20-Apr-2000 Thursday
The sixth floor in the East Tower of 1010 Second Ave. downtown holds
what
you'd expect of a company that combines college and the
Internet.
Personal computers occupy most of the 10,000 square feet, along
with row
after row of twenty-somethings, mostly in sweat shirts with
affiliations to
colleges such as Harvard, Stanford, UConn and UCSD. The
office bustles with
people and the sound of clicking computers as workers
tweak a product that
aims to be all things to college students.
It's
the headquarters of CollegeClub.com, a San Diego-based
Internet
company claiming to be the No. 1 destination of 2 million college
students
from the United States and 60 other countries. This week, the
company filed
to raise $85.3 million in an initial public
offering.
The brainchild of San Diego native Michael C. Pousti, 33,
CollegeClub.com
offers an array of online services,
including e-mail; auctions; student
discounts on products such as books,
clothes and music; a photo gallery; a
dating service; chat rooms; horoscopes;
games; and help with homework and
term papers.
Club members also can
share photos, add captions to them and build personal
picture albums
online.
The service is free to students. The company makes its money from
other
companies that provide services -- sponsors such as Gateway
and
Hewlett-Packard, that post logos -- and a 5 percent transaction fee
from
items sold online.
For retailers, services such as
CollegeClub.com and Boston-based
StudentAdvantage.com, which
also claims a large student membership, are the
gateway to a
multibillion-dollar market. According to Jupiter
Communications, a New
York-based research group studying online commerce,
college students will
spend $2.5 billion online by 2002.
Forty-seven percent of students use
the Internet to shop, compared with 28
percent of the general population,
said Ekaterina O. Walsh, an analyst for
Forrester Research Inc. of Cambridge,
Mass. And the number of college
students online, which jumped from 43 percent
to 61 percent in 1999, is
expected to reach 80 percent before the end of this
year, she said.
"It's an attractive group to marketers," Walsh said.
"You're looking at the
leading edge of `Generation Y,' which will be the
biggest generation to hit
the market after the baby boom
generation."
They're "the final advertising frontier," early adapters who
can attach
themselves to a product and drop it with equal ease, Pousti said.
They
haven't had time to forge any brand loyalty yet, which is what makes
them
attractive to retailers, he said.
"Companies of every type want
to reach this market," he said.
San Diego has two companies competing for
this demographic on the Web. In
addition to CollegeClub.com,
Colleges.com also targets college-age men and
women. CEO John Carrieri said
Colleges.com, which employs about 30 in
Sorrento Valley, is a resource in
which college students and soon-to-be
students can comparison shop for books,
scholarships and colleges, among
other services.
Pousti's virtual
college community began as a reaction to his own college
experience. As a
computer engineering major at University of California San
Diego in the late
1980s, he felt he was missing out on something, commuting
back-and-forth to
class.
"Back then, after going to class, you could go to a library or go
home.
There wasn't much else to do," he said.
So, a few years later,
he decided to re-create the college experience. But
first, he set off on
another entrepreneurial venture, Productivity
Solutions Corp., a company he
founded in 1990 to develop client server
technology for Fortune 500
companies. A year later, he sold the company to
Unisys Corp. of Blue Bell,
Pa. Proceeds from the sale gave him seed money
to put his vision into
practice.
Getting started
In 1993, with a half-dozen other UCSD
alumni, Pousti founded CollegeClub
for phone users who would
gain access to voice mail and the ability to
return messages by using a
personal ID and password. Two years later, the
company launched the Web site
and started going after student groups,
fraternities and
sororities.
Most students who use CollegeClub.com do so
by computer, but 34 percent
rely on phones, which remain a key component of
the service. In February,
Ericsson Inc. of Sweden joined the company in an
alliance that will give
students access to CollegeClub.com's
services using a number of wireless
applications: mobile devices, pagers,
digital phones and Personal Digital
Assistants, or PDAs.
Pousti had no
doubt that his concept would work from a social standpoint.
The big
question: Could he make money from it? Armed with a vision and a
demographic
hard to dispute, he shopped his idea around and drew the early
backing of
investors that included Netscape co-founder John Kohler and
former Hewlett
Packard controller Jerry Carlson.
"They loved the vision -- a business
based on technology," Pousti said.
Venture takes off
So did Vern
Yates, coordinator of San Diego Band of Angels, a group of
about 160 local
investors. "The college market is attractive to a lot of
advertisers and
companies who want to keep their brands in front of college
students," Yates
said.
In 1998, when Yates first began meeting with the company,
CollegeClub.com
claimed 250,000 members. "It's 20 times that
now. Usership is very high,"
he said.
But what really persuaded Yates
and several other members of his group to
invest in the company was Pousti's
vision.
"When you look at a company, you look at certain things, such as
management
passion, and Michael certainly had passion for this concept. There
was no
doubt in his mind that it would work and become successful," Yates
said.
With a fresh infusion of capital, Pousti expanded his management
team. He
remains CEO in charge of planning; James DeBello is chief
operating
officer; and Ruby Randall, who helped reorganize the Upper Deck Co.
and
spent six years with 20th Century Fox, was brought in to head sales
and
marketing.
Partnering and strategic agreements also have been part
of Pousti's plan.
In January, CollegeClub.com worked out a
three-year deal with Sony Corp. of
America and Sony Pictures Entertainment to
co-brand and integrate
promotions through the Web site: collegeclub.com>http://www.collegeclub.com.
The
company also recently acquired CollegeStudent.com, CollegeBeat.com
and
Campus24.com, a student site for classifieds and auctions. Yesterday,
the
company also said it will also purchase Versity.com, which provides
online
lecture notes for university classes throughout the country.
In
keeping with its growth, the company expanded its work force in the past
year
from 80 to 300 employees who soon will occupy 50,000 square feet.
It also
secured an additional $55 million in financing, $40 million in
series C
convertible preferred stock through the Seligman Technology Group
of New York
and $15 million from a group led by Convergence Partners of
Menlo
Park.
The company, which lost $25.8 million last year on $2.9 million in
revenue,
said it would use proceeds of the initial public offering to fund
its
growth.
Danger ahead?
For its e-retail arm,
CollegeClub.com signed up 75,000 local merchants and
75
major retailers, including Barnes & Noble, Virgin Music, OfficeMax
and
Brooks Brothers. The company also has an exclusive arrangement with
the
National Association of College Stores to sell various campus products
--
T-shirts, software and books -- mainly online, Pousti said. About
200
college bookstores have signed up.
But Anya Sacharow, an analyst
for New York's Jupiter Communications, a
research firm that studies online
commerce, sees some danger in all of
this.
"By trying to be all things
to all people, you spread yourself too thin,"
she said. While
CollegeClub.com may want to be the one-stop site
for
everything from clothes to music, students are more site specific.
"They
want to go deep within a certain category. They're more likely to go to
a
vertical site solely about music," she said.
Not if they're
acclimated properly, said Pousti, who recently announced the
addition of a
new Web site. It's called HighSchoolClub.com.