Incorporated: 1995 as Sybarite Interactive, Inc.
NAIC: 541990 All Other Professional, Scientific, and Technical Services
SIC: 7389 Business Services Nec
LivePerson, Inc., develops software to help companies interact with online shoppers. Its products facilitate real-time communication between web site visitors and the companies operating web sites, giving enterprises the ability to improve customer support, increase sales, and reduce customer service costs. For small- to medium-sized businesses, LivePerson provides LivePerson Pro, which enables live chat, and LivePerson Contact Center, a complete contact center service with live chat, voice, and e-mail management capabilities. For larger businesses, the company offers its Timpani platform, which facilitates real-time sales, marketing, and customer service. LivePerson serves more than 5,000 customers, including EarthLink, Hewlett-Packard, and Microsoft. Based in New York City, the company maintains offices in Atlanta, Boston, Dallas, San Diego, San Francisco, Montreal, London, and Tel Aviv.
Origins
Before he started LivePerson, Robert LoCascio formed a business whose death knell was sounded by the same phenomenon that underpinned his foray into customer service technology. Soon after earning a business degree from Loyola College in Baltimore, Maryland, LoCascio remained in Baltimore to start his first business, IKON. IKON developed and sold interactive kiosks that universities could use to give students information about campus activities. LoCascio integrated video features with advertising and commerce capabilities and found a receptive audience for his invention. Citibank and Northwest Airlines were among the advertisers signed on by IKON, whose kiosks were installed at New York University and the University of Maryland. By the mid-1990s, however, LoCascio knew IKON's days were numbered. The Internet was beginning to establish itself, and LoCascio realized students soon would be able to get all the information they desired without leaving their dorm rooms. He sold IKON to a college marketing firm and readied himself for his next challenge. "I know I can go from three guys in a room and build something," he recalled in a January 26, 2004, interview with Crain's New York Business, "but can I build a $100 million or $500 million company? That's the real challenge." LoCascio moved from Baltimore to New York City to answer the question he posed to himself.
In starting his second venture, LoCascio put the cart before the horse. He arrived in New York City in 1995 without any concrete idea of what his new enterprise would be, but one of the first things he did was to incorporate a company. "You need a company," he said in his interview with Crain's New York Business, brushing aside the suggestion that his approach was backward. "Before you get an idea, you get a business card," he explained. Although the method was unconventional, the start-up venture succeeded by capitalizing on the rapidly growing online world, the same burgeoning force that prompted LoCascio to abandon IKON. LoCascio started Sybarite Interactive, which developed real-time chat technology for use as a customer service tool. Through Sybarite Interactive, LoCascio developed a web-based community called TOWN, which was used by companies such as Xerox Corporation and TRW Incorporated. The technology used within TOWN engendered LivePerson, a product that debuted in November 1998 and became the new name for LoCascio's venture.
LivePerson, an application service provider (ASP), provided interaction between e-commerce web sites and online shoppers, seeking to add a human element to the decidedly impersonal experience of shopping on the Internet. "Our original vision was that people who want to buy something on a web site would like to get help," LoCascio said in a July 25, 2006, interview with Investor's Business Daily. "They would love to click open a window and use text-based chat to ask questions of a company representative." LoCascio was not alone in addressing the needs of improved customer service on the Internet--companies such as Acuity, Brightware, and eShare Technologies were vying for the same business--but not all of his competitors were ASPs. As an ASP, LivePerson used technology based on instant messaging (IM) made popular by Internet service provider America Online, which required no hardware or software installation. Web site visitors were given the opportunity to click on a customer support icon, which enabled real-time communication via text-based chat in pop-up, on-screen dialogue boxes. LivePerson hosted the service on its servers and databases, routing the chat from its clients' web sites through LivePerson's servers to the clients' representatives. "In the real world, we are used to talking to humans," LoCascio said in a May 31, 1999, interview with Advertising Age. "You can't automate the customer service process. Putting the human back in the online shopping process is such a simple idea, but it works."
To market his services, LoCascio could not only tout LivePerson as a way to improve customer service, but also as a way for companies to save money. Providing customer support via telephone lacked the efficiency of LivePerson's click-to-chat service, an advantage LoCascio stressed in marketing his company's services to operators of e-commerce web sites. According to LoCascio's reckoning, a company representative was capable of handling ten to 15 customers per hour over the telephone, while the same representative using a chat service could interact with 20 to 35 customers per hour. The difference in productivity translated into significant savings. A company that used telephones to provide customer service paid an average of $6 per call, while an online chat cost the company an average of $1.80.
Armed with an effective sales pitch, LoCascio set out to convert e-tailers to LivePerson's click-to-chat service. Within the first six months of the product's release, the company signed on more than 50 clients, encouraging LoCascio to step up his efforts. A new web site was unveiled in mid-1999 along with a more than $250,000 promotional campaign featuring the tagline, "Give Your Site a Pulse," which fueled the company's growth and provided sufficient exposure to lead LoCascio toward the next step in his company's evolution: its debut on Wall Street. In February 2000, the company announced it expected to raise nearly $60 million in an initial public offering (IPO) of stock, which was completed two months later. Robust growth followed, as LivePerson's client roster expanded to roughly 800, including high-profile clients such as Ford Motor Co., Compaq Computer Corp., and National Discount Brokers. LivePerson's payroll expanded to 180 employees as demand for its customer service technology increased, but soon the company's rapid growth sputtered, quashed by the bursting of what became known as the "dot-com bubble."
Turbulence
In March 2000, one month before LivePerson's IPO, the Internet sector began to show the first signs of weakening. Nearly every company that relied on the Internet as part of its business plan experienced the adverse effects of rampant optimism turned sour, LoCascio's firm included. LivePerson began to reel from the debacle in 2000 and 2001 when the company teetered on the brink of collapse. During the period, the company was chewing through $2 million per month as its stock value plunged to below $1 per share, putting it in the precarious position of being delisted from the NASDAQ. LoCascio was confronted with what became LivePerson's crucible, a challenge he addressed by seeking salvation in Israel. He found a company in Israel, HumanClick Ltd., that had developed a product similar to LivePerson's click-to-chat service, but the Israeli company offered the service for one-tenth the cost of LivePerson's service. LoCascio bought the company in October 2000 and slashed his payroll by 75 percent, as he prepared to instill the type of fiscal discipline that had been ignored throughout the Internet sector in the years leading up to its collapse. LoCascio vowed to tighten the reins on spending and not slip back into the pattern of operating with negative cash flow. By November 2001, LivePerson began generating positive cash flow and, although the company's stock continued to hover in the $1 range, LoCascio had steered his company away from potentially fatal damage. LivePerson survived its first great challenge, enabling it to exploit a market that was becoming increasingly receptive to the advantages afforded by using customer service technology.
LivePerson Branching Out into Marketing Services in 2003
LivePerson nonetheless suffered through several money-losing years as it progressed toward the fifth anniversary of the introduction of its namesake service. The company generated $8.2 million in revenue and incurred a $6.7 million loss in 2002. Revenue increased to $12 million and losses were cut to $816,000 in 2003, the year LivePerson began to turn the corner financially. The company's customer base had expanded considerably during the previous three years, despite the hardships, swelling from 800 to roughly 3,000. Equally as important, the type of services provided by the company had evolved, becoming more comprehensive and sophisticated. LoCascio, in a July 25, 2006, interview with Investor's Business Daily, described how his company diversified into marketing services. "Retailers told us that click-to-chat was great for certain purposes, but it's not optimal for selling online," he explained. "Their people on chat were taking only support-related calls. They wanted to make some commission, but they weren't selling anything. Retailers are really challenged with traffic on their web sites because 98 percent of people leave without buying. So we said, 'Let's proactively engage them for help and send them for help and send them back to Web chat.'"
The leap from customer support to sales promotion gave LoCascio a new line of attack as he sought to make LivePerson an indispensable tool for e-commerce operators. The technology supporting the company's new, proactive chat service enabled service agents to detect a visitor's presence on a web site. Instead of waiting for a visitor to click a button and ask for help, the premise of the company's click-to-chat service, a service agent could start a real-time conversation, jumping in to help the visitor based on the visitor's browsing habits. If a visitor demonstrated more than a modicum of interest in a web site by viewing a certain number of a web site's pages or by remaining on a web site for a certain length of time, a sales representative could approach the visitor electronically, offering assistance through a chat box. If a visitor lingered in the checkout section of the web site, a sales representative could intervene and attempt to resolve any confusion over completing the transaction process. LivePerson's proactive chat became the basis of the company's Timpani platform, which provided real-time sales, marketing, and customer service capabilities that could be used by major corporations such as AT&T and much smaller businesses such as a local automobile dealer operating an online showroom.
LivePerson began to show consistent profitability as it neared its tenth anniversary. The company posted $2 million in net income in 2004 and $2.5 million in net income in 2005. Revenues increased steadily as well, reaching $17.3 million in 2004 and $22.2 million in 2005. As the company began its second decade of business, there was enormous potential for growth, with only 10 percent of e-commerce web sites deploying marketing and customer service technology similar to the products sold by LivePerson. With 35 percent of his company dedicated to product development, LoCascio felt confident he could stay ahead in the technological race to give businesses the most advanced online customer service and marketing software. In 2006, LivePerson's ingenuity was on display with the introduction of LiveCall, a click-to-talk application that represented the next evolutional step in online customer service and sales support. As the company looked to the future, further advancements promised to increase the attractiveness and necessity of LivePerson's service, making LoCascio's goal of someday building a $100 million-in-sales company an attainable objective.
Principal Subsidiaries
HumanClick Ltd.; Proficient Systems, Inc.
Principal Competitors
RightNow Technologies, Inc.; Kana Software, Inc.; Art Technology Group, Inc.; WebSideStory Search and Content Solutions Inc.
Further Reading
"Click-to-Talk Solution Integrates Voice with Live Chat," Product News Network, May 8, 2006.
Gilbert, Jennifer, "LivePerson Focused on the Human Touch," Advertising Age, May 31, 1999, p. 62.
Jain, Anita, "Robert LoCascio, 35; Chairman, CEO, LivePerson Inc.," Crain's New York Business, January 26, 2004, p. 18.
Smith, Erika D., "Online Chat Companies Offer Alternative to Telephone Labyrinth," Akron Beacon Journal, June 15, 2004.
Whiddon, Robert L., "Facing Facts: Customers Want a Pulse," IPO Reporter, February 7, 2000.
Yoshai, Michal, "LivePerson Buys Kasamba," Globes, June 26, 2007.
— Jeffrey L. Covell
