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Business Observer Friday, May 14, 2010 9 years ago

Serious Action

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John Lemp built a $120 million company in eight years — in a place not exactly known for technology gazelles. Despite the doubters, he predicts much more growth to come.
by: Mark Gordon Managing Editor

REVIEW SUMMARY
Entrepreneur. John Lemp, co-founder of Sarasota-based IntegraClick.
Industry. Online advertising
Key. Firm is considered something of a pioneer in the world of cost-per-action online advertising.
By The Numbers. Click here.

The words people use most often to describe John Lemp are nerd and practical joker.

The evidence makes for an unlikely image: To some he's a geek who reads graphic novels and loves to figure out complicated Web algorithms in the middle of the night.

To others, he's a backslapping life of the party kind of dude — a guy who hosts dozens of people at his beachfront mansion for rollicking Thanksgiving and Fourth of July bashes. He's also the kind of guy who leaves gory props — think fake cut off fingers — sticking out of the garbage disposal on Halloween for others to find.

More evidence: In high school in the mid-1990s, Lemp would forgo typical teenage indiscretions to instead build Web sites with his buddies at sleepover parties. Just last month, Lemp, 29, stood on a second floor balcony of his house and dropped a water balloon on his 60-year-old aunt.

But don't be fooled. Lemp is not just a goof-off.

He has a workaholic, cutthroat, competitive side. An accomplished high school athlete, Lemp nearly played Division III college football at a small school in upstate New York. He still hits the occasional home run in local recreation league softball games.

The competitive side of Lemp truly manifests itself in IntegraClick, the Sarasota-based Internet marketing and advertising company he co-founded in 2002. The company, which sells and brokers online advertisements, has grown 400% the last three years, from $24 million in 2007 revenues to $120 million last year.

The company also mirrors Lemp's attack-like mentality. “There can be no balance in business,” Lemp says. “If you want to win, you have to do it.”

IntegraClick is doing it with a bite rarely seen in Sarasota or Bradenton. For instance, at 85 employees the company produced $1.4 million in revenue per employee in 2009, a startling figure that defies the recession.

The company has also been recognized by several high-profile national and state organizations and publications. The list includes:

• Inc. Magazine, where IntegraClick was listed as the fastest growing advertising and marketing company in the country on the Inc. 500 last year;
• The state of Florida, which awarded the company the Governor's Business Diversification Award last year for its job growth; and
• JMP Securities, which named the company to its inaugural 100 Best Privately Held Internet companies list earlier this year, a roll call that includes Facebook and LinkedIn.
For that kind of growth, Lemp — IntegraClick's chief executive — has been named the Review's 2010 Entrepreneur of the Year.
“John's vision is incredible,” says Robert McAfee, IntegraClick's vice president of technology, who recently joined the firm after a consulting career in software and programming for entities including the World Bank, KPMG and Nike. “He has a lot of charisma and has really gotten people to buy into what he is doing.”

A new model
IntegraClick makes money in the world of cost-per-action online advertising. The model is like it sounds: The advertiser only pays the host of its ad when an 'action' happens, such as a sale of a product or a subscription to a service.

The more traditional method of online advertising is called pay or cost per click, which is also like it sounds: The advertiser pays the Web site host or owner when a user clicks on an ad, regardless if the click leads to a sale.

The cost-per-action way, say Lemp and a host of others involved in online marketing, is hands-down better because it eliminates risk for advertisers. A campaign that underperforms in any other method of advertising, be it newspapers, radio or pay-per-click, still costs the advertiser money.

But in cost-per-action an underperforming ad campaign doesn't cost the advertiser a cent.

“It's an extremely effective form of advertising [and] it might be the model that saves the industry,” says Paul Levinson, a professor of communication and media studies at Fordham University in New York who wrote a book about online advertising last year. “Even more remarkable is that this model has taken off in the teeth of the recession.”

IntegraClick, through its subsidiary named ClickBooth, is a clearinghouse for cost-per-action ads, where it's essentially the broker between the advertisers and the publishers of the ads. Some of the other top industry players, companies such as Santa Barbara, Calif.-based Commission Junction and Chicago-based Performics, take the same approach.

Over the last eight years ClickBooth has built up a network of about 1,000 advertisers and more than 30,000 publishers. The publishers can go to the company's Website, www.clickbooth.com, and create an ad campaign to match a client or a certain program.

When an action happens, an advertiser pays IntegraClick a pre-determined fee, anything from a few bucks to $100 and up.

IntegraClick then takes a percentage of that fee and pays its publishers, which are mostly independent contractors spread worldwide. So a large portion of the company's millions in revenues pass in and out quickly.

The bulk of IntegraClick's client base of advertisers are small and medium-sized business, although it has deals with a few national companies, including Dish Network, ADT Security and Sarasota-based Hoveround, which sells powered wheelchairs and scooters.

The model, and IntegraClick's ability to mine success out of it, has drawn potential buyers to Lemp's door. Lemp, however, says he has no interest to sell or move the firm. Instead, he wants to stay in Sarasota and take the company public someday.

'Slim margins'
While IntegraClick's staggering success has attracted many admirers and fans, the company has also attracted some criticism and doubts. In several interviews going back to 2008, Lemp admits that the company's meteoric rise “is a bit unbelievable.”

Specifically, IntegraClick has been criticized over the past few years in multiple Internet chat rooms and message boards for two specific allegations. One claim is that the company pays its publishers too little, too slow or sometimes not at all.

Another allegation is that the company engages in phishing. That is when a Web site sets up a portal, sometimes one pretending to be another site, that is designed to gather a user's passwords, social security numbers and other personal data.

Lemp has heard the complaints and followed the online chats. He denies the allegations. “There will be some of those guys out there,” says Lemp. “But they hold no merit.”
The company has hired attorneys to fight any accusations. The company also has a large compliance department, where it makes sure its employees and publishers adhere to anti-spam email and other industry regulations.

In some ways, doubts about IntegraClick's staying power and legitimacy remind Lemp of the early days of the company, when it designed Web sites. That was back in 2002 in what Lemp calls his one-bedroom “ghetto” apartment in Sarasota.

It was there that Lemp and a friend from college, Amanda Huntington, made cold calls to find customers. Lemp, a native of Long Island, N.Y. and a graduate of the Rochester Institute of Technology, met Huntington in college.

The duo moved to Sarasota in search of warm weather. But initially their business wasn't hot, despite many 20-hour days and lots of ideas thrown around. “I realized that if you wanted to do anything cool online,” says Lemp, “you had to figure out a way to monetize something.”

Lemp thought he hit the jackpot in 2004 when he read about the concept of cost-per-action online advertising. The theory, Lemp says, spoke to his sense of fairness, where everyone has the same chance to succeed if they work hard.

At first, Lemp and Huntington weren't sure what they were doing, so they got clients on the cheap. Says Lemp: “We worked off slim margins because we just wanted to make our clients happy.”

By 2005 the company had moved out of Lemp's apartment. By 2006 it surpassed $15 million in annual revenues. Huntington remained with the company and is now its chief financial officer.

Up late
Lemp, meanwhile, has maintained the same work-hard, play-hard approach.

In other words: He is motivated by the chase.

“My biggest fear would be to run out of challenges,” says Lemp. “That is what scares me the most.”

Indeed, several people in Lemp's life, from IntegraClick employees and executives to a high school buddy, have all been awed by his work ethic. “He's probably one of the hardest working people I've ever met,” says McAfee, the IntegraClick executive who says he worked plenty of 15-hour days before joining the firm. “He can work you into the ground.”

Melissa Filipkowski, who has been with IntegraClick in marketing and sales for a little less than a year, has also experienced the Lemp work ethic. That happened late one night a few months ago when she noticed Lemp was logged into his instant messaging account while she was going through a difficult e-mail exchange with a client in Hong Kong.

So at 10 p.m. Filipkowski contacted Lemp over IM and told him she was in a jam with the client. Filipkowski says Lemp gave her three specific suggestions to help her solve the issue. “He's very encouraging and open to give feedback,” Filipkowski says.

Plus, being online and working at 10 p.m. is a cinch for Lemp. After all, this is a typical workday: He gets into the office around 2 p.m., works there through dinner and goes home around 8 or 9 p.m. Then he hangs out with his girlfriend for a little bit before he goes back to work, usually until 3 or 4 a.m.

Lemp says he takes some time on weekends to wind down, when he might go fishing, read a book, or play games with friends and families. With the games Lemp is notoriously competitive, be it a board game like Scattergories or a computer simulation game like Sims.

Chris Murolo, a close friend of Lemp's since elementary school, says Lemp always liked to work for the mere challenge of figuring something out. “He was always pushing me to do more and work harder,” says Murolo, a dentist. “His outlook on life is he doesn't care if he is successful. He just wants to do the best he can.”

Lemp's inner circle is unanimous in saying he has remained humble through IntegraClick's success. Lemp has, however, enjoyed some of the rewards of that success: He drives a marine blue Porsche Cayenne SUV and he recently bought a 5,200-square-foot waterfront home on Siesta Key.

New initiatives
A more recent move than Lemp's new house is IntegraClick's new headquarters. In fact, earlier this year the company closed on a deal to buy two buildings totaling 79,000 square feet on 12 acres in north Sarasota County. IntegraClick is moving into the new space throughout May.

The purchase had two things going for it. One, IntegraClick got the buildings for $5.75 million, at least half of what it could have cost during the boom. Plus, tax-exempt bonds from a federal stimulus program run by Sarasota County financed part of the purchase.

Lemp hopes IntegraClick's new home, a mile west of Interstate 75, just off of University Parkway, will be more than a headquarters. He also hopes to lease some of the unused space to other local startup technology companies.

That goal follows one of IntegraClick's newest initiatives, www.authorise.com. The company says the site is an alternative funding source for small businesses that want to become involved in cost-per-action advertising. It's also another way for IntegraClick to spread its brand message.

“Our goal is to help other companies grow,” says Lemp. “I want to see other people become successful entrepreneurs.”

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