Interview with Dan Pelson,
Chairman And CEO Of Bolt, Inc.

Provided by nPost.com, which features extensive interviews with Business and Industry leaders from around the world

Interviewer:
Nathan Kaiser, Founder and CEO, nPost.com

Face-To-Face Friday, 10.19.01

Bolt Inc. - The leading community of Teens and Young Adults on the Internet. Dan speaks at length about the ability to leverage a communication platform into building dynamic relationships between marketers and their audience.

nPost.com: I am here with Dan Pelson of Bolt, thank you very much for meeting with me today. Can you please give us an overview of the Bolt model, and what you are looking to do?

Dan: We started the company about five years ago because we realized that there is an audience out there that since the beginning of time has been difficult to understand and communicate with. Whether you are a mom or dad, or a marketer trying to reach this audience, which consists of teens and young adults. We realized that this audience was growing in size and importance dramatically, and is in fact the fastest growing segment of the US population, and globally makes up about one billion people. Suddenly, because of the Internet, there was this newfound ability to communicate with this audience.

nPost.com: So Bolt was created to facilitate communication between teens?

Dan: When we started the company, we realized that our goal would be well served if we could make Bolt a communication platform for teens and young adults around the world. In doing that, and serving their utilitarian need to communicate, because they want to communicate, they are just tough to communicate with if you are an adult. By serving that need we would gather tremendous amounts of data and insights about the marketing place, and ultimately we found that we have a better understanding about this consumer than anyone else in the world. The way that we moneytize it is by providing marketing service to companies that want to develop relationships with this audience.

nPost.com: Your technology platform facilitates communication between individuals in this demographic correct?

Dan: Our core audience is men and women between the ages of 15 and 24, with 18 being the average age. We have created a community with over 6 million registered members, and the idea is that it is a one-to-one, one-to-many, one-to-few types of communications, there are a lot of different modes of doing it. It is not just over the Internet, it also includes wireless as well. It doesn't matter to us what the form factor is, as long as we can drive the ability for people to communicate and connect. That is what our consumer wants, so we filled that void for them, we give them the ability to communicate and connect in an environment that they have a high trust factor with. It is also done in such a way that is anonymous for them; we are not collecting their home address, or name.

nPost.com: You don't collect personal pieces of identification?

Dan: Correct, users create a user ID which they make up. We also collect their zip code and age, and hundreds of data points on each member, other than their real name and address.

nPost.com: One of your statements was that Bolt allows for communication with this audience. Your technology allows for communication between members of this audience, how do you then reach into this audience for a marketer or a company doing product research?

Dan: Both those concepts go hand in hand. Pulling information out of this marketplace come first, and we then work with the client to better allow them to better communicate with this audience. It is not just about them delivering an ad message to this audience, it is about building relationships.

nPost.com: Between the marketers and your members?

Dan: Exactly, we found in order to do that, particularly with young adults and teens, the best way to build relationships is through a dialogue. It comes back to the core concept of communication. Where other audiences are older and more set in our ways, and don't care to much about having dialogue with advertisers. They simply what to know what the product is, they will see the product on TV, they may pay attention to it, maybe they won't, but that is probably the most affective way to reach them. This audience is looking for dialogue.

nPost.com: How does your audience react to the fact that they are speaking with marketers?

Dan: There is no issue with the fact that it is a marketer, as long as it is relevant to them they actually feel empowered by that dialogue. They won't be empowered if it is completely irrelevant to them. The idea is to identify who the audience is, pull the information out, segment the audience as much as possible psycho-graphically, demographically, geographically, etc. Work with the client to understand whom they are trying to reach, and what kind of message they are trying to deliver to this audience.

nPost.com: So you are not just a channel for delivering a message?

Dan: A lot of what we do, is the practice of the understanding about how to start establishing relationships. In some ways the delivery of that message becomes the easy part. At that point you have done most of the work. You have established who you are trying to reach, here is the right time to reach them, here is the type of message that works, format of message whether email, banner, grassroots, sampling, etc. Once you have figured all that out, then it is very easy to deliver the message. Of course, the key is to cycle back and determine if it worked. There is a more effective way of doing it, and you can then keep refining the process.

nPost.com: How are you able to identify the issues, trends and needs of the audience that you are then able to communicate back to your advertisers and sponsors?

Dan: Bolt is a 24 hour a day, 7 days a week focus group of hundreds of thousands of individuals on a daily basis, and millions of individuals over the course of a month from across the globe. They are all saying what is important, and what isn't important to them. The information is all there, once you have built the communication platform, identifying the information and storing it is not the hard part. The hard part is having the people to pore through that information, the polls, the message boards, the surveys, the tag books, the clubs that are created, the keywords used. They are the ones responsible for identifying the trends, and gather the insights. Unfortunately most Internet and New Media Companies don't talk about data enough. Data is the real value proposition of the Internet and Wireless. Of course data is not enough, it is the insights that are derived from the data that is extremely valuable.

nPost.com: What is the overall purchasing power of this marketplace?

Dan: We like to call it a trillion dollar market place, because it is extremely hard to qualify. It is hard to wrap a definitive number around it, because the audience totals over one billion people globally. In terms of measurable numbers, in the US alone, others have quantified this number as $150 billion annually. In the US alone there are 40 million individual that constitute this marketplace.

nPost.com: What is your percent capture of the US market?

Dan: It is between 7 and 8%. We only have a very tiny percent of the global audience, although in certain areas we are quickly growing or user base. In the UK we have a few hundred thousand members, and the same is true for Canada and Australia. We haven't broken into the non-English speaking areas yet.

nPost.com: Can you go a little bit more into your initial thoughts when you founded Bolt?

Dan: I co-founded Bolt with Jane Mount. When starting the company we were looking at massive growth in this marketplace combined with social trends that were making this audience even more important. Twenty years ago, even if the audience was as big as they are today, they didn't have the economic power that they now have. They really have a lot of power, and they are currently hit with thousands of marketing messages each and every day. Suddenly, a few years ago the Internet came along, and they flocked to it. Why did they flock to it, because it is an empowerment medium? What do I mean by that? They have the power to communicate. Most of these segments find themselves disenfranchised, because they feel that they don't have voice.

nPost.com: So Bolt was able to offer a solution?

Dan: Teens are the epitome of a disenfranchised community, and we recognize that. We also recognize that they are the ones driving the success of the AOLs, the Yahoo!'s, and the other community sites available online. Take all those factors, and we saw a very clear void, which was that it would be great if we could solve the needs of the consumer and the marketers at the same time. These all need the ability to communicate. Consumers need to communicate with each other, and what do marketers want to do, but to communicate and connect with them as well.

nPost.com: How did you first begin establishing your membership base?

Dan: Well, it has been a long process. It took us about one year to get to 30 or 40 thousand members, and then we had to establish the right distribution relationships like the Hotmails, the AOLs, these kind of things.

nPost.com: More from a viral marketing?

Dan: That is exactly what started to happen.

nPost.com: I would expect that to be the case, because the value of the service to your users increases dynamically with the number of their friends and associates utilizing it as well.

Dan: Exactly, and that is why users who use AOL use AOL, and those who use Bolt use Bolt. They have created what we call barriers to exit. They have invested themselves and their friend's time into our platform, and it is not very easy for them to leave. It is synonymous to them moving from one town to another. Once they have invested the time and effort into defining who they are, posting their pictures, creating their tag book, sending Bolt Notes, joining clubs, etc, they don't just leave because Yahoo! came along and created a stock ticker. We saw that there was an opportunity to really focus on this marketplace, and we clearly are not everything to everybody. We are focused on youth, and that is really our area of expertise.

nPost.com: Exactly how does your revenue model work? With the downturn in the advertising model, everyone has been impacted.

Dan: We haven't been as affected by the downturn in advertising as everyone else, but that doesn't mean we haven't been impacted. Everybody, and I don't care what your revenue model is, the economy is terrible right now, and we are all seeing the impact of that. In our case, we don't go after advertising dollars per se, but we are still within the marketing budgets of companies. In lot of cases we are actually getting paid from the Relationship Management accounts of some of our clients. A lot of companies have CRM departments, and that is what is driving our revenue, versus the Media Buying departments. Long story short, we are helping companies build relationships with teens and that tends to come out of the Marketing or Research budgets. These have taken significant hits, but because we are not solely focused on the Media buying departments, we have not been hit as hard as the Yahoo!s or the AOL's.

nPost.com: Are you actively working with companies in the initial product and service research and development stages?

Dan: Absolutely, we do it at all levels. We work with clients with pre-market products, baseline research to help clients determine how their brand stacks up to others. One case is Hawaiian Punch and they were looking to do a package redesign. They wanted to use our audience to help determine what the new packaging looked like. That is one of the most powerful types of research anyone can get. To the consumer, that type of ownership in the development and design process is extremely empowering. They aren't stupid, and we aren't tricking them; we are simply saying that Hawaiian Punch needs their help in redesigning the packaging.

nPost.com: How is this empowering to your members?

Dan: Through this type of interaction, consumers are able to have a direct influence on the product. In a sense they have an ownership stake in that product, and that is what is empowering to them. Also, the consumer is able to win prizes and money by assisting our clients.

nPost.com: Do you foresee bringing on subscription services to assist your advertising/sponsorship model?

Dan: What we are doing in respect to subscription services is approaching it from a wireless standpoint. The way we look at it is not so much from a subscription or non-subscription. We currently generate 100% of our revenue corporations, which allows us to stay true to our focus. We are not looking to go a consumer subscription service or a merchandise model. We are looking to leverage our core competency, which is communication into other mediums. There is this revolution going on in Europe and Asia, where everyone is using wireless devices via SMS to communicate with each other, and they pay for that service. We have the killer applications that work on the Web, SMS, WAP, and others that work globally. That is a direct revenue stream from the consumer. This is a billion dollar market currently, and is growing significantly month-to-month.

nPost.com: Yes, but that is in Europe where the cost structure for talk time is much higher than in the US and it is therefore much cheaper to communicate via instant messaging in Europe. How well do you think that this technology will be accepted and utilized in the US?

Dan: That is part of the success in Europe. The main thing is that they have a completely different approach. In Europe and Asia the focus is to get customers in at a lower cost entry point, but users pay as they go. Because of that, the consumer is charged off their usage. In the US consumers are pushed to the higher cost plans, and the carriers hope that they never use the service. It is similar to the airline model, where Airlines overbook planes, and hope that not all the customers will show up. That has been the key driver, and yes the phone calls are much more expensive, but I think it will be a similar model here in the US.

nPost.com: What is the total market then for Instant Messaging?

Dan: Well, worldwide we have surpassed over One billion messages per day. This market came from Zero a few years ago, and is now a major source of income for carriers in Asia and Europe to the tune of billions of dollars a year.

nPost.com: How are you competing against the AOLs of the world? AOL has about 31.2 Million registered members with a huge chunk of the Teen market, how does that impact you?

Dan: We look at our competitors as being AOLs, Yahoo!, MTV, and stations such as Fox. Our competitors consist of any media property that reaches our target audience. In the case of Yahoo! and AOL we offer core insights into this marketplace. They tend to take a very traditional media approach to things. They simply position themselves as saying they reach a large number of eyeballs. One example is when Fox is selling advertising space for the Simpsons, and says that 40% of their audience is teens. We think that is an extraordinary inefficient way to build relationships. What we say to our clients is that they should use the other channels if they are simply trying to deliver a message, but to use us when they want to establish key relationships. Bolt offers clients the ability to communicate user insights, analysis, and feedback with standard or dynamic messaging campaigns.

nPost.com: Have you found a large education curve in working with clients about the added capability of working with Bolt?

Dan: It has changed dramatically over the past five years, and a lot of that has to do with education. As with everything there are companies that get it, and those that don't. The reality is that advertising and advertising agencies have done a lot to distract companies from what their ultimate goals are. The advertising companies are looking more to win awards and such than delivering a comprehensive message to a targeted base of individuals. The education of our clients mostly consists of explaining how the Bolt infrastructure can build relationships with teen.

nPost.com: If you a very interesting demographic in that they are always maturing. Are you looking to expand the Bolt model, and possibly retain those users once they age past your key demographic?

Dan: No, the way we look at it is that it is always getting older. Right now we see Bolt really focusing on the youth market.

nPost.com: So you will be loosing these key relationships that you have created with this market place.

Dan: Similar to MTV, which has a very targeted age group, and loses them.

nPost.com: But they did buy VH1 to help target the older demographic.

Dan: They also bought Nickelodeon to appeal to a much younger audience as well. Currently though, we are solely focused on tapping into the billion people out there that represent this market. That is where we believe the most opportunity exists.

nPost.com: How do you foresee really targeting a much more international membership?

Dan: Well, we really see the Instant Messaging capability helping us in that regard. It doesn't take any additional infrastructure changes for us, and or translation capabilities. It is really a scalable model for expansion into non-English speaking areas. They are creating their own content, and all we have to do is change the static content on our website to read that local language. As long as their computers have the capability to read different languages, then we are able to expand into different areas. It really is a bit more complicated than that, but we don't foresee it being too much of a challenge. We see wireless being the form-factor, because that is what people are using today.

nPost.com: What do you see as the largest issues facing today?

Dan: The biggest issue we are facing is staying focused on those things that we can control. Unfortunately, over the past couple of years we have realized that there are a lot more things outside of our control that directly influence our business. That is the biggest challenge, which is how to continually adapt and change to things that are out of our control.

nPost.com: And what are the main opportunities that you see?

Dan: Wireless.

nPost.com: Your technology would allow say a message between my cell phone and a user on the Bolt site?

Dan: Absolutely, our technology exists now. If you have a WAP device in the US then you can send and receive note from someone using a PC. It is completely seamless, and independent of carrier. Our business model consists of a huge database with profiles of millions and millions of users, with hundreds of data points on each user. We have an application layer that works regardless of platform, and then we have an interface for each technology; WAP, SMS, Web, etc. The really exciting thing about our marketplace is that you can never figure this group out. They are constantly changing.

nPost.com: There will always be a need for you service.

Dan: There will always be a question of how do I better communicate with this group?

nPost.com: With the wireless model have you created revenue sharing agreements with the carriers?

Dan: Yes, that is where the revenue comes directly from the consumer.

nPost.com: With AOL being an investor in Bolt how have your crafted that relationship?

Dan: We actually manage their teen relationships on AOL. If you go to AOL you will find a version of Bolt that is only on AOL for their members. It basically gives them more glue to keep these individuals within the AOL environment. They understand that they don't have the tools that we provide. In addition, we do all the moderation services; we cull through all the information created by their members and provide that information back to AOL.

nPost.com: Can you go into detail about how your service has helped one particular client?

Dan: One example is Kodak, which is a 115-year-old company that produces film for cameras. They generate the bulk of their revenue from film production and have been directly impacted by the rise in digital cameras with our audience base. They realized that they had to start building relationships with these consumers and position themselves as a facilitator of digital imaging. With our two organizations working together we decided to incorporate their digital imaging capability into the Bolt environment. We now have a 100,000 people a month using Kodak tools to work with and showcase their pictures online.

nPost.com: Kodak has been able to supplement their film customer with online users.

Dan: These 100,000 people are creating cards to send to friends, storing these pictures online, and manipulate the images online through Bolt and using the Kodak technology. This is extraordinarily powerful, because there is a relationship between Kodak and these individuals. They have established these relationships and the next step is to start having these individuals paying for services; additional storage fees, printing fees, etc. They aren't just using Bolt as an advertising medium, but using us to develop a solution to one of their core business issues.

Provided by nPost.com, which features extensive interviews with Business and Industry leaders from around the world

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