Scott Kurnit: If It Works, AdKeeper Will Be Printing Money

In 1996, Scott Kurnit founded the company that would become About.com and managed it into one of the most popular Internet startups in the U.S., before staging an IPO in the spring of 1999. More impressively, Kurnit sold the company to the publisher Primedia for $690 million in late 2000, as the dot.com bubble was fast deflating. (In 2005, About.com was acquired by its current owner, the New York Times.)

Kurnit spent the next 10 years investing in startups and skiing a lot – 80 days a year in recent years – but he says that one idea nagged at him: the idea that done right, people might be moved to save online ads for later viewing.

Kurnit says that it “never felt like the right time, it never felt logical” – until now. Indeed, just 10 months after Kurnit began work on AdKeeper, his new, New York-based startup is about to roll out a system in which people can simply click on the ads they like for later viewing in a digital cupboard hosted by the company. And the company is sitting on a stunning $43 million from investors who think that if anyone can convince people to save their online ads, it’s Kurnit.

Yesterday, Kurnit phoned from his office in New York to discuss how he’s planning to pull it off. The conversation has been edited for length.

You think that yours is an idea whose time has come. Why?

A number of things have changed in recent years. Technology improved – on the consumer side, there’s no software downloads or preregistration. On the industry side, things also changed. [It used to be a question of] could you get the ad networks and serving companies to partner with you in a way to make this work? The answer was no. It’s still largely no – there’s too much friction, too much deal-making. But then you say, wait, with pixel calls and cookies, I don’t need publishers or ad networks or serving companies. We can pass through all those systems [and nest instead] within the four walls of the ad [on publishers’ pages]. I mean, if I’m McDonalds and I buy the ad unit, I get to do what I want.

After you take the friction out [the questions left are]: will consumers like the ads [and] will the system be simple enough?

The system seems very simple, but what makes you think consumers will start noticing banner ads?

It’s funny. The closer you get to industry pundits, they less they like ads. [In trying to sign up clients], we went to media agencies and they said: people really don’t like ads. But I have the advantage of [knowing better] because of the many verticals we created at About.com and when you have endemic advertising that’s properly targeted, people like it. At Primedia, all these magazines like Motor Trend and Guns & Ammo have ads that are in some cases better than the content and people do like them, and the same can be true of online ads. Google’s business is so great because its [ads] are well-targeted.

But I know you agree that most online ads today are horrible, so are you helping your clients with creative?

We’re not doing their work for them but it doesn’t mean we can’t share perceived best practices. Then there’s a tool kit that we’re developing, where we’re saying to advertisers, there’s stuff you can do in an [AdKeeper ad] that you couldn’t before, like create an ad in which the more people who keep it, the more the price [of the good or service] goes down for everybody. It’s the Groupon effect without the middleman.

A second tool is a scavenger hunt. I keep an ad, say, for the Showtime show “Dexter,” but there are other ads that make up the “Dexter” story, and because we have methods for delivering extra information once a consumer has [saved] an ad, we can let them know there are other ads at AOL and CNet and the 100th person who finds all of them gets Showtime free for life. I’m not saying that Showtime will do that, but it’s a tool that makes advertising playful. So you start to see have active keeping and storing can [change the way that ads are created].

Seems like your biggest competitor will be email, where a lot of people right now save the ads they want to keep. Do you agree?

When we did our first focus group, they said, “Yeah, I print a Web page or I keep an email. “Then we said, “There’s this new service,” and 17 of the 19 went “Really? When can I get that?” So I don’t think we’re competing with email. I think we’re another, easier use case. Also, you can send the coupons in your email to your own keeper, so if you get an email from the Gap, you get can get it formatted and you track its expiration or whatever it was along with your other offers. So we borrow from email; we don’t get scared of it. 

And the service rolls out next month?

Yes, we’ve signed up [more than 25 brands], but it’s very hard to do demand planning for something that has never existed. So we’ll make noise from day one, and more noise as we feel our way. Gmail was in beta for three or four years before they took the tag off. Very few businesses show up with the marching band on the Internet. We’ll start bigger than just about any of the businesses we’ve seen out there, though, so it’s interesting.

When you pitch brands, what are you promising them, and how are you charging them?

Our business model has in it that clicks will amount to .1 percent, which is standard right now on the Internet. But my own view is that we’ll see a .5 percent “keep” rate, so 5 x bigger than clicks.

As for how we get paid, the button is free for them to put on their ads, and my gut says it will be free forever. But we’ll make our money the way publishers do. When a consumer engages with the ad by saving it, clicking, or buying through it, we’ll charge a CPM, CPC, and CPA, charging less for it than what people expect. We’ll have to see market activity before we know more – if it’s a blend or how we charge. I think some we’ll charge on an impression basis and some on a CPA basis. One cellular company is happy to pay a $100 acquisition fee, so it puts it in our camp: can we get a customer to click through and get phone service?

You just raised an enormous amount of money – much more than you were seeking. Does the market feel frothy to you?

There’s no question that the market has moved dynamically. But there’s this continual recognition that this Internet thing is so disruptive to businesses that if you hit one of these things, it will just print money. Groupon just prints money. Facebook just prints money. And AdKeeper has one of those models that we could be printing money, too.