Dave Alberga

What company do we as triathletes transact with the most? We might say Nike or Saucony if a training run is considered a "transaction." Or it might be Slowtwitch or Triathlete Magazine, if reading is a transaction. But if a transaction is defined as making a purchase, Active.com might be the winner.

Therefore, we thought it might be illustrative for us to peek under the hood of this race registration juggernaut, and below is our interview with the president and CEO of The Active Network. I found during my interview with Dave Alberga that my assumptions about this company were not valid.

Dave Alberga is 39 years old, and grew up on the East Coast. He graduated West Point in 1984 and became an army infantry officer. A self-styled glutton for punishment, after his military service and a stint in the corporate world he then went back to school and concurrently earned an MBA and a degree in economics from Stanford Business School.

Alberga has traveled widely and done a lot of cause work, and he is personally invested in the role healthcare and food commodity markets play in the developing world. In a roundabout way he appears to be bringing that background to important and unanticipated revenue streams for Active.com, which will become apparent when our interview mentions pledge management.

All through his collegiate and post-college career he was racing bicycles, both road and off-road, and running--"but as a hobby, certainly not as an elite."

Alberga eventually ended up the Chief Operating Officer at CitySearch, a division of Ticketmaster. It was there the he got introduced to online transactions.

La Jolla-based Racegate.com and Florida firm ActiveUSA.com merged in 1999 in a triangular deal that included Ticketmaster, which invested roughly $12 million in the combined entity. The new firm was called Active.com, and Alberga became its chief executive.

SLOWTWITCH: I think our readers would be surprised to find out how your company makes its money. The average person might suspect that it's almost all the result of online entry transaction fees from endurance events. Can you tell us where your revenue comes from?

DAVE ALBERGA: According to Media Metrix we are the 7th or 8th largest sports site in the world, and the only one in the top ten that is organized around participatory sports. All the others are fan-based. But our primary revenue product isn't actually online registration, it's software sales. While we have numerous products, our software revolves around data management for participatory sports and other activities. That's about a third of our revenue. These products range from large enterprise software systems for park and recreation departments which can sell for hundreds of thousands of dollars, all the way down to fee-based home page building tools for events and teams. These are $50-a-year products for the coach who need roster management tools for his youth soccer league.

Another third of our revenue comes from advertising. The final third is registration-related, and there the message about our business is this. We really have two important customer sets. One is the participant and the other is the event organizer. The interesting thing is that in many respects we provide as much to the director as to the participant. It's the back-end functionality, the data management tools. We save the organizer a tremendous about of time and energy in data entry and handling and management. Most of these events have very marginal economics, so taking care of all this really helps out the event itself. Now the event director doesn't get 500 letters in the mail every day, all which have checks and race forms filled out longhand. He doesn't have to do the data entry, and of course now with us he's able to accept credit cards.

ST: One of the things I've discovered in business is that you can't steer your company too much. Sometimes your company tells you what it wants to be, and if you're a good listener you discover revenue streams you didn't anticipate. You've built some proprietary software that you described earlier, and I understand you've serendipitously found another set of customers. Can you tell us about that, and how much of this was planned, and how much of it was a surprise?

DA: Yeah, you're right. I know what you're talking about. How we got into this was by simply talking to event directors. Many or most of these events were tied to a charity. We found we had the ability to build pledge-management tools, should participants decide to pay money for a cause--say, breast cancer or leukemia. The web is perfect for that. Then it became apparent that companies are adopting our tool in ways that aren't tied to an event. In other words, it's just the pledge management they needed. So yeah, that's now a growth area for us.

We also believe there's more registration processing out there for us. Park and rec departments use us for athletic activities as we expected, but our software is also be used in those same park districts for a wide gamut of other activities like pottery classes, belly dancing classes.

All that said, we still consider triathlon to be our home. That's what most of us are in this office, triathletes. That's what we do.

ST: Another thing I've discovered in business is that you can't fall in love with every component of your company. Some things just don't work. What hasn't worked for Active? What was the biggest mistake you ever made, and how long did it take you to wise up and cut bait?

DA: We built an absolutely huge tool, what I term the Death Star. It was enterprise software for running large league organizations, where there are ten or twenty-thousand individuals to manage. It was the best stuff out there. It took all their needs into account and would manage all that data. But, it turned into something that was so complex and so hard to use, despite its robust ability. It was just too much. People just didn't get it, just didn't understand it. I think we'll end up backing our way into that functionality through our current web-based management tools. That said, we scrapped it completely, It was hard, we spent a crapload of money on it--an obscene amount of money. We thought it was a killer application, but people didn't recognize it as such. They didn't really care.

ST: You're a dot-com, ergo you have no rational business plan and making money is not the point. Is that how it is with Active, or have you guys turned the corner?

DA: We don't make money yet. We have units that make money, units that don't. We're still relying on investment dollars. We're very close. This is the year we'll go cash-positive. Yes we've managed to raise investment dollars, but we manage our costs very closely. We want to be around. I think people look at us now and realize that we're within spitting distance from being cash positive, which is important to our investors and employees as well. Plus, in the end when you really look hard at where we are generating the preponderance of revenue…you pretty quickly come to the conclusion that we’re really not a dot-com.

It was tough in the beginning. Because of the glut of investment dollars that were available the market was ridiculously competitive--silly competitive. Now it's much more comfortable. We can do business in a rational way.

ST: You're not a public company, so you don't have to tell us this, and you may not want to tell us, but what can you tell us about your business goals this year that are quantifiable, like revenues, EBIT, IBT, whatever?

DA: We don't release most of that. We're still a small company. We have under a hundred employees. But I will say this. I believe our business is very scalable, we'll compare favorably with other companies in other non dot-com industries. Therefore sophisticated investors have looked at us and have continued to invest.

ST: If I might press my luck, how much do you spend on R&D as a percentage of your revenues?

DA: It depends on what you count as R&D. I've got a development team of about fifteen, plus about five other technology folks, out of the 100 [we employ]. You could count them as R&D, but I really don't, because it's more about coding functional products, rather than basic R&D.

We've got a lot of customer service people. That's the preponderance of people we have here, account managers who deal with race directors, and a great customer service team who deal with participants. We've taken a lot of that off the back of the event directors.

ST: One way you've grown is by merger and acquisition. I can think of four or five off the top of my head. That can be a really hard row to hoe, what with relocations, turf protection, not-invented-here, and culture clash. How do you rate your ability to absorb acquisitions versus what other companies go through? Has it been easier or harder than you expected?

DA: At this point I rate us as being very good at it. I think that the companies we've acquired would say we're pretty good at it as well. You should always expect it to be harder than you anticipate, and hopefully it becomes less hard. The secret is to make sure the fit is right and make sure, above all else, that the ownership and management team is a fit with ours. If you acquire a company in which you don't like the owners and the management, you're going to have a problem, regardless of how great the strategic fit is.

ST: Are you done acquiring?

DA: Every time I say yes I turn out to be wrong. There are fewer and fewer interesting acquisitions out there, but there are a few that still remain. There's nothing in the works.

ST: Where will your growth come from?

DA: I want to obtain ubiquity. I want us to be the data management and registration default in the participatory world. I really want to be synonymous with accuracy, security, and great customer service. We do those three things correctly, and we'll win.

ST: You are in an excellent position -- probably more than any other entity in the country -- to tell us which sports are growing, and by how much. What's hot in the world of participatory sports?

DA: Online registration is such a nascent industry right now so it’s hard to say where our growth is coming from. We don't know how much of our growth is true growth in numbers of participants or simply increased online conversion. But we believe we're seeing more new events being successful than we've ever seen before, that more events are selling out than in the past, and that this is the case in triathlon more than in any other sector. I mean obviously adventure racing is growing, but it's very small still in absolute numbers. Triathlon has got more growth than in other [sports]. The number of overall participants in running dwarfs triathlon, but growth in triathlon seems to be stronger than that of any other major endurance sport.

ST: Do you see it as Active.com's mission to be a generator of information for participatory sports -- to be the sports world's database?

DA: Data becomes very helpful as we get larger. Let me give you an example of what we’re already doing with park and recs. We have relationships with 5000 of them through the National Recreation and Parks Association, and we have a paid relationship with about a thousand of them as software clients. We're working with the NRPA to generate facility inventory management software to track and compare their annual budgets and recreational facilities, so they can each see where they line up compared to other departments around the country. It's very useful to them for funding justification.

Then along come other government agencies who are also interested in this sort of thing -- in this case to get data on obesity. So we're talking to them, seeing what we can do to help them get the data they need. But it's important for people to know that when we share data with entities like the government, we're taking generalized trends, groups of data. We obviously don't share anybody's individual information. And hopefully the outcome is better funding for our parks and support of sport organizers.

ST: I know you're working hard at conquering Europe.

DA: We're in the very basic stages. Over the years we've done a tremendous amount of registration for large events over there, but on an ad hoc basis. So we've spun off a separate company, in which we're an equity holder, and they're arranging their own additional financing over there. We won't do it ourselves in Europe. We're more interested in licensing the software.

But there are other areas in which we see growth, both in our revenues and in our ability to further be of service to the event director. For example, it's hard for race organizers to find sponsors. So we're trying to figure out a way to bundle properties that are sponsorable. For example, we could bundle a hundred events and allow a sponsor to have a national series up and running this season. More money ought to be flowing into endurance sports, but it's hard to get sponsors and events to find each other. So we'd like to help bring that money and have the sponsor let us worry about the execution.