Newport Beach-based OhGolly.com Inc., a provider of Web hosting and e-mail for small businesses, is hoping the fourth time is a charm.
The 2-year-old company has scrapped, reorganized and tinkered with its business plan about as often as a scientist swaps chemicals in a bid to find a magic solution. The company has gone from being a small businesses portal to a more focused provider of Web pages and other online services.
In the wake of OhGolly’s latest changes, which included a management shift and the cutting of 10 jobs, executives say they believe they have a keeper.
“We’re really focused on being cash-flow positive and making a profit,” said John Theron, who became president in January, replacing Frank Kavanaugh, who retained his positions as chief executive and chairman. “The landscape is littered with dead dot-coms, and we don’t intend to be one.”
OhGolly, which counts about 50 workers and a 16,000-square-foot office, has been a chameleon, adapting to the changing Internet market to keep afloat. That has meant growing and slashing its head count, reshuffling executives and reordering its business to be focused on technology and service,and lean enough to get to profitability.
Swapping plans on the fly is something OhGolly and other dot-coms have become accustomed to. Even so, it’s one of the challenges OhGolly executives say they didn’t anticipate.
“What happens in any mania, which is what we’ve gone through, is that you have anybody with a unique domain name and a good idea becoming a millionaire,” Kavanaugh said. “And that phase of the entertainment is clearly over.”
These days, the pendulum has swung the other way, Kavanaugh said.
“You continue to have this idea that all dot-coms are bad, which is also an irrational over-reaction,” he said. OhGolly traces its beginnings back to February 1999,the “good ol’ days,” Kavanaugh said.
Back then, he said venture capitalists “gave you money for anything” and prospective employees demanded staggering salaries and said “ludicrous things like ‘I want to take my dog to work.’ ”
OhGolly, which pushed a 1950s theme in its early marketing, started out as a “small-business community” offering a slew of services, ranging from Web hosting to “dessert topping,” according to Kavanaugh, who joined the company in 1999.
Kavanaugh has overseen turnarounds before. In 1996, he took over struggling Costa Mesa-based printer maker NewGen Systems Corp. and sold it to what’s now Imaging Technologies Corp. of San Diego in 1997.
At OhGolly, Kavanaugh changed the company’s game plan when he realized the business had no focus.
That fact was pointed out to Kavanaugh, who taught at Chapman University at the time, when he asked students who held business degrees a simple question: “What do we do?”
“Not one of them could tell me, which was the first indication that we had something wrong,” Kavanaugh said.
Soon after, OhGolly made its first round of changes. It cut its 200-plus contractors, most telemarketers, and laid off about 54 of its 80 employees. It also completely changed its business model. The site re-launched in December 1999 solely offering free Web sites to small businesses. The bet was that some of those customers would eventually pay for services as they grew, Kavanaugh said.
But the plan bombed.
“We were 100% right about the market that we chose, but we were probably 100% wrong about the idea that you could give someone something and they would become a paying customer at numbers that would allow you to sustain a business,” Kavanaugh said. “At that point, fortunately or unfortunately, people bought that, and we did too.”
OhGolly knew it had to change gears, but scratched its head for months as to where to go. At the time, it wasn’t tight on cash, having received a chunk of funding from private investors. The company to date has received five rounds of funding from undisclosed investors totaling about $14.5 million.
In July, after bolstering its head count to about 80 employees, OhGolly re-launched again. It still offered Web hosting and e-mail services to small businesses, but it charged a fee.
After a few months, though, OhGolly realized it had another big problem: it still wasn’t profitable. To get there, the company in October downsized again, taking its head count from about 80 to 50.
That count inflated a bit, but was trimmed back to about the same level in January when OhGolly had its fourth reshuffling. The company eliminated about 10 full-time positions, transferred four employees to different departments and made Theron, the head of the technology division, the company’s president.
The moves coincide with the company’s bid to reverse losses by May. Plus, they dovetail with the site’s current focus: easy-to-use technology and customer service,two reasons, Theron says, OhGolly has been able to distinguish itself from competition.
The site has many rivals, ranging from large companies such as IBM Corp. and Englewood, Colo.-based Verio Inc., which both offer Web hosting and services, down to small local operations with similar offerings.
Since OhGolly hones in on companies with fewer than 10 employees,small businesses that can be intimidated by the Internet,communication is key, executives say. The company’s site offers help online while the company offers phone support.
“Our advantage is to provide them with professional ease to do some Web service that really empowers them to compete,” Theron said.
The acceptance curve for small businesses has been good, Kavanaugh said.
“The media did a good job convincing people that they had to be on the Internet,” he said, adding that the initial mad rush has damped down to steady growth.
Though OhGolly has had its ups and downs, the site has more than 114,000 members and last year was ranked by market tracker Cahner’s In-Stat as the “No.1 value-added e-business service provider for small businesses.” It also has an extensive list of strategic and technology partners, including iPowerbiz, a Newport Beach direct sales and marketing outfit, OfficeMax.com, the online arm of Office Max Inc., Microsoft and Exodus Communications Inc., which provides Internet hosting.
Now, the site plans to keep to its word and enhance its technology to include services like electronic scheduling and marketing, Theron said.
“We’re not talking about rocket science here,” he said. “We’re talking about basic, simple services.”
OhGolly is also looking to acquire another company (most likely a struggling dot-com) in the next six months to enhance its offerings, according to Kavanaugh. But, he said, his top concern is focus.
“No one like us can afford to make a lot of acquisitions, because acquisitions tend to derail you for a period of time,” Kavanaugh said. “The most important thing for us is execution.” n
