Tampa Bay Business Journal: Inuvo Streamlines Operations to Gain Strength

CLEARWATER — Getting smaller but more focused is the key unlocking the doors to growth at Inuvo Inc.

The online marketing firm has sold nine businesses and operations since early 2009, shortly after Richard Howe was named president and CEO.

A staff of nearly 300 people was trimmed to 68 employees, lead by a revamped management team and a board of directors with deep ties in the technology and advertising industries.

The company's software was re-engineered, creating a single platform designed to prevent fraud while also targeting advertising more effectively by analyzing use patterns on individual computers.

"The key to successful marketing is understanding those [individual] behaviors. Otherwise, you're just taking a guess, which is not in the consumer's or the advertiser's best interest," Howe said.

Streamlined business

Inuvo (NYSE Amex: INUV) has two distinct business segments that both use the technology platform. Its "exchange" segment designs, builds and operates technology that puts advertisers and publishers together. The company gets income from clicks on ads, leads and sales.

Inuvo's "direct" segment is made up of websites the company itself owns and operates — among them Yellowise.com, bargainmatch.com and babytobee.com — which drive traffic directly to advertisers. The company gets income from a combination of advertising revenue on the web pages and lead generation activity.

Margins are higher in the direct segment because Inuvo doesn't have to share revenue with anyone, Howe said.

It's a more streamlined business than it used to be. The company was formed through the acquisition of several Internet businesses, each with their own systems and cultures.

In May 2008, the board of directors decided to bring in management with proven experience in integrating businesses, Internet advertising and detailed knowledge of behavioral targeting technologies.

Within six months, the board hired Howe, who previously was chief marketing/business strategy and M&A officer at Acxiom Corp. (Nasdaq: ACXM), a $1 billion-plus interactive marketing firm. Prior to that Howe headed marketing services at Fair Isaac & Co. (NYSE: FICO), an analytics and decision management company.

Howe said the restructuring of Inuvo, at that time called Kowabunga! Inc., was the hardest turnaround he'd ever undertaken. He focused on selling business units that were not aligned to the company's core operations, most recently MarketSmart Advertising Inc.

MarketSmart, a traditional advertising agency in Raleigh, N.C., was sold to the ad agency's management for about $769,000.

"The more businesses you acquire and don't centralize, the more difficult it is to manage your far-flung empire," said Eric Martinuzzi, a research analyst at Craig-Hallum Capital Group LLC in Minneapolis. "Rich has done a good job of getting the business down from a centipede to a three-legged stool."

Martinuzzi does not provide research coverage for Inuvo, but he is familiar with the firm following Inuvo's presentation in October at Craig-Hallum's Alpha Select conference for small companies that have the potential to grow.

Building a team

Team relationships and a culture of trust are important to Howe.

Among the management team Howe recruited is Wally Ruiz as chief financial officer, a position Ruiz formerly held at SRI/Surgical Express Inc. (Nasdaq: STRC) in Tampa.

Charles Morgan, former chairman and CEO of Acxiom, joined the Inuvo board, as did Jack Balousek, the executive who brought the California Dancing Raisins commercials to market in the late 1980s. They joined Mitch Tuchman, a Silicon Valley venture capitalist who chairs the board, and Charles Pope, a veteran CFO at several well-known Tampa firms, including The Palm Bank, SRI Surgical, Aerosonic Corp. (NYSE Amex: AIM), Reptron Manufacturing and Innovaro Inc. (NYSE Amex: INV).

Although Inuvo, like many technology companies, shows net losses on its financial statements, it is cash flow positive and has been using the money it gets from selling off parts of itself to pay down bank debt. The company owed $8.2 million on a term loan and revolving line of credit at the beginning of 2010. That's down to about $5 million now, and Ruiz said it could be paid off by the end of the year.

With the hard work of transforming the company in the rear view mirror, Howe is now focused on increasing market share.

"We're reinvesting in the company now," he said. "We're fueling growth."

Inuvo Inc.
Nature of business: Online marketing services
Address: 15550 Lightwave Drive, Suite 300, Clearwater
Phone: 727.324.0046
Web: www.inuvo.com
What's in a name?
Inuvo has had several names, including Gemstar Enterprises Inc., CGI Holding Corp., Think Partnership Inc. and most recently Kowabunga! Inc.
The name was changed last year because Kowabunga! sounded dated, said Richard Howe, president and CEO. Inuvo, a combination of the words "innovate" and "nuevo", is a name that will stand the test of time, he said.
— Margie Manning

Read more: Inuvo streamlines operations to gain strength | Tampa Bay Business Journal

Read PDF Version