The Journey

Startup 2.0: The Internet is Coming! How will we make money?

May 2nd, 2006   |   by Frank Addante

[Startup 2.0] ReaXions, Inc. – Web Design, Development and Advertising Technology Company

Age: 21-22
Time Period: 1997-1998
My Role: President and Founder
High Point: Developing one of the first online video streaming websites for the 1998 Winter Olympics with Visa

At Starting Point (Startup 1.0), we made graphs, lots of graphs… We would impress ourselves with graphs and charts showing hockey stick growth in users and website traffic. We loved our graphs… we were very excited about how our user base and traffic were growing very quickly. One day, someone created another graph called “Expenses” – it looked a lot like our “Web Traffic Growth” graph… Then we got really carried away and created a graph called “Profit” – this one looked A LOT different… after that one, the graph making party was over.

It suddenly hit us that it actually costs more money to support more traffic! So then the question was posed: “How will we make money?” Advertising was the answer! (though, at the time, companies that we would sell to did not have an “online advertising” budget… creating budget = not good)

Starting Point was one of the first sites on the Internet to offer targeted, track-able advertising. The revenue-engine behind the site was driven by technology that I created to display banner ads, text links and to deliver targeted emails for the site. It was a simple concept; if someone searched for the word “long distance” we displayed an advertisement for AT&T long distance. I developed this ad-serving technology for Starting Point at ReaXions. I was running two companies at the same time – one which was a “dot-com” (Starting Point) and the other which developed technologies for “dot-coms” (ReaXions).

After seeing the online advertising model work for Starting Point, I decided to build upon this concept and enable other websites to do the same. So, I started a new company, ReaXions, Inc. During this period of time (1997-ish), websites were basically static, online advertising brochures. Marketers, and their respective companies, were looking to “go online.” At ReaXions, we created one of the first online video streaming enabled sites for the 1998 Winter Olympics. ReaXions helped companies create websites and then provided them with the tools to promote their sites and monetize the traffic (marketing software). They paid us -a little- money to develop their website and then they paid us -a lot- of money for the marketing tools to drive revenue from it. The more money they made, the more they were happy to spend with us. A lot of other companies started realizing the same thing – Internet advertising was heating up…

At ReaXions, we invented the technology (adMonitor) that would later serve as the foundation for my next startup (L90: Startup 3.0)…

Click here to see a semi-working version of the ReaXions website from 1998.

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SNAPSHOT:

Venture Capital Funding: $0 (profitable)

Exit: Evolved into my next company: L90, Inc. (Startup 3.0)

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LESSON(S) LEARNED:

What you don’t know can’t stop you: Our team was very inexperienced and we had no idea what our limits were. So, we simply kept reaching further and making mistakes until we got to the right answer.

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BIGGEST…

…reason for success: As the market changed, we recognized it and evolved into a much bigger business plan.

…mistake: Being young and naïve, I understood very little about business. I got involved with people who understood it much better than I did. As I created a lot of value for others, I failed to surround myself with smart people who could protect my interests.

…challenge: Figuring out how to scale.

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IF I WERE…

…smarter: We would not have allowed ourselves to discover the “wrong” way to do things. In doing so, we were able to formulate the right plan. Otherwise, we would likely have failed like most other website development companies did at the time.

…dumber: I would have raised venture capital for a company/business plan that would not have scaled.

…to do it all over again: I would have skipped this company altogether and went straight to the next one (L90, Inc.: Startup 3.0 – which leveraged the technology we developed at ReaXions)

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People often talk about the dot-com “bubble” bursting… did it really burst? Or did a bunch of investors simply lose money? The number of people online continued to grow… the number of websites continued to grow… the money spent online continued (e-commerce and advertising) to grow… It is too easy to start an online business – anyone can do it, anywhere in the world and reach anyone in the world — with little “obstacle to entry” (by the way – I do not believe in “barrier to entry”). The question is no longer “how do will we make money?” it is now… “how will we continually evolve to protect the way we make money?”

Next on deck: Startup 3.0… “Internet advertising is good. No, it’s bad. Oh wait… it IS good!”