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THE FOLLOWING ARTICLE IS A 5000 WORD
WALL
STREET JOURNAL FEATURED
COVER
STORY.
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Site
Seers: For Thriving Dot-Com, One Hot Market
Isn't What It Brags About --- Keen Has
Experts to Counsel On Any Topic, but Clients
Click Heavily on Psychics --- Some Calls
Are Inside Jobs
By
Suein L. Hwang
Staff Reporter of The Wall Street Journal
Article:
06/12/2001
The Wall Street Journal A1
(Copyright (c) 2001, Dow Jones & Company,
Inc.)
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SAN FRANCISCO -- Among the few dot-com survivors,
Keen Inc. is a standout. It runs a Web site listing thousands
of people who give paid advice, over the phone, to people who
click on their names. Portraying itself as a marketplace of
advisers on a wide range of mainstream topics, Keen boasts heady
sales growth, blue-chip backers and plenty of cash.
But Keen doesn't
boast about one secret to its success: customers such as Dawn
Simpson, a San Antonio legal administrator who went to the site
not for advice on taxes or gardening or law, but to divine her
future.
When her life
hit bottom after her live-in boyfriend left and she miscarried
their child, Ms. Simpson spent hours on the telephone talking
to psychics listed on Keen's Web site. They kept predicting
her guy would come back. But the only thing that came to Ms.
Simpson was $3,000 in credit-card bills for the calls.
The psychics
"knew what I wanted to hear," Ms. Simpson says. "I
even told them I don't have this money, and they'd say, `Don't
you want happiness in your life?' "
Keen
-- with pedigreed investors such as Benchmark Capital and Microsoft,
glowing press clippings and vocal fans on Wall Street -- is
among the last remaining hot Internet start-ups. "This
is one of the few that will emerge from the rubble as a legitimate
and successful business," says Andrea Rice of Deutsche
Banc Alex. Brown, which invested in the firm. At least until
recently, Keen was calling itself the fastest-growing e-commerce
business in U.S. history.
Keen
says its membership ranks have swelled to more than 3.5 million
from two million in mid-February. While Keen doesn't disclose
revenue, executives have said they expect the company to be
profitable by early next year, and they have plenty of cash
to get them there. Keen has its sights set on an initial public
offering.
"To
find sound advice and reliable information, consumers want to
speak to someone they trust," explains the corporate-background
page on Keen's Web site. It describes Keen as a "resource
for connecting people who want to give or receive live, immediate
advice on everything from computer help to dieting, tax questions
to personal issues, romance to nutrition."
But
Keen's recipe for success may be much simpler, offering a revealing
clue to what it really takes to succeed on the Internet. ComScore
Networks Inc., which tracks online consumer behavior, says 89%
of calls made to Keen's advisers in December and January were
to psychics, and 6% were to categories that include sexual come-ons.
NetRatings Inc., another research outfit, says Keen's household
demographics and advertising patterns veer toward lower-income
consumers. "Based on what they're saying to people, I would
have assumed their customers are clicking on areas like how
to repair a wallet or grill a salmon," says Sean Kaldor,
a NetRatings executive. "That isn't where things are going."
Last
year Keen acquired 800predict, a Web site for psychics, and
began listing them on its own site. It didn't announce the acquisition.
Keen says it was too insignificant to publicize.
Also
last year, Keen hired a provider of adult Web sites called Teleteria Inc. Keen was "very clear
they didn't want any press about the phone-sex portion of their
business," says Teleteria's
president, Jay Servidio.
Keen's
chief executive, Karl Jacob, denies that the company focuses
on psychics or sex, or that it has tried to mask its sources
of revenue. He says ComScore's numbers aren't accurate. Keen,
he says, did admit that they went to Jay Servidio because hs
is the leading expert on the adult internet industry and they
are focused on industries such as information services, consulting
and financial planning.
Keen's roots
go back to March of 1999, when a young Yale graduate named Scott
Faber watched his New York taxi driver chat on his cellphone
and had a bright idea: He could create an eBay for human capital,
he thought, where the buyers and sellers could use the phone
to trade information.
By
August, Mr. Faber was in California talking to Benchmark, the
firm that made its name by backing eBay. Benchmark took the
idea from there, in classic Silicon Valley start-up style: putting
in some money, tapping its network of technology investors,
lining up board members and getting the story out to the news
media.
The
first step was to link Mr. Faber with Mr. Jacob, a Benchmark
"entrepreneur-in-residence" looking for his next project.
A former executive of Microsoft Corp. who had sold it his software
start-up, Mr. Jacob was a quintessential Silicon Valley fast-tracker,
driving a Dodge Viper and racing sailboats. By November 1999,
its Web site was up. Just a few weeks later, Keen announced
that it had raised $60 million.
The
site listed self-registered experts known as "KeenSpeakers,"
usually under pseudonyms, and showed a per-minute charge for
talking to each. A customer who wanted some advice would register
with Keen, then click on a speaker. Keen's technology would
connect them by telephone -- leaving both sides anonymous --
and start charging the caller's account, with Keen taking 30%
of the fee.
Keen's
executives and Benchmark decided to let advice-givers list themselves
freely. "We wanted to position ourselves to be open to
anything and anyone," like eBay Inc., says Dustin Sellers,
Keen's head of customer acquisition. Big names invested, including
eBay, Paul Allen's Vulcan Ventures, Inktomi Corp., Integral
Capital Partners and Cnet Networks Inc.
At first,
Keen targeted Web-savvy young people, advertising on "Friends"
and "The X-Files." Mr. Jacob tapped his media contacts,
talking in interviews about the doctors and software engineers
who offered advice via Keen. National publications and shows
including Fortune, BusinessWeek, CNBC and The Wall Street Journal
picked up the theme, calling Keen a "cool company,"
an "up-and-comer" or "one to watch."
"Keen
has been pretty consistent in presenting the image of kind of
a homogeneous platform for this exchange of information, and
I guess the media has listened to that message," says Jeff
Skoll, a Keen board member and eBay co-founder.
But
employees found it wasn't easy to get people to pay for travel,
business or career advice from anonymous strangers. "The
early adopters were usually people who already had experience
talking to people on the phone and looking for advice, like
astrology and psychics," says a former Keen marketing employee.
"The problem is getting [other] people to really see the
value."
When
funding for consumer Web sites started growing scarce about
a year ago, former Keen employees say, Keen went after "the
low-hanging fruit." It acquired 800predict in June 2000,
adding its psychics to the Keen stable.
Neither
Keen's Web site nor 800predict's site mentions the acquisition.
Some former Keen employees say top executives told them that
if they were asked about 800predict, they should describe the
relationship as a partnership, not an acquisition. Mr. Jacob
denies that and says Keen didn't hide the purchase.
In
the summer of 2000, Keen sent potential investors projections
of revenue growth. "We set numbers out there and beat them,
every time," Mr. Jacob says. In October, as some dot-coms
were folding, Keen raised $42 million from investors to push
its total above $100 million.
Some
former employees say Keen turned its own workers into a captive
market, frequently asking them to call certain parts of its
own site. For instance, one KeenSpeaker offered callers taped
instructions on how to make squirrel pie, a piece of advice
that ended up in a Fortune magazine article about Keen. The
Web site shows that 15 callers have offered an evaluation of
that advice-giver under the site's feedback system. But former
workers say that at least eight of the 15 were actually Keen
employees, their screen names show. One was Mr. Sellers. Another,
they say, was Mr. Jacob.
Keen's
eighth-highest-ranked expert in the travel and recreation category
is "Dusty Road." But Dusty Road is a screen name of
Keen's Mr. Sellers. Of the nine pieces of feedback Dusty Road
has received, former employees say two are from Mr. Jacob, one
is from a brother of the CEO and one is from "kellynice,"
the name of Keen's advertising agency. Citing its privacy policy,
Keen declined to verify the identities of the postings.
Mr.
Jacob says staff calls to the squirrel-pie KeenSpeaker merely
reflect curiosity. He doesn't think evaluations by anonymous
Keen employees are misleading, asking, "Is their feedback
any less valid than yours?" And they couldn't skew the
site's overall numbers, he says, because the staff numbers only
about 150. Some ex-employees say that while they were asked
to make calls in part to check on speaker quality, they suspect
it was also to prevent rarely called speakers from dropping
out.
Speaker
listings show that the top five psychics on the Web site have
drawn 15 times as many calls as the top five computer experts.
Mr. Skoll, the director, says that "certainly more than
half" of Keen's business is "in romance and astrology."
Keen
is talking about expanding its ties to Linda Georgian, a KeenSpeaker
who was co-host with Dionne Warwick of a Psychic Friends Network
infomercial once common on cable TV. "They'd be my [public-relations]
representative and book me on shows" such as Howard Stern,
Ricki Lake and Jerry Springer, Ms. Georgian says. Keen says
it offers such support to any KeenSpeaker.
Mr.
Jacob was asked about psychics in February, and said that Keen
was just as strong in the health, computers and business categories
as in psychics. Asked again last month, he said the company
didn't wish to reveal its business breakdown.
He
did identify categories in which revenue is growing fastest.
They are money and career, business, and health and therapy,
he said. He noted that "calls aren't the same thing as
revenue."
Ms.
Simpson's calls represented revenue. Recalling the events of
late last year -- her boyfriend's departure and her miscarriage
-- the San Antonio woman says she was "losing my mind,
losing my hair. I started drinking all the time." She began
calling Keen's psychics repeatedly, at prices sometimes above
$4 a minute.
"They
kept telling me that `he loves you, loves you so much, he'll
come back to you,' " she recalls. "It was like an
addiction, filling my head with all this stuff." One psychic,
she says, insisted she stay on the line for an hour while the
psychic burned a candle. It cost her $350.
Finally,
one psychic e-mailed her, suggesting she stop wasting her money
and get on with her life. She says she complained to Keen about
all the bad advice from psychics and the money it cost her,
and Keen knocked a couple of hundred dollars off her bill. "They
told me I knew what I was getting into, that this is just for
amusement," she says.
Some
KeenSpeakers fret about vulnerable customers. "I see so
many people call with the last penny in their hand, people who
spend their grocery money, their mortgage money, calling a psychic,"
says "bimmyj," a former food-service manager who offers
counseling on Keen. Most KeenSpeakers don't want the public
to know their real names.
"DeepWater,"
a psychic, says some callers are struggling with loneliness,
abuse, poverty or depression. "I see people come in with
serious problems and lose thousands -- I mean thousands -- of
dollars," he says, asking not to be identified because
of his day job in financial services.
Gail
Summer, president of the American Association of Professional
Psychics, says she rejected a request by Keen to encourage its
members to become KeenSpeakers. She says the problems starting
to bedevil the Web site are "just a mirror of what happened
in the 900 [phone] industry. First it was a core group of psychics
who were very responsible and truly believed they were serving.
Then the big marketing companies got involved in the game, and
they didn't care who answered the phone as long the caller was
on the line long enough."
Mr.
Jacob denies that Keen has such problems. He says he isn't familiar
with Ms. Simpson's case. He says Keen's system of letting callers
rate speakers should flush out any problems.
Keen
recently advertised in supermarket tabloids, highlighting a
new toll-free telephone number. It gives Keen access to people
who don't have Internet access. "Love him or leave him?"
reads a large color ad in Star magazine. "Is he the one?
Talk to someone who knows! Keen has the largest selection of
the world's best psychics, tarot readers and spiritual advisers."
Most
of Keen's online advertising promotes psychic readings and runs
on sites targeting women, according to a partnership between
NetRatings, Nielsen Media Research and ACNielsen.
Nielsen//NetRatings
says Keen users are more likely to have incomes below $25,000,
to have just a grammar-school education, and to be African-American
than are visitors to the average Web site. KeenSpeakers say
the site attracts a significant number of black women, a traditionally
big segment of the psychic-call market. "They're definitely
focused on relationships and psychics," says NetRatings'
Mr. Kaldor.
Mr.
Jacob says Keen doesn't target African-Americans, lower-income
people or the less-educated. In fact, its customers are more
likely to have graduated from high school or college than the
general population, he says. Advertising in the tabloids is
just a "small part" of Keen's promotion, he adds.
As
for sex calls, ComScore, which confidentially monitors the Internet
behavior of more than 1.5 million volunteers, found such traffic
not just in Keen's restricted "adults only" area but
also in its "romance and social" category. That category's
top-rated speaker until recent days was "Liz69," who
calls herself an "Experienced, Gorgeous, Sexy Female!"
A woman named Amanda Lewis, who was listed until recently in
the romance and social category as "ahotsexychick,"
said she offered phone sex and had received thousands of calls.
Some
Keen employees say they were surprised to be presented with
a contract that read in part: "I understand and agree that
my job responsibilities at Keen.com may require me to access,
review, and/or monitor material that is sexually explicit or
of a sexual nature (`Adult Only Material')."
In
a February interview, Mr. Jacob said Keen had never been much
interested in the sex category. "We have a community, and
that isn't the way we want to make our money," he said.
Jay Servidio of Teleteria, the adult-Web-site provider,
says Keen executives approached him last year and "said
they wanted to be connected with someone who knows the [900-number]
business, who knows everybody, and who wouldn't get them in
any lawsuits." He says that he "brought the biggest
players from the phone-sex industry in the world to Keen."
He
cites Videosecrets, a big provider of live adult entertainment
to the Web. Online customers already could watch and chat with
its models. Now they can also talk to them on the phone using
Keen's technology. The Keen site shows Videosecrets has received
7,400 calls over the past year.
Mr.
Jacob says adult content provides less than 5% of Keen's revenue.
He says the point of Keen's relationship with Jay Servidio was
simply "to understand the adult industry and policies to
determine how to deal with adult on Keen" -- just as Keen
tries to "understand the pitfalls of other industries."
Keen says that Jay Servidio has been a tremendous help in understanding
not just the industry but how to market in the industry.
Mainstream
sides of the business are growing quickly, says Mr. Skoll, the
board member. "I think Keen stepped into a situation where
the markets that were most opportune for using this kind of
system were things like 900 numbers," the eBay veteran
says. But Keen management "really sees this as a platform
for helping people exchange information for all sorts of things.
And over time, they're not limiting themselves to romance and
astrology."
Keen
says its latest offering, providing technical support on Microsoft
Office XP software, has been one of many recent hits. "With
the right momentum, the right growth," Mr. Jacob said in
February, "a company will break the IPO blockade. It would
be great to be the company to do that."
Jay Servidio is President of Teleteria, Inc., a company that has been
building and hosting commercial and adult custom Web sites since
1994. Teleteria's clients
are located all over the world.
© 2009
Teleteria.Biz. All Rights Reserved.
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