The San Francisco Chronicle

JANUARY 23, 2005, SUNDAY, FINAL EDITION

SECTION: BUSINESS; Pg. B1; ON THE RECORD

LENGTH: 3541 words

HEADLINE: PLANETOUT;

On the Record: Lowell Selvin

BODY: Busy doesn't begin to describe the past 12 months in the life of Lowell Selvin, chief executive officer of PlanetOut, the Web portal for the lesbian, gay, bisexual and transgender communities. He took big steps in both his business and private life.

Selvin navigated PlanetOut through an initial public offering in October, netting $41.6 million for the company. Because of the chilly market, he postponed the offering for several months in midstream and then restarted it after Wall Street interest rebounded.

On the home front, Selvin married his partner after same-sex marriages were briefly legalized in San Francisco. The issue was a huge topic on PlanetOut, which supports the cause. .

PlanetOut, based in San Francisco, includes PlanetOut.com and Gay.com, among other Web sites. The company, which has 3.3 million active users, claims to be the biggest media firm focused on the gay and lesbian community.

The network features news, online dating, chat, e-commerce and travel guides. In the third quarter, the company -- only intermittently profitable since its inception in 1996 -- lost $29,000 on revenue of $6.3 million..

Q: You recently completed an initial public offering. What was the process like? And why did you have to postpone it?

A: We are very glad to have completed our public offering and be able to move on as a company. The IPO process, as every CEO will tell you, is very intense -- nine months, 10 months of preparation, a long quiet period, all the filings, and then the road show itself.

With us, we went on our first road show -- we call it Road Show 1 -- around Aug. 1. We saw over 100 accounts in about two weeks, including internationally.

At the same time, the Nasdaq was slipping. The Internet comp group that we are measured against was slipping. We could literally see our price in the book slipping. As we have in the past, we played our own game and said, "We don't want to go out at this price." So we just picked up and waited.

We came back -- had what we called Road Show 2, the return of PlanetOut -- and successfully executed a public offering. Now, our stock is up close to 40 percent.

Q: How do you plan to spend the money that you raised?

A: First, the funds will be focused primarily on building out the online experience through products, features, technological investments. It will also be used to expand internationally.

In addition, we may diversify into other media and make acquisitions if they prove to be prudent and accretive to the business.

Q: What are your international plans?

A: We're currently in a number of markets. We recently entered Germany, Brazil and Australia, to name a few. That means starting with our extraordinary chat product. You may not be aware, but our network as a whole is No. 1 in Nielsen/NetRatings at-home rankings for connection times among all Web sites they track.

Q: What makes a good market for you internationally?

A: One where there is an aggregated gay community -- there's gay awareness, if you will. For example, if you look at a market like the United Kingdom, there's a very strong gay community. Whereas a market like India might be more difficult for us, so that might come later.

Q: Some analysts have said that the IPO was as much a political event as a business event. Do you agree?

A: My view is that it was a turning point in terms of community growth. The lesbian, gay, bisexual transgender community, though you see it more in the media, and you certainly see it more politically, really remains invisible.

For this company to have a business model that works, to have made it through the dot- com crash successfully and then to go public with a ticker symbol that says LGBT, I think is an extraordinary community event that has political and social and other ramifications.

It's also, I believe, a tremendous economic event. This is an under-served market -- $600 billion in buying power in the United States alone. We reach 3.3 million active members (out) of roughly 15 million adult gays and lesbians in the United States and 260 million adult gays and lesbians in Europe, Latin America, Asia and North America combined. We're just scratching the surface. Q: How does the company make money?

A: We have three primary revenue streams. First, subscriptions, of which online dating is a major component. That's roughly two-thirds of our revenue. Advertising around our media and programming is roughly a quarter of our revenues. The balance is made up of transaction services, primarily product sales though our Kleptomaniac.com product engine, as well as downloadable premium content through Out&About, our travel guide.

Q: What is it like competing against Yahoo and Match.com, which are much bigger entities? And what others do you consider to be competitors?

A: We compete on two levels. First there are the major players -- Yahoo, MSN, AOL and Match.com to some degree. We compete in terms of overall media, in terms of people wanting to come together in groups and to chat. We compete in terms of advertising and in personals.

We also compete to some degree against other gay and lesbian companies, online and offline. There are local magazines. There are national magazines in Britain and the United States. There are some smaller online businesses and some regional players.

Q: Where are your U.S. customers located, and how has that evolved?

A: It may surprise you that we skew toward the South and the south Midwest more than we do in urban areas and the coasts. The reason that we believe is that gays and lesbians don't want to be in isolation. They're looking to reach out.

Think about kids in Topeka, Kansas -- the 18-year-olds, the 20-year-olds. Where do they go without fear? Maybe they can't get a magazine in the mail because their parents or their dorm mates or their roommates or their friends might find out they're gay.

Q: Do you mean that you have more members in the South and the Midwest?

A: I mean that it's proportionally skewed. We find ourselves to have a higher percentage per capita in that south Midwestern band than you might otherwise find in the U.S. census.

Q: Do you have to do anything differently because many of your users are in the closet?

A: We have a tougher privacy policy than most Web sites. In terms of protection of youth, we generally have tougher policies.

On some major Web sites, youth can get adult material by just saying "I'm 18." We create far greater hurdles. We believe that we have to be more vigilant because there are some double standards. At the same time, we want to provide a welcoming environment for people. Q: Have any states or political groups tried to curb your content?

A: Not so much politically. In fact, we've been told by some states that we are very responsive in terms of reacting to people harassing others.

But in terms of corporations ... for example, we have recently launched an ad campaign, "Play for Keeps." In a lot of the major cities, you're going to see us on billboards, and you're going to see our ads on taxi cabs.

It's two football players, with their shirts off. In one, they're across the line from each other. One player is looking at the other and one's looking at the camera.

In the other ad, they're walking off in the distance on the field, and it's dark; night has fallen. They're very wonderful and loving and nurturing images.

Yet Clear Channel (the company that owns the ad space) prohibited us from running the ads in a number of cities, among them a city where my in-laws live and where I go to most every year for the holidays -- Indianapolis. So we do deal with some limitations like that. We're playing against a double standard. There might (be) on the same billboard a Calvin Klein model with only underwear on, male or female. But two football-playing guys holding hands somehow is offensive.

Q: Are you worried that conglomerates like Clear Channel could hem you in?

A: We don't believe that there's some wall. In fact, we see the walls that were there breaking down.

If you were to have asked me that question five years ago, it would have been a very different answer. If you had asked me even three years ago, I would have provided a middle-range response.

But we've recently had companies -- for example, General Motors, Bristol Myers Squib, Intel, IBM and so forth -- some of them are repeat advertisers. We are in fact breaking down the walls. We are bringing corporations to the gay community in a way that they could never be brought before.

Q: Have any religious groups protested or somehow come out against what you do?

A: To this point, no religious groups have protested outwardly around us. We expect that to happen.

We have corporations that have specifically thought about the reaction from the religious right. But just look at our site today and see who's advertising. The decisions are made in favor of the gay and lesbian community and in favor of supporting this business. Q: Was the Clear Channel incident limited to Indianapolis, and did you try any legal recourse?

A: I think it was six or seven cities around the country.

We're not a political entity, we're a business entity. Our job is to create the most value for our shareholders. There are large gay and lesbian populations in cities like Indianapolis.

Eventually, whether it's Clear Channel or any other company, they're going to have to open their eyes and say, "We're missing a large part of the community in these cities." We continue to show up and push.

Three, four years ago, we couldn't get any meetings with the automotive manufacturers. This year, in the last nine to 12 months, GM, Ford, Chrysler, Toyota are all on our site as advertisers.

Q: All this year? What do you think happened?

A: I think a number of things. We've been calling them year after year. We can talk all we want about this being a gay business, but in fact, we believe it's a best practice, best of breed business. Apply Business 101 and, over time, you'll tend to succeed.

That's what happened in automotive. We called on them. We presented. We demonstrated the power of the demographic. Also, the environment and the variables changed around us while our reach increased.

Q: Are they tailoring ads for your audience, or are they running standard ads?

A: The most successful ads on our site are tailored to the gay and lesbian audience. To give an example -- I won't name the computer manufacturer -- but just a few years ago, they were just glad to be on our site.

They had a picture on a laptop. We said, "That's not going to work. This is about a community of people who want a human experience. We need to get some people in the picture, and it needs to be a gay experience." The creative we got back about a month later was a laptop with a pride flag.

Well, that helped a little bit, but that wasn't the point. Now they use laptops with two guys or two gals and a cup of coffee and they get great click-through rates, and they keep coming back.

Q: Do some users believe that being targeted to is condescending?

A: Is it better to be singled out or invisible? I would offer that it would be better to be known and on people's radar screens. I'm in a relationship for 26 years, and if you are advertising to me with a man and woman holding hands looking out at a salmon river in British Columbia, it's not nearly going to resonate as much with me as if you showed two men doing that, because that's what my partner and I do.

Smart corporations, smart ad agencies, smart moviemakers and smart TV producers already know this. It feels inclusive.

Q: Where did you grow up, and did you ever think that you would be the CEO of a major gay-oriented company?

A: I was born in the projects in Brooklyn, N.Y., and mostly raised outside of Washington, D.C., in suburbia and then outside Chicago for high school in Des Plaines, Ill. I then went to University of Illinois, where I studied sensory perceptual psychology and aeronautical astronautical engineering.

That's where I met my partner in 1979. I'm one of those who didn't understand my gayness until much later in life. My partner would argue that as soon as he opened his eyes, he knew he was gay.

I didn't realize that I was gay until I looked across a crowded room and saw someone that my soul fell in love with before I did. And that was my partner.

Q: Were you going to be an aeronautical engineer?

A: What I always believed growing up is that I was going to be a builder, and I was going to build something that might in a small little way change the world.

Never in my dreams did I believe that one of those things that I might have a hand in building would be a legacy in the gay community and that it would be a highly successful, economically valuable business like we have at PlanetOut Inc.

I had helped build a high-tech company (Light Signatures, which was ultimately sold to Telecredit/Equifax).

I had co-founded and helped build a product company (Degree Baby Products) that was successful and that we sold to Johnson & Johnson.

I helped Arthur Andersen (the accounting and consulting firm) to build a strategic planning practice there. I was able to rebuild and do a turnaround in network marketing (Arbonne International, which sold skin care and nutritional products), all the while doing a lot of charitable and community work in the gay and Jewish communities.

For me it's a gift. No, I didn't envision this, but I envisioned the feeling.

Q: A year ago, San Francisco was in the center of the same-sex marriage storm. Did you and your partner get married, and how was PlanetOut situated?

A: On the personal side, what Gavin Newsom did in San Francisco I found to be an extraordinary move. I think it will go down in history.

For us, we had been together for so many years. At 15 years, we asked "Do we have an anniversary or confirmation ceremony? No, let's take a trip." At 20 years, we said we should really do something. At 25 years, we said "Shouldn't we do something?"

We never felt the urge because it was never there in front of us. We don't want to be civil union partners; we're not. We believe we're married in every sense of the word.

When Gavin Newsom did what he did, we rushed down to City Hall like kids, like thousands and thousands of others -- no matter how humiliating that was -- just to get married.

We waited for hours and hours, and came back and stood in line another day, and finally got married. It felt surreal.

We took our license and framed it and hung it in our kitchen. Just this week (in December) we received the notice of annulment from the city. I'm going to frame that and put it right next to the license.

In terms of PlanetOut and the business -- we had tremendous coverage. We were asked to speak in multiple news venues. Even the Fox News channel asked Planet-Out to speak -- Neil Cavuto -- and I commend him for that. We raised a kind of ruckus in how we responded on Fox News.

Q: How did you respond?

A: One of the questions he asked was, "Well, if the power of the marriage certificate is going to go away in a few weeks, wasn't this all a meaningless effort?" My personal view and I think on behalf of many of the members of our online community, I said it felt like a statement that we're not going to sit in the back of the bus anymore.

The company we've created says: "You belong, it's OK, and by the way, you can have a great and wonderful experience and we can build a valuable company."

Q: PlanetOut has been profitable only a handful of quarters. When will it become consistently profitable, and how do you plan to do that?

A: If you look at the net income line, we came pretty close in Q3. We are going to continue to invest in the business. I can't talk about '05 or '06 in terms of financials.

But let's just say that those investors who have invested in us see our clear path to profitability, see the momentum that the business has built. Our top-line growth, 30 percent, is in multiple revenue streams. We certainly don't intend to be not profitable. We intend on providing tremendous shareholder value.

Q: The company had considered a merger with Liberation Publications, owner of the Advocate, Out and HIV Plus magazines and the book publisher Alyson Publication. That fell apart. Why was that, and would the company consider getting into offline media in the future?

A: Each of the major heritage companies, Gay.com and PlanetOut Partners, considered a merger with Liberation Publications. In mid-2000, when I called Liberation Publications and said that we weren't going to go forward, it was a time to hunker down and focus on core competency.

One of the reasons why we believe we succeeded through the dot-com crash was that we saw it coming, we consolidated very rapidly, we managed expenses, we stuck to our business model all the way through.

We diversified the revenue streams, stayed in advertising when people said not to and stayed international when people said not to. The payoff is clearly what has happened this year and in years to come.

In terms of potential other acquisitions, we're going to consider a lot. But they need to be valuable and accretive to the business. While we may make some offline moves, it would be about building the online experience.

Q: What about PlanetOut as an acquisition target?

A: We've been an acquisition target in the past. We imagine that someone is going to knock on our door in the future.

Large companies might look at us, an MSN, Yahoo, and AOL, Viacom, InterActive Corp. and others to pick up our demographic. If it made sense and built shareholder value, we'd certainly consider it.

Q: A lot of online content companies have failed over the years. But content has seemed to come back into vogue. Why do you think that is?

A: One of the big lessons learned from early "dot-comism" is that people were sold a horse and got a mule. They believed that any URL would be successful and that if you put a banner out there everyone would click. There was a Ponzi scheme, where dot-coms with a lot of money were giving dot-coms their money and others were giving them back money.

What happened was that the advertisers who got mules instead of horses ran from the Internet. But now the viewing hours and connection time on the Internet exceed television, radio or print. Yet advertising dollars are still very small in proportion. We believe advertising is only going to grow in the future.

Q: What gets your attention among the current trends on the Internet?

A: There are a number of mega-trends. Social networking and social interaction, which is what we're so much about, is an extraordinary core engine to a business and certainly to ours. That will continue, I believe, for years to come.

I see convergence of a thing you call a TV today and a thing you call a PC. Over time, those two things will look more and more alike. The screen that you use for them will become common.

The ability to stream over the Internet is improving almost as rapidly as HDTV is improving. I think you will see those forces coming together as broadband -- which would be a third mega trend -- picks up.

Also there's this idea of transportability. It's in your hand, your wallet, your car. The ability to take it with you will become very important, and it has already in some other markets.

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ON THE DOT-COM BOOM

One of the big lessons learned from early dot-comism is that people were sold a horse and got a mule.

ON INTERNET TRENDS

Social networking and social interaction, which is what were so much about, is an extraordinary core engine to a business and certainly to ours.

ON LGBT VISIBILITY

The lesbian, gay, bisexual transgender community, though you see it more in the media, and you certainly see it more politically, really remains invisible.

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Briefcase

Name: Lowell Selvin

Age: 45

Job: Chairman of the board and chief executive officer Education: B.S. in sensory perceptual psychology and aeronautical and astronautical engineering from the University of Illinois

Affiliations: A founding member and chair of the Gay & Lesbian Focus Forum of the Young Presidents' Organization, serves on the advisory boards of the Gay & Lesbian Athletics Foundation, MOSAIC: The National Jewish Center for Sexual and Gender Diversity and the Hebrew Union College's Institute for Judaism and Sexual Orientation

Family: Life partner, Gib Winebar

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Beyond the boardroom

Latest reading material: "Teachings of Rumi," by a Sufi mystic

Favorite kind of movies: Science fiction

Favorite vacation: Anywhere the salmon are running

Hobbies: Martial arts, fitness, piano