Sees Profit Before IPO Sees Profit Before IPO Sees Profit Before IPO


by Hal Plotkin
Silicon Valley Correspondent Inc. is a rare breed of Silicon Valley start-up. The CEO of the nine-month-old firm says his company will actually be making money before it goes public, which could happen as early as next year.

“I’d certainly buy the stock when they go public,” says Darcy Fowkes, an analyst with the Aberdeen Group, an information-technology market-research firm based in Boston. “They have exactly the things Wall Street looks for.”

Mountain View, Calif.-based sells an Internet-based service that allows Web-site operators to quickly and easily create a searchable index for their site. Once a site’s index is operable, usually in a day or less, Web surfers can use the search feature to determine if the site has what they’re looking for. Web-site operators can also receive regular reports detailing exactly what people coming to their site are seeking.

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The company offers a free basic service that’s aimed at small- and medium-size Web sites. Operators of larger Web sites are paying up to $10,000 a year for additional features, such as daily updates of their indexes.

By contrast, adding custom-designed search features to large Web sites usually costs an average of about $250,000, according to a recent study by Forrester Research, based in Cambridge, Mass.

“They’ve made a smart decision to target an addressable market,” says Lucas Graves, an analyst at Jupiter Communications, based in New York. “It’s seems to be a market that’s underserved.” was initially capitalized last January with $500,000 in seed money. The company has since signed up more than 1,200 customers, despite an almost total absence of formal marketing. Current customers include Inc., based in Mountain View, Calif., and Palo Alto, Calif.-based Inc. has also been named a “preferred provider” by Palo Alto, Calif.-based Hewlett-Packard Co. {HWP} and by San Francisco-based SmartAge Inc., one of the leading service bureaus used by Web-site operators.

“It’s been viral marketing so far,” says Nick Halsey,’s CEO. “But people seem to be excited about what we’re doing.”

From a business standpoint, there are several reasons to be excited.

In addition to receiving revenue from the company’s paying customers, also generates income by selling advertising on the results pages that are returned after a user inputs a search query. can target ads accurately, because the company knows exactly what Web surfers are seeking.

There appears to be a large and growing market for Searchbutton’s product. According to the company, more than 79 percent of all Web sites don’t yet have search capabilities.

What’s more, several recent studies indicate that the most popular major commercial Internet search engines typically archive as little as 15 percent of the total information available on the Internet.’s technology gets around that problem by including all available information in each site’s searchable index.

Several studies have shown that people surfing the Web prefer sites with search functions.

“Most people will leave a site if they don’t find what they’re looking for after three clicks,” observed Mary Laplante, during a recent trade-show panel discussion in San Francisco, which featured a demonstration of’s product.

Laplante is cofounder of Fastwater LLP, an Internet research and consulting firm based in Coraopolis, Pa. “Things move fast on the Web,” she says. “You either help people find what they want quickly, or you lose them, and they probably won’t ever come back.”

“It’s been viral marketing so far, but people seem to be excited about what we’re doing.”

— Nick Halsey, CEO is also winning points with analysts for the way the company is creating additional opportunities to sell complementary products to its customers. As an example, for an additional fee, users will be able to see how their company stacks up, in terms of visitor behavior, with the average performance of other companies in their industry.

“Once we establish a trusting relationship with a site owner, we can offer a variety of other services,” Halsey says.

The company provides user-driven analytical tools, which help Web-site operators fine-tune their offerings. If a user visiting an auto-related Web site types in the word ‘‘vehicles” in a search field, for example, they may come up empty because the site archived information under “autos” instead.

With’s analytical tools, however, Web site operators can find out which words should be cross-referenced with which documents to make sure visitors are pointed to the right resources.

“That kind of tool is very important,” says Lucas Graves of Jupiter Communications. “You don’t want to lose people just because they used the wrong word.” is facing very little in the way of direct competition, the one exception being companies selling similar, but considerably more expensive, custom services to large Web sites, Fowkes says.

“The category of outsourced search provision will persist,” Graves says. The only thing has to worry about, he says, is that competitors will probably copy the company’s innovative business model before too long. Even so, Graves says he “won’t be surprised to see [] prosper over the next couple of years.”

The company is a few weeks away from closing its next round of venture-capital financing, Halsey says.

The 20-employee firm plans to double its workforce before year’s end, and will probably proceed with an IPO sometime during the next 12 months.

“We’re taking advantage of our first-mover status,” Halsey says. “We expect to be profitable by the time we go public.”

About the Author /

My published work since 1985 has focused mostly on public policy, technology, science, education and business. I’ve written more than 600 articles for a variety of magazines, journals and newspapers on these often interrelated subjects. The topics I have covered include analysis of progressive approaches to higher education, entrepreneurial trends, e-learning strategies, business management, open source software, alternative energy research and development, voting technologies, streaming media platforms, online electioneering, biotech research, patent and tax law reform, federal nanotechnology policies and tech stocks.