Samer Hamadeh, Vault.com

Name	Samer Hamadeh	Nathan Kaiser
Affiliation	Vault, Inc.	nPost.com
Title	CEO and Co-Founder	Founder and CEO
Website	Vault.com	nPost.com
Type	Face-To-Face	07.19.01

nPost.com: I am here with Samer Hamadeh, one of the Co-Founders of Vault.com, thank you very much for being here with us today.

Samer: My pleasure.

nPost.com: I would like to start off by getting a little background on how Vault.com originated.

Samer: Sure. Actually it starts quite a while back. I was graduating from Stanford in 1991 with a Bachelor's in Chemistry, and it was a terrible Job Market at the time. All of my friends were have a very difficult time finding work, so I decided to stay at Stanford and get my Masters in Chemical Engineering. I finished that up in 1992, but I had spent a summer working as Chemical Engineer at Chevron thinking I would work at Chevron upon graduation.

The problem was that I really didn't know anything about what Chemical Engineering was all about, and I certainly didn't know what Chevron would be like, I just accepted the job on a whim, because a friend of mine had worked there before. I show up for this job at Chevron, my boss was gone for the entire first week I was there leaving me a very difficult stack of books to read on Grease Reology, which is the study of the flow and movement of grease through pipes.

nPost.com: So a real heart pounding subject.

Samer: Oh yes, so when he came back we talked about how I would do projects where I would test some of the many different greases that Chevron made. They had all types of greases, different ones for different types of machines, climates, etc. So I was to go out and test a few different greases at different temperatures, humidity levels, etc. My job in essence was to test these greases under many conditions and determine where they broke down. It took over a month to get setup with samples, laboratory, equipment, etc. At this time, I was already halfway into the summer and haven't even started to get anything done. This whole time I was thinking: "What is wrong with this place?" At the same time, a lot of my co-workers were much older and completely disgruntled. When the summer ended I told myself that I wasn't go to work there for sure.

I was telling this story to my roommate, Mark Oldman (another co-founder), and my brother (another co-founder), and they were telling me that this type of thing happens a lot. A lot of people go into either a profession or a company, and have no idea what they are getting into. So we began to wonder what the hit-to-miss ration was for that type of event, which is why many people don't stay with a company for too long, their expectations are completely opposite from what they find at a company.

We thought it would be a good idea to put together products that give insights into specific companies.

nPost.com: From an insider's point of view.

Samer: Exactly, from specific industries and companies. If I had spoken to people at Chevron and read a dossier on Chevron, if not the entire oil and gas industry, I would have had a much better picture of what I was getting into.

That is really had it started. We came out to NYC and decided to write a book, which became "America's Top 100 Internships," and were able to sign a contract with Random House Princeton Review, put the book out that fall in September.

nPost.com: How were you able to get the background on all the companies?

Samer: We worked with Stanford's Career Center pretty extensively. We also did a lot of sleuthing, working the phones, calling companies, telling them what we are doing. Signing the deal with Random House also gave us the IN that we needed. You call Boeing, Microsoft or Intuit and tell them what you are doing, and most people were only too happy to help us out.

We not only used Stanford's Career Center, but others, as well, at major universities around the nation. Asking them to point us in the right direction of companies and students that we might want to talk to. In total, we interviewed somewhere around 1,500 people who had worked for hundreds of different companies.

It was real tedious stuff, everything was done by hand, and we ended up working over 20 hours per day, and that is not an exaggeration. We would sleep 4 hours, get up and jam through the day; writing, [and] researching all day long.

nPost.com: How did you then begin transition into what you are today.

Samer: At that time, we weren't Vault. We actually wrote another few books, such as "Internship Bible", business schoolbooks, etc. At one point we had a suite of four books. At then Mark went off to get his law degree at Stanford, my brother went off to get his JD MBA at Wharton and Penn Law, and I went off to become a Management Consultant at LEK which is a Los Angeles strategy consulting firm. Two and a half years into all that, the Internet started to emerge.

It wasn't the Internet as we know it, but Prodigy, AOL, CompuServe, etc.

nPost.com: All of the original proprietary online services.

Samer: Yes, and within the same two or three months we started getting calls from all three of them. All three wanted to license the content that we had created within our suite of four books. This was in 1995, and we ended up signing an agreement with Prodigy. We realized that there was something to these online services, that perhaps people would be willing someday to buy content online.

nPost.com: Were these online services wanting updated information, or did they just want to use your content as it was already written?

Samer: They just wanted to license what was already in the book. You have to remember, that at the time, they just needed something to fill out their content offering. Their marketing message at the time was simply that they had a lot of great information available at one place. In a way they were trying to create a proprietary library online, with email capability, but not that many subscribers were there. They were also willing to pay for this content. It never really took off in a huge way, but we started to make a little money, so we decided to move forward with some type of online site, but at the time we still thought books were the way to go. Finally, after a few years at the consulting firm, I decided it was time for me to break off, and try to do something on my own, and make something of this.

At this time Sam and Mark still had a year to go in their degrees, so we all decided that I would be the one to go and do this. I moved out to NY, and signed a book deal with Houghten Mifflin. My living room became my office, started hiring some assistants, interns, and by the fall we had our first book called Job Vault, which was an expose on about 500 companies.

nPost.com: Were these Fortune 500 companies?

Samer: They were all across the spectrum. For this book, we used all our old contacts at the career centers across the country, and others. We began to promote it online, because we had a site that was hosted by Prodigy, although I can't remember what is was called now. We also used a lot of contacts from the site as well. We would put up a link on the site, saying that we were looking for people who had worked at certain companies, and get in touch that way with people who could help us.

Within a year and three months, we had over 120 titles. Most of these books, though, were only about 60 to 70 pagers on one specific company. But we still did not use the Internet, the way that we do today. It was 1997 and we were using the Internet mainly to promote the guides and to sell them. At the time, it was called Vault Reports, you could visit our site and investigate one of any 500 companies, of course at that level, it was really just a little excerpt from the main book. Users were given the option if interested about that company to actually purchase the book. We sold a fair amount of books that way.

nPost.com: About how many people did you employ at this time?

Samer: Early '98 we had between 8 and 12 people, they were either in journalism school or working for their paper as an undergrad at NYU or Columbia or Fordham, etc. They were all either interns or part-timers. Orders would come in via Excel and we would download them every hour and then there would be an intern shoving books into envelopes in the corner of my living room. We would then ship them out at the end of the day.

nPost.com: Were you profitable from the get-go?

Samer: We weren't profitable from the get-go, we were operating at a small loss for the first couple of years, but it was always a small loss. We were able to keep the loss small by maintaining a small staff of about ten really young people who we weren't paying all that much. It was always a lot of fun.

In late 1998, when the whole dot.com thing started really kicking in, we decided to start really pursuing funding. We were able to secure $3 million in funding in December 1998.

nPost.com: I actually remember reading about that in Fortune.

Samer: You're right, that was our first major big hit, a whole half page expose in that Fortune. We launched a very basic web site that had some slightly more interactive content that changed on a more regular basis, we were also covering many more companies, up to 1,500 at the time. You could also continue to buy books, at this time we not only had our books, but we were also selling books on related topics from Ingram. At one point we had about 250 titles total, and they were all housed in this back room. We were handling all the backend operations, warehousing, shipping and we were doing it very primitively. We had someone simply grab the book off the shelf, put it into the envelope, print out a sticker/label, and it was on its way.

The site over time started to take shape, and around this time our investors started talking about us getting into recruiting. We were still big believers that you could really get into recruiting by allowing companies to brand themselves around the content. That is how we first made money, we would go a company like Northwestern Financial Network which at the time was called Northwestern Mutual Life Insurance Company, and propose that they sponsor the area that reported on their company; insider's point of view, job posting, etc.

Clients now have mini-web sites that allow them to talk about what it is like working for them, the opportunities they offer, and positions available.

nPost.com: Now are these mini-web sites, how are they managed by the client companies?

Samer: They have the ability to update it themselves, but usually they will contact us, and we will change or update the information as needed. There was talk at the time of launching job boards but we were all about content, and were focused on created comprehensive content that would attract people to the site. We believed that we would also be able to make money, by having these client companies advertise around our content. In the beginning, we also had very general banner adds, with GM advertising cars and magazine publishers advertising subscriptions on the site, but nothing really targeted.

In the Spring of '98 we launched job boards and message boards, and those really started taking off. Of course, everything about the Internet was about being free back then, and so were we.

nPost.com: Now your job boards were free for both people listing and people searching?

Samer: That is correct. We thought we could make money by advertising.

nPost.com: Now, though, you have a listing fee for companies placing their ads on your site, correct?

Samer: Yes, but we only began to charge three weeks ago. Up until June 1st, you could still post on our site for free. Up to Ma,y we had 16,000 companies that were posting job ads on the site every month.

nPost.com: How many jobs total?

Samer: About 100,000 that were available at any given time per month. It was one of the largest job boards on the web, but, of course, it was all free. While we were making decent money from advertising and book sales, it was not enough to support the entire infrastructure required to maintain the company.

So we made the decision to start charging companies to post job ads, because we had the data that proved that they were very successful in finding qualified candidates on the site, and that we provided them a very valuable resource month after month.

nPost.com: What type of drop-off did you see as a result of this new fee?

Samer: I can't quantify that for you right now, but we did see a drop-off, but three weeks later we starting to regain that lost ground in terms of the number of postings.

We also offer package deals for companies that are looking to post large numbers of jobs, and we just signed a deal in which one company is going to post 1,000 jobs per day. Our per job posting fee is $50.00, and of course we aren't going to be charging them $50,000 everyday. nPost.com: I would also think that this is all high-margin incremental revenue. You already have sunk these costs in concern for infrastructure, and so all new incremental revenue tends to increase you margin per dollar earned?

Samer: True, that is the beauty of the Internet, in that it doesn't really cost extra to post more jobs. The servers are already in place, the software is already built, and the potential is huge.

So we are in a conversion process of contacting each of those 16,000 different companies and start selling them our listing service.

nPost.com: As a little background, Vault.com has some of the most company specific message boards on the Internet. Yahoo is financial related, but Vault has the real insider knowledge of a company, directly from its work force.

Did you plan for these message boards to become what they have been, or was it quite fortuitous, and how did you drive people to these message boards?

Samer: That is a very good question. You can drive the number of visitors in many different ways. At one point, we used direct advertising, we took out full-page ads in the Wall Street Journal, Fortune, Business Week, and we also did truck advertising (e.g. on the side of buses) and this all drove recognition. We did a lot of online advertising where we were rotating our banner on a lot of relevant sites. This was during the heady days, when there was a lot of advertising money out there. We were just very savvy when it came to advertising. We do a lot of affiliate deals, a lot of cost per acquisition deals.

nPost.com: What type of affiliate deals are you doing?

Samer: We have a relationship with CommissionJunction, and a number of offers through them. One is that we will pay sites for driving traffic to our site, or a percentage of any transaction that they are able to facilitate on the site, etc.

We have also built up a large membership base.

nPost.com: You have developed a critical mass that enables you to market to others.

Samer: The message boards were a unique innovation, in that they were questions pertaining to jobseekers looking to find out more about the internal workings of a company from current employees. That was a new concept at the time, now there are a few sites that offer similar concepts, but not many, and we are by far the largest. Yahoo is by far the largest concerning general topics, and financial information, but we are the largest in our niche.

In the early days, we offered an unfettered discussion. It was a lot like the Wild West, in that they could do or say anything. Which, over time, we learned was not a good way to do business.

nPost.com: From a liability standpoint?

Samer: Interesting enough, the Congress and the courts ruled on this issue very early on, they found that the carriers of message boards were not liable for anything on them. The people who posted were liable though.

nPost.com: How does this relate back to Vault.com now requiring registration?

Samer: Well, let me give you a little history on how it has all evolved. It kind of began as the Wild West, you could do whatever you wanted, and there was no liability. What became the issues, was that as more people became comfortable with message boards, the topics and the discussion began to become nonsensical. You still had the majority of people who were talking about relevant topics, such as I just got an MBA, how is the best way to apply it, what are my chances of getting in with your company, I just got an offer from your company can you tell me about the following three things, etc. The issue was that we also had a lot of people who tended to deviate from the relevant conversations, usually in an unprofessional manner, and with little to no value to what they were saying.

nPost.com: So these people were driving the nature of the boards away from professional questions and insights?

Samer: Yes, people began posting dating information, people were asking about the baseball games, the weather, anything you can think of. This began to generate a lot of responses directly back to our organization telling us that they could no longer find relevant information, that their posts were getting lost amongst the junk.

Our initial step was to hire moderators to control what was being said on the boards, and also institute clear rules as to what type of information should be available on the boards. That helped to some extent, but in the last few months we had such a huge surge in messages that the moderators weren't able to keep up with it all.

Another issue was that since individuals could post anonymously, that it was beginning to become more and more difficult to follow each message thread.

We also wanted to foster a better sense of community, and responsibility on the boards, so we began forcing registration for posting. We have made it as simple as possible with a username, password, and message board handle. If you look at the messages posted since May 15th, when we instituted this new policy, the message are much easier to follow and read, and much more relevant. It is still completely anonymous, but now you can follow who said what, how they replied, etc.

nPost.com: Going back to the revenue model, since you place advertising on the message and job boards, what is the proportion of banner advertising to job listing fees? Or, since you just started the listing fee, what do you forsee as the balance between the two?

Samer: Advertising in the strictest sense has never been more than one-third of our revenue anyway. Recruitment marketing has made up over two-thirds or our revenue where companies can talk about themselves on the site. While this is a form of advertising, it is a form of advertising that is much less cyclical. Luckily, with this downturn and the CPM's for banner ads having come down 60-70% or more, we really haven't been all that affected. It turns out that branding yourself on a site is much more discretionary than pursing qualified new employees. Over time, the percentage of our revenue dependent upon advertising will go down as the listing fee starts to establish itself.

In addition to that, we have introduced services to our member community offering resume review and career planning. Until a few months ago, people had their pick of jobs, without having to worry about how well their resume was written or how to optimize it for a specific industry.

Now the pendulum has swung the other way. The employers are getting inundated with resumes and not the job seekers being inundated with job offers. Now, the job seekers are wondering if they have the best resume, or if they are saying the best thing in the interview. We have had pretty good results so far.

nPost.com: What type of capture/conversion ratio are you seeing?

Samer: Less than one percent of people who view the link are clicking through. But I sincerely believe that there is lot of opportunity in this area as well. It is analogous to Kaplan Test Prep, where people used to wonder why the service was worth $1,000, now they believe and realize that they are at a competitive disadvantage if they do not utilize the Kaplan course. We believe that people will realize that they may be at a competitive disadvantage if they do not utilize our service.

We are also continuing to see an increase in book sales.

nPost.com: Are you continuing to handle that all on your own as well?

Samer: We don't, actually those 120 guidebooks disappeared, and we only kept six. All of the other guidebooks are provided online for free. We also outsourced distribution of those books to Random House.

nPost.com: Through all of its stages of development, where do you for see taking Vault.com in the future?

Samer: Well, there are just so many paths that we could pursue, and as much as I would like to plan for five years down the road, right now we are looking one year ahead and driving the company towards profitability. The best way to do that is to ensure that we have the best mix of products, and I think that the path we are on right now makes a lot of sense.

If you have a substantial community in a specific community, then we can leverage these communities into more and more revenue streams. We currently have over 35,000 lawyers who use the site and we offer a wide range of services directly to them, and the organizations that service that community. The long term potential is to continue to grow the number of communities that are served by Vault.com and continue to grow each of the communities at the same time.

If we do this right, we will have far more than the 5 communities we have currently, hopefully up to two dozen. Each one will have its team of individuals who will work on them. We estimate that each of these communities can sustain revenue of between $2 and 5 million each year.

nPost.com: How do you differentiate yourself from your competitors; both online and old media.

Samer: What we try and do is to utilize our known strengths, our massive membership, our insider's view of companies and organizations, and our ability to fine-tune our service offerings to both members and customers. That is the imperative. There are many ways to reach our members: traditional print ads, television, radio, etc., but only Vault.com offers the wealth of information provided on specific companies by employees themselves and offers such a comprehensive community for customers to target.

The insider's view is our competitive hook that really differentiates us from our competitors.

nPost.com: For the insider point of view, is there a way to do a side-by-side comparison?

Samer: Not at this time, there are charts that allow you to compare the per diem, planes, taxis, etc.

nPost.com: Which leads me to the simple conclusion, that I will never hire one of those firms, because they always charge it back to the clients.

Samer: Yes, they do.

nPost.com: You recently laid off a number of your employees in January and February. How has that impacted your organization?

Samer: To start off with, it was a very difficult thing to do. We were forced to layoff people who had been with the organization 2- 2 ½ years. It was a business decision to conserve cash and reorganize the company, and focus on key areas of business. We did an analysis of each business unit, each initiative and determined which ones were going to make our company stronger, and for those that weren't in our long-term interests we were forced to close them. Consequently, we were not forced to significantly increase the workload of our remaining employees.

Another difficult thing to quantify, as well, was the loss of company morale. It took quite some time of constant reinforcement to bring it up to levels prior to the layoff. Although, I don't think we can ever recapture the heights of morale in the midst of the dot.com mania.

nPost.com: Sounds like a very difficult undertaking.

Also, what are the most important message that employers should take away from the content and information that is posted by their employees on your boards?

Samer: There have been a number of articles written on this subject. Basically, message boards have become a legitimate way for employees to talk about a company. If Vault doesn't do it, someone will. Minus the extraneous messages that have no relevant feedback, the messages that are contentious posting of either positive or negative information on a company, those are extremely valuable. Many human resource departments are beginning to use these as a means of gauging the internal temperature of a company.

One example is that a Salomon Smith Barney analyst posted on Vault a list of 50 things that were wrong with the analyst program. It went from the car service available, to the dining allowance. Within an hour or two, The New York Times picked up the story, and a lot of people began posting responses to this post. Most importantly, the HR department took this posting very seriously. Management then called a meeting and brought over 600 analysts into a room to discuss the posting. They went down the list, and explained how they were going to address each and every one, what they were going to do, and explained their reasoning.

They were able to nip this thing very quickly, and many of the analysts were very impressed that the concerns were addressed, and were given a full explanation. A lot of companies choose to ignore this information and lose as a result.

This is a wonderful resource to find out what your employees think and feel before they walk out in the exit interview.

nPost.com: That concludes my questions. I thank you for meeting with us today, and I appreciate you sharing your insights and experiences.

Samer: It was my pleasure.