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Social Networking Without Boundaries : hi5 CEO Ramu Yalamanchi (Part 5)

Posted on Wednesday, Jun 11th 2008

SM: How did you fund the initial startup? Where did you get the funding? RY: We had a rolling round, primarily from friends and family, with a target goal of $250,000. The first $10,000 came from my dad. I went to Chicago, where my brother had just started working as an internist. He wanted to introduce me to his friends because he wanted them to invest. I told him I wanted $250,000 and he told me it would not be a problem. I went there and made the pitch and left with just one of his friends investing $10,000. I went home and I was pretty upset about that, so my dad gave me the next $10,000. He told me it would help me be successful!

The rest of the funds came from friends. I have a friend who put in $80,000. In April of 2004 we raised the last $50,000 of the initial $250,000 target. That allowed us to get the business profitable in October of 2004. The cost of delivering web services was going down, and that worked in our favor. Bandwidth was going down and servers were getting more efficient. At the same time ads were going up. We hit it at the opportune time. There were a lot of companies that were able to get pretty far without raising money who also started around the same time.

SM: How did you ramp up the ad sales?

RY: We have always tried to stay pretty focused on product and product development. That led us to find interesting partnerships where we could outsource the ad sales. Early on in the business we worked with traditional ad networks, which included a division of Monster called Tickle who we still work with today. They have been a great partner who has helped us monetize at a level that would have taken us 12 months or so to reach.

SM: What types of ads does Tickle serve to you?

RY: They are an ad sales rep company. They go to consumer packaged goods and movie studios and get good brands on board. They are a rep firm.

SM: Were they filling your entire inventory? If you had 5 million users at the time, then you had good volume.

RY: They were not filling all of it. They were filling a decent amount of inventory. Today we do 20 billion pages a month and probably 30 billion ads a month. At the time it may have been a few million ads a day. It was a much lower volume, but we were able to monetize it well enough that we could support the business.

SM: How have you seen ad rates work for your audience?

RY: They have gone up over time. That is a function of more dollars coming to the web as a whole. Our next goal is to know more about the user and what the user actually wants so that we can understand intent. That is how we think about the business going forward as opposed to 20 billion views of untargeted advertising.

SM: Beyond the demographic understanding, have your revenues to date come from untargeted advertising?

RY: Revenues have come a few ways. There is some targeting similar to what you mentioned with demographic targeting. One of the ways we have been able to continue to monetize our inventory around the world is by using the same model we started with. We had a really good partner in the US, and we have expanded that to include companies in a half a dozen different companies throughout the world. We have a deal with Portugal Telecom, we have a deal with one of the top Internet companies in Thailand, and we have many other similar deals. These partnerships have allowed us to monetize at a level that would have been difficult to do ourselves unless we had gone out and built our own sales teams.

This segment is part 5 in the series : Social Networking Without Boundaries : hi5 CEO Ramu Yalamanchi
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