 Data Processing & Preparation
InfoSpace, Inc., develops products that help consumers find content and information on the Internet or through their cellular telephones. The company's online search and directory services are offered through its branded web sites--Dogpile.com, Switchboard.com, Webcrawler.com, InfoSpace.com, Zoo.com, and MetaCrawler.com--and through the web sites of its distribution partners. InfoSpace's search and directory services enable online users to locate information, merchants, individuals, and products. The company's mobile business provides products and services that enable cellular operators to configure and to customize the services they offer to their subscribers. InfoSpace occupies facilities in Washington, California, and Massachusetts. Overseas, the company operates subsidiaries in the United Kingdom and the Netherlands.
Origins
InfoSpace's first years in business typified the spectacular rise and fall of the Internet sector during the late 1990s. The company embodied the dizzying exuberance that vaulted small, often unprofitable, start-ups into the stratosphere. The same speculative forces sent a throng of dot-coms spiraling downward, crashing to the ground. When InfoSpace was a four-year-old company with $71 million in revenues and an operating loss of $102 million, it boasted a market value greater than that of the 84-year-old Boeing Company, the largest aerospace company in the world with annual revenues eclipsing $50 billion and profits topping $2 billion. From such heights, InfoSpace plummeted with the speed of a comet. The company's stock, which once traded at more than $130 per share, plunged to under $1.50 per share within a matter of months. InfoSpace, unlike many of the companies in its sector, survived the free fall, but the debacle left a scar, one always to be remembered by the company's founder, Naveen Jain.
Jain's roller-coaster ride began with a 7,000-mile journey. He was raised in New Delhi, India, and earned his undergraduate and graduate degrees from the University of Roorkee and St. Xavier's School of Management, respectively. After arriving in the United States in 1979, Jain worked for several computer companies, serving stints at Unisys Corporation, Tandon Computer Corporation, and UniLogic, Inc. In 1989, he joined Microsoft Corporation, beginning a seven-year stay at the company. Jain held various positions at Microsoft, accumulating the stock options that would give him the financial freedom to strike out on his own with InfoSpace. He led the marketing efforts for Windows NT, the software company's high-powered operating system, and he helped develop MSN, Microsoft's online service. Jain left the Redmond, Washington-based software giant in March 1996, the same month he started out on his own with a company he named InfoSpace.com, Inc.
Jain established his offices near Microsoft's headquarters and began pursuing the same general objective chased by his former employer, William H. Gates III. "Our goal is world domination," Jain averred in a December 20, 1996, interview with Puget Sound Business Journal. He intended to create the Internet equivalent of a telephone book, a source of basic information that he could sell to other companies. Jain began integrating information found in the white, yellow, and blue pages of traditional telephone directories and added e-mail addresses, fax numbers, and an assortment of other information, assembling the content he worked feverishly to license to other companies.
Jain worked 120 hours per week, a schedule he would maintain throughout his leadership tenure, holding sway as the company's chief executive officer, president, and sole director. Beneath him, a dozen employees supported his efforts to market InfoSpace's content, registering quick success in their efforts. When a company licensed InfoSpace's content, the licensee's web site essentially linked with InfoSpace's directories, making a switch that went unobserved by consumers because InfoSpace developers created a branded page that looked like the licensee's web site. The arrangement produced a simple, revenue-generating business model: Consumers were offered information for free and InfoSpace collected money by licensing the content and selling advertising on the mirrored web site. In November 1996, after Jain had brokered deals with roughly 50 major Internet partners that linked to his directories, InfoSpace posted its first monthly profit, leaving Jain brimming with confidence. "Within a couple of years," he said in his December 20, 1996, interview with Puget Sound Business Journal, "we'll get to a $1 billion market capitalization. I'll be really surprised if in 1998 we're not close to $100 million in sales."
Jain's optimism was reflective of his own personality and the business environment in which InfoSpace was born. Naysayers, particularly those expressing pessimism about the business potential of the Internet, were difficult to hear in the late 1990s, their voices drowned out by sanguine growth prognostications that heralded the beginning of an economic revolution. A speculative bubble, which economic historians observed began in 1995, was underway as well, making analysts and investors as confident as Jain in InfoSpace's prospects. Together, Wall Street and Jain rode the speculative wave that characterized the period, each feeding the other's preconceptions. InfoSpace, a corporate infant, surpassed Washington State's corporate grandfather in market value, making the late 1990s a period of immense gratification for Jain and all those who invested in the vision of the New Delhi native.
InfoSpace's mercurial adventure on Wall Street began with its debut in the public spotlight. By the end of 1998, Jain had added new content to his offerings, providing features such as maps, stock quotes, weather forecasts, and horoscopes. InfoSpace provided information related to sports, local businesses, and community events. Jain had convinced roughly 100 Internet partners, who operated more than 800 Web sites, to license such content by the time he completed InfoSpace's initial public offering (IPO) of stock in December 1998. A series of acquisitions followed, as Jain began guiding the company into the wireless segment. In 1999, he purchased wireless Internet portal Saraide Inc. and Prio Inc., an e-commerce company with technology that enabled wireless users to complete commercial transactions.
The speculative bubble that became known as the dot-com bubble began its wrenching downward swing in 2000. The climax occurred in March 2000, the month InfoSpace, coincidentally, dropped the ".com" from its corporate title. The name change was made to reflect Jain's effort to move the company into the wireless arena. "When the company was founded in 1996," Jain said in statement published in the March 6, 2000, issue of RCR-Radio Communications Report, "our vision was to deliver commerce and information infrastructure on the Internet--anytime, anywhere, and on any device. We have since significantly grown our business to provide comprehensive infrastructure services to both the online and offline worlds. Dropping the dot-com from our name will more accurately reflect our true business model of making every space an InfoSpace." The following month, Jain relinquished his post as chief executive officer to strengthen his growing company's managerial ranks. Arun Sarin, the former chief executive officer of Vodafone Airtouch PLC's U.S. and Asia Pacific regions, took over as InfoSpace's chief executive officer, helping orchestrate a mammoth deal within weeks of his arrival. In July 2000, InfoSpace announced it was acquiring Go2Net, a Seattle-based competitor financially supported by Microsoft's cofounder, Paul Allen. The transaction, valued at $1 billion because of the hyperinflated stock prices of the period, was completed in October, doubling InfoSpace's payroll and giving the company access to Go2Net's expertise in delivering applications over broadband networks, the next frontier targeted by Jain.
Calamity Strikes in 2001
The full magnitude of the technology sector's collapse hit InfoSpace in 2001. The value of the company's stock had been tumbling down from its high of $130.53 per share in March 2000, and events in 2001 hurried the fall. In January, after a nine-month stay, Sarin announced he was stepping down as chief executive officer to spend more time with his family. The following month, Jain, who reclaimed his post as chief executive officer, announced InfoSpace was laying off 250 employees, or 21 percent of its payroll. Analysts, on the lookout for the slightest sign of distress, lost confidence in the company, particularly after InfoSpace reduced its revenue projection for 2001 from $350 million to $215 million midway through the year (InfoSpace ended up recording $161 million in revenue in 2001). The company's stock suffered miserably, sinking below $1.50 per share during the year, destroying InfoSpace's market value and triggering a raft of shareholder lawsuits.
During the precipitous slide in InfoSpace's stock value, Jain worked tirelessly at forging new partnerships. He wanted to extend the company's distribution model to the television, an objective that spurred him to form alliances with major telecommunications and cable companies as well as with software developers whose products connected the Internet to the television. "We're going to be platform agnostic," an InfoSpace senior executive remarked in a June 29, 2001, interview with Puget Sound Business Journal. Ultimately, however, Jain's efforts failed to impress. In December 2002, InfoSpace's board of directors fired Jain, replacing him with a telecommunications veteran named James F. Voelker. Jain's troubles did not end after he was dismissed from the company he founded. In August 2003, a federal judge found Jain guilty of insider trading and ordered him to pay InfoSpace a staggering $247 million as a result of a shareholder lawsuit.
Healing Beginning in 2003
InfoSpace emerged from the tumultuous period with its reputation tarnished and its business in need of an overhaul. The company turned to Voelker for help, enlisting the aid of a retired executive with more than two decades of experience in the telecommunications industry. Voelker began restructuring the company in 2003, shedding businesses involved in online games and web hosting and divesting financial information web sites. He focused the company's efforts on three businesses: search service, payment processing, and wireless content. The company's search business included three primary web sites, Dogpile.com, MetaCrawler.com, and Webcrawler.com. Its payment processing service was called Authorize.Net, which InfoSpace had acquired as part of the Go2Net merger. The company's wireless content business concentrated on supplying ring tones, graphics, and games to mobile operators. Voelker's efforts produced stunning results, helping to wash away the painful memories of the previous years. In 2002, when InfoSpace's revenues sank to $114 million, the company recorded an operating income loss of $120 million. In 2003, Voelker's first year in charge, the company's operating income loss was reduced to a far more acceptable $5.8 million. During the next two years, InfoSpace exhibited the financial vitality necessary to restore analysts' confidence in the company. Revenues increased from $249 million in 2004 to $339 million in 2005, years in which the company posted operating income of $45.5 million and $46.4 million, respectively.
Midway through the decade, InfoSpace was on the mend. As the company plotted its course for the years ahead, two notable events shaped its plans for the future. In 2006, the company reported it had lost one of its mobile carrier customers, which was expected to result in a 60 percent reduction in its mobile revenues. Although not named, the mobile operator was reported to be Cingular Wireless. The news prompted InfoSpace to restructure its operations and to reduce its mobile content offerings. In February 2007, because of its decision to scale back its mobile content business, the company sold its mobile games studio to Los Angeles-based Twistbox Entertainment Inc. The other notable event was a rumor, but a rumor with profound implications. In May 2007, industry observers were speculating that InfoSpace was the target of a takeover by a Spanish provider of content and applications for cellular telephones. The company, LaNetro Zed SA, reportedly was putting together a bid of $1.07 billion for InfoSpace, a deal which likely would have a tremendous impact on InfoSpace's future.
Principal Subsidiaries
InfoSpace Sales LLC; GSM Information Network B.V. (Netherlands); Moviso LLC; InfoSpace Europe Limited (U.K.); InfoSpace Mobile, Inc.; IOMO Limited (U.K.); InfoSpace Germany GmbH (Germany).
Principal Divisions
Online; Mobile.
Principal Competitors
Google Inc.; LookSmart, Ltd.; Yahoo! Inc.
Further Reading
Baker, M. Sharon, "InfoSpace Finds Profit in Online Directories," Puget Sound Business Journal, December 20, 1996, p. 4.
------, "InfoSpace's 2000 Revenues Skyrocket While Stock Free Falls," Puget Sound Business Journal, June 29, 2001, p. 54.
Barlas, Pete, "Crimped by Dot-Bust, InfoSpace Finds Room," Investor's Business Daily, September 3, 2003, p. A6.
Beckman, Kristen, "Global Mobility, InfoSpace to Deliver Internet Content to Cell Phones," RCR-Radio Communications Report, June 28, 1999, p. 26.
Bruno, Antony, "InfoSpace Gets into Wireless IP Space," RCE-Radio Communications Report, December 13, 1999, p. 10.
Chan, Sharon Pian, "Bellevue, Wash.-Based InfoSpace Names New Chief Executive to Replace Founder," Seattle Times, December 22, 2002.
------, "Bellevue, Wash.-Based Internet Content Firm InfoSpace Cuts 250 Staffers," Seattle Times, February 6, 2001.
Hoover, Ken, "Tech Bubble Propelled InfoSpace into Orbit," Investor's Business Daily, August 8, 2005, p. B17.
"InfoSpace Drops Dot.Com," RCR-Radio Communications Report, March 6, 2000, p. 30.
"The Man Behind All Those E-Ads," Business Week, June 26, 2000, p. 76.
Meisner, Jeff, "InfoSpace Seeks New Paths to Profitability," Puget Sound Business Journal, November 2, 2001, p. 5.
Omatseye, Sam, "Sarin Exits As InfoSpace CEO; Will Continue on Board," RCR Wireless News, January 29, 2001, p. 30.
"Verizon Wireless Selects InfoSpace to Provide Platform for Wireless Internet Services," Cambridge Telecom Report, April 10, 2000.
Yu, Roger, "Seattle-Based Internet Firm InfoSpace to Acquire Local Rival Go2Net," Seattle Times, July 27, 2000.
— Jeffrey L. Covell
