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TMF Interview With theglobe.com Co-CEOs Todd Krizelman & Stephan Paternot

March 2, 1999

With Yi-Hsin Chang (TMF Puck)

Online community theglobe.com (Nasdaq: TGLO) was the brainchild of two juniors at Cornell University, Todd Krizelman, a biology major, and Stephan Paternot, a computer science major. The duo started the business almost five years ago with an initial $15,000 raised from family and friends and student employees, who were paid pizza for their services. Today, the chat and message boards website has more than 2 million members and 9.3 million users.

TMF: You've come a long way from paying employees with pizza at Cornell to successfully going public late last year. Is this how you envisioned yourselves five years ago hanging out in your dorm room?

Krizelman: I don't think necessarily that we would've been able to predict exactly how the company would grow and evolve. We certainly had very high hopes for it. I think we also should emphasize that we still certainly do encourage people to be paid with pizza.

TMF: Great. How did you choose the name "theglobe.com?"

Paternot: We chose theglobe in a sense because I am from Europe and Todd's from California, and it seemed that the Internet would sort of help bridge that gap. But at the same time, because we were just viewing this as a global game, that we would be building a community that anyone in the world could access.

Krizelman: We definitely envisioned the company as an international company rather than expecting our entire audience to be from the U.S. Even today 40% of our audience out of the 9.3 million monthly users are outside of the U.S.

TMF: How did you convince investors -- such as former Alamo-Rent-A-Car owner Michael Egan, who invested $20 million in the company, MTV Networks founder David Horowitz, former Raychem President Bob Halperin, and PeopleSoft CEO David Duffield -- to invest in an upstart Internet company run by essentially two kids just out of college?

Paternot: Well, as Todd and I built the business we gradually sort of proved our way year by year, finding some investments first from just friends and family and then building the business, seeing that our audience was growing. We never really had the luck of money falling in our laps. We really had to go looking for it and prove our way to getting it. So, when we met people like Bob Halperin out on the West Coast through various business relationships, he already saw that we had developed the business and had come quite a ways.

"We view what we've built as very much marrying the depth and breadth of portals with the user interaction that you have often found in communities."
Then the same thing happened with David Horowitz. Once we brought Bob Halperin into the loop, we were then able to bring in David Horowitz, who himself is a media expert, who could understand the business and see what we had done and what we had developed and that we were growing; and was then interested in jumping in. So it was a gradual building process. After we got those guys we were able to attract other investors such as Michael Egan. At that point, our business had already been going for about three years and built itself very solidly.

TMF: How much of the company do you still own? Do you feel you've lost any control over the business since attracting major investors and then going public?

Krizelman: Each of us own less than 10% now. Regarding the issue of control, actually I think, if anything, we felt that as we've been growing the company, Steph and I have very much been able to lead it and run it. However, if anything, part of our philosophy has been to surround ourselves with a great management team. Everyone from sales to our COO -- who had spent 14 years as a vice-president at CBS -- and others really have allowed us to grow the company successfully and manage a lot of the operational issues that do arise.

TMF: What are your plans for improving the website and differentiating yourself from your competitors? Do you view yourself as a portal?

Krizelman: I think we view what we've built as very much marrying the depth and breadth of portals with the user interaction that you have often found in communities. So when you come to theglobe you're going to find a community that's very much different from often what is known as community. For us, it's e-commerce, content -- and that content may be music and movie reviews, stock portfolios, this type of thing -- as well as user interaction. It's all of those things together that we believe is community.

TMF: Considering the rapid consolidation in the industry, do you expect to be acquired by a larger Internet company or would you prefer to stay independent? Do you think you might be a little late to the consolidation game?

Paternot: No, we don't think we're late to the consolidation game. In fact, we think we're in excellent position to do consolidating of our own. We certainly think that that is going to be one of the key ways for us to grow. We recently acquired Azazz.com, which is one of the leading e-commerce players, and rolled them up into theglobe. We expect to do that in many different areas of the site ranging from the content areas and other services.

"We think we're in excellent position to do consolidating of our own. We certainly think that that is going to be one of the key ways for us to grow."
We also feel that we have a strong management team. We've shown very strong quarterly growth. In fact, the last three consecutive quarters of growth apparently were one of the strongest in the industry, and we expect to keep moving forward in this direction. That's not to say we're not looking for strong media partners -- in fact, we are. We certainly think it's going to be very important for us to find major traditional media backers. For instance, you can help build a business further as well as help build theglobe's brand. But independent of that happening, we're still growing the fundamentals of our business very rapidly.

TMF: You work as Co-CEOs. Is that difficult, especially if you disagree on a subject? Or do you just flip a coin or something?

Paternot: Working as Co-CEOs actually has been a huge plus for us, especially since when we started four years ago, Todd and I had little experience, and we had to learn everything on the fly. It really helps having a partner that you can bounce things back and forth with, and we found that at the end of the day, we make much better decisions together. We pretty much act as one CEO in that sense -- we've shared an office for four years. We continue to share an office, and even though we bounce ideas back and forth like crazy and have arguments and discussions about things, at the end of the day one decision, one unified voice comes out of this office.

TMF: Would you say you have different strengths but a common vision?

Krizelman: I think certainly over the last four years we've each managed different parts of the company as we grew, and, if anything, we try to remain extremely flexible as we've grown the company. As we've gotten in this post-IPO time, I think now we actually spend much of our time working with investors, speaking with analysts and certainly public relations-type activity, and certainly overseeing the vision and the strategy that we need to employ to make sure that we're not only hitting the next quarter but the next four quarters.

TMF: Do you see yourselves as Co-CEOs of theglobe.com five, 10 years from now?

Krizelman: Yes.

TMF: I imagine that most of your employees and most of the people you deal with in business are actually older than you. Do you find it hard to get respect from others in the business or in the investment community, you know, hard for them to take you seriously?

Paternot: That's gradually changed. Yes, we've definitely had a lot of resistance, and Todd and I can recognize it. Certainly, one thing we know is that people will always first greet us with great skepticism because we are young. Then we have to go and prove ourselves. And even if we're proving ourselves, people then want to believe that we won't be able to make it, and if we are making it, they want to hope that we'll fail. So, we have natural barriers as to resistance coming from peers in the industry as well as from more senior people who are potentially looking to invest.

"We've shared an office for four years. We continue to share an office, and... at the end of the day one decision, one unified voice comes out of this office."
We just have to constantly go the extra stretch to prove ourselves, whereas in many cases, just because of your age and appearance difference you wouldn't have that issue. I would definitely say that the situation's improved. Four years ago, we had all barriers. Now I think a lot of people have heard of theglobe, have seen that we've generated some significant successes and generated some wealth for a lot of people. It's helping us build a reputation that we're not just two guys who don't know what they're doing. And instead people are believing in us a little bit more.

Krizelman: We've always been surprised, actually. Every now and then, we have someone in the press or we'll read something that will actually indicate as if it were an accident that we got as far as here or that it was easy, indicating somehow that they thought it must have been easy for us to get this far. If anything, I think we felt that we are at a disadvantage because of that prejudice.

TMF: I think I saw you guys on CNBC and one of you mentioned that you're actually working harder now than you ever did. Could you elaborate on that?

Paternot: That was probably Todd that mentioned that. It varies. It's a completely different work mode. When we started up we were really in startup mode where Todd and I lived, breathed, and thought about the company 24 hours a day. You were blind to your whole personal life. Four years later, and 150 employees later, and a strong management team on board now means that Todd and I no longer have to be the last guys doing everything but instead can focus on different aspects of the business, which varies from time to time. Sometimes we are able to get out of here before nine in the evening, and sometimes we're not out of here until two in the morning, but our lives are a little bit more normal now.

Krizelman: Overall as a company, you end up working harder. I think, if anything, just because there's so much intense scrutiny on everything you do as a public company whether it's new hires that you made or just wanting to make sure that you hit your quarters and beat analysts' estimates. There's tremendous expectation that comes along with being a public company from everybody.

Paternot: Yeah, definitely I would say that at least the stress level has gone up.

TMF: Do you ever think that maybe you went public too early?

Paternot: No, I would say that if we could've gone public back when the first Internet companies went public, that would have been very nice. We would've been one of the first big players. We certainly had created theglobe back at the beginning of the Web in late '94, early '95. I think we went [public] when the company was certainly ready. We've proven ourselves for about four years in terms of our business model and bringing on a strong management team. We have a track history. So, in that sense, I think we probably went at the right time. I certainly don't think we should have gone later.

TMF: Where do you see the company 12 to 18 months from now?

Paternot: I think we'll see the company downtown in the business district -- I'm kidding. We just have a bit of a space constraint here, so we will be moving.

TMF: Are you moving out of New York?

Paternot: No, we're going to still be in New York. That's been one of our biggest plusses you know. We always envisioned the company being a media company, not a techie company, so we want it to be specifically in a media capital where there's over 18 million people giving us vast resources for marketing expertise, for brand building expertise, and for content.

We envision theglobe having a lot more users. We're going to just keep pushing forward. We've seen close to 1,000% growth in our audience last year going from about a million monthly users in January to 9.3 million in December. We want to keep moving forward there and expanding that audience.

"One thing we know is that people will always first greet us with great skepticism because we are young. Then we have to go and prove ourselves."
At the same time, we're going to be moving forward with our e-commerce. We recently acquired an e-commerce company, and we're tightly integrating it into theglobe, and we're really pushing heavily there. As Todd mentioned earlier, for us the definition of community is commerce, content and user interaction, with user interaction not being the one thing that dominates, but all three pieces. And this really is going to help show how strong we're positioning ourselves in the commerce place.

TMF: Are you doing any advertising on TV or radio?

Krizelman: Yes. In 1998, we actually had just under a $10 million ad campaign that was on television, telephone kiosks. One of the things that we've tried to do, in fact, is try to advertise in traditional media because we found that if you can attract a very mainstream audience it has several benefits. One, those are people without pre-established brand loyalties, so they become better customers. And at the same time we find that this type of advertising not only attracts new users to the site, but also attracts media buyers, business partners, and distribution partners to the company.

TMF: Great, is there anything else you'd like to add?

Paternot: No, I think that covers it. Thank you very much.

TMF: Thank you so much for your time.

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