Bankrate, Inc

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Bankrate, Inc.

11760 U.S. Highway 1, Suite 500
North Palm Beach, Florida 33408
U.S.A.
Telephone: (561) 630-2400
Fax: (561) 625-4540
Web site: http://www.bankrate.com

Public Company
Incorporated: 1993 as Intelligent Life Corporation
Employees: 159
Sales: $49.05 million (2005)
Stock Exchanges: NASDAQ
Ticker Symbol: RATE
NAIC: 518111 Internet Service Providers

Bankrate, Inc., researches and consolidates bank rate information from some 4,800 financial institutions in all 50 states, which it then provides to banks and lending institutions through its two business segments: the online publishing division and the print, publishing, and licensing division. The company's Bankrate.com web site is geared toward consumers, offering them free rate information on more than 300 financial products, including checking and ATM fees, credit cards, money market accounts, car loans, and home equity loans. The site also provides editorial content, featuring original articles related to personal finance.

While the company maintains a neutral, objective stance it makes its money through advertising. More than 500 financial institutions purchase hyperlinks to the rate tables, and they along with marketers purchase graphic ads on the site. Bankrate material is also distributed online through such partners as AOL, Yahoo!, and MarketWatch. In addition, Bankrate produces "The Bankrate.com Personal Finance Minute," an audio program that can be heard on local radio stations, Armed Forces Radio, and XM Satellite Radio. Moreover, Bankrate data is referenced on television by cable channels CNBC and CNN Headline News. The company's print division distributes rate information and similar content to approximately 100 newspapers, including eight of the top ten, and a number of U.S. magazines. Bankrate also provides rate surveys to institutions and government agencies for a fee. Based in North Palm Beach, Florida, Bankrate is a public company listed on the NASDAQ.

FORMATION: 1982

Bankrate was founded in Miami Beach by journalist Robert K. Heady. Born and raised near Springfield, Massachusetts, Heady served in the military in both World War II and the Korean War, and then in 1953 graduated from Northwestern University with a journalism degree. Heady worked in public relations in Miami Beach followed by a stint in New York in the 1960s as an editor at Advertising Age. He joined Crain Communications to become the publisher of Industrial Marketing, and in 1973 he struck out on his own, founding a newsletter called Bank Advertising News. In 1982 he started the company that would own Bank Advertising News as well as a new publication he launched in response to Congress's decision to deregulate interest rates. Convinced that consumers needed a source to turn to for bank rates—savings rates, mortgages, personal loans, and the like—presented in a way that the average person could understand, Heady began publishing a newsletter called Bank Rate Monitor. It quickly became the publication of record in the industry, and a valuable resource for consumers in their efforts to shop for the best financial products.

In 1993 Heady sold Bank Rate Monitor to a group of investors led by Peter C. Morse, who formed Intelligent Life Corporation to house the acquisition. A graduate of Georgetown University and holder of an M.B.A. from Columbia University Graduate School of Business, Morse had been the chairman of toy retailer FAO Schwartz. Following his departure he headed a private equity firm, Morse Partners, Ltd. Morse took over as Intelligent Life's chief executive officer and was quick to realize the potential of the Internet. Online operations were begun in 1996 with the launch of Bankrate.com, essentially an Internet version of Bank Rate Monitor. Two years later the company shifted its entire focus to the Internet and began phasing out the newsletters in favor of adding new web sites. Spearheading the effort was a new CEO hired in July 1997, William P. Anderson, former CEO of an H&R Block, Inc. subsidiary, Block Financial Corporation, which was involved in the delivery of online financial services.

Not only did Intelligent Life embrace the Internet, it looked to offer a more diversified selection of personal finance resources. In keeping with this change in direction, Intelligent Life launched theWhiz.com web site in May 1998, providing personal finance information in an entertaining manner to a segment of the population that was not normally targeted by online financial sites, which were geared towards older white males. In contrast, theWhiz.com targeted an audience that was not only younger, but also more female and ethnically diverse. Furthermore, Intelligent Life established Consejero.com, a Spanish language web site for personal finance information. A Spanish version of Bankrate.com was available, and would supply Consejero.com with material, but the new web site offered content that was tailored for Hispanics living in the United States as well as citizens in such countries as Argentina, Chile, Columbia, Costa Rica, Mexico, Panama, Peru, Puerto Rico, Spain, and Venezuela.

Although Bank Advertising News was sold for $125,000 in December 1998, Intelligent Life retained some of its print publications in order to absorb some of the cost of research and creating original content. They included three rate information newsletters, the flagship Bank Rate Monitor and its institutional audience, as well as 100 Highest Yields and Jumbo Flash Report, targeting individual consumers. In addition, Intelligent Life published Consumer Mortgage Guide, established in 1995 to publish mortgage rate listings in major newspapers, which then shared in the sale of ads in the allotted space.

Intelligent Life expanded its Internet holdings in January 1999 with the acquisition of The College Press Network (CPNet.com), a company that since 1995 had been assisting college newspapers in going online and would become a network of college newspaper web sites. It also became a sister site with theWhiz.com, which began to provide editorial syndicated content to the affiliated college newspapers, including information about investing, budgeting, and shopping for the college-age market. Other Internet ventures for Intelligent Life included ilife.com, a vertical personal finance portal; IntelligentTaxes.com, a personal income tax information web site; and Garzarelli.com, a subscription site for Elaine Garzarelli, a prominent Wall Street investment adviser.

COMPANY PERSPECTIVES

Bankrate, Inc. is the Web's leading aggregator of financial rate information. Bankrate's rate data research offering is unique in its depth and breadth. Bankrate continually surveys approximately 4,800 financial institutions in all 50 states in order to provide clear, objective, and unbiased rates to consumers.

PUBLIC OFFERING: 1999

Intelligent Life was taken public in May 1999, through an initial offering of stock raising $45.5 million. The money was earmarked for further expansion and put to use in August 1999 when a pair of acquisitions were completed. Nearly $5 million was spent to buy Professional Direct Agency, Inc., owner of Pivot.com, a direct marketing insurance web site. About $830,000 was used to acquire Green Magazine, a publication offering personal finance and investment advice in an entertaining manner. It had been founded by Ken Kurson, an author and regular money columnist for such magazines as Esquire and the Source, as well as a contributor to National Public Radio's "Marketplace" program and CNNFn's "Take It Personally." Not only would Kurson remain editor-in-chief at Green, he was also tapped to help theWhiz.com flesh out its editorial message. In addition, Intelligent Life established a broadcast division in a bid to produce syndicated personal finance programming, such as the Cost of Life personal finance segments distributed to television stations. The company also made a heavy investment in the summer of 1999 when it broke a $20 million marketing campaign that ran ads in such top-tier publications as the Wall Street Journal, Forbes, Fortune, and Time.

In December 1999 Intelligent Life changed its name to ilife.com, Inc. Prospects for the company appeared bright to the management team, this despite the loss of $34 million in 1999 and another $17 million in 2000, and in preparation for anticipated growth it took steps to build a new 35,000-square-foot headquarters to replace the current 11,000-square-foot facility, the lease of which was set to expire the following year. A $7 million deal to build a new headquarters in Jupiter, Florida, at the Abacoa Business Center was signed and about $300,000 was paid in deposits. Yet there was a harbinger of bad times ahead: The price of the company stock never exceeded the $13 a share level at which it debuted on the NASDAQ, and by the close of the year had slipped to $4.50. The price suffered a complete collapse in the early months of 2000, even as most Internet stocks continued to climb, albeit most were soon to suffer a similar fate.

MOUNTING A COMEBACK: 2000

Anderson resigned in February 2000, replaced by Elisabeth DeMarse. Holder of a Harvard M.B.A., DeMarse was a well seasoned executive, having served stints at Western Union and Citicorp before spending ten years at financial information provider Bloomberg, serving as vice-president of marketing and business development. She then gained Internet experience at Hoover's, Inc., where she acted as an executive vice-president for content, strategy, and acquisitions. After joining ilife.com in April 2000, she quickly took steps to address the company's money-losing internet operations. In May 2000 CPNet.com was sold to Colleges.com, Inc. for shares of stock, and in July Pivot was sold for $4.35 million to First Union, resulting in a $290,000 loss. No buyers were found for Consejero.com, which was ultimately closed down, as was Garzarelli.com, ilife.com, the Greenmagazine.com site, and the Green Magazine print publication. Intelligent Taxes.com was folded into the Bankrate.com site. Plans to build a new headquarters were also abandoned, and the company forfeited its deposit and extended the lease on its old accommodations. The workforce, in the meantime, was slashed from 250 to little more than 100.

By the autumn of 2000 the price of ilife.com stock dipped below $1, eventually bottoming out at 19 cents, and it was only a matter of time before the NASDAQ delisted the stock, which was relegated to the Over-the-Counter Bulletin Board, generally the death knell for an Internet company. In fact, ilife.com was listed by Barron's as a company on the verge of going out of business, based on the rate it was spending available cash. However, unlike casualties of the dotcom sector's demise, ilife.com had a healthy core, the original Bank Rate Monitor business. In an effort to return to its roots, the company changed its name to Bankrate Inc. in September 2000 and mounted a comeback by taking advantage of the strong Bank Rate brand. The company did not abandon the Internet, however. It simply focused its resources on Bankrate.com, which had been enjoying strong ad sales. The company also relied on its traditional print products to grow revenues to $18.3 million in 2001 and $26.6 million in 2002, when the company was able to post a $6.7 million profit. The comeback was completed in January 2003 when Bankrate began trading on the NASDAQ SmallCap Market and the price of its stock approached the $5 level.

Revenues continued to climb in 2003, totaling $36.6 million, while net income increased to $12.1 million. Despite the success enjoyed by DeMarse, she was replaced in June 2004 by Thomas R. Evans, the former president and publisher of U.S. News & World Report, the Atlantic Monthly, and Fast Company, as well as the CEO of GeoCities Inc., a family of personal web sites. Prior to joining Bankrate, Evans had served as chairman and CEO of Official Payments Corp., a web site that allowed taxpayers to make electronic bill payments to the government.

KEY DATES

1982:: Robert K. Heady begins publishing Bank Rate Monitor newsletter.
1993:: Intelligent Life Corporation is formed to buy out Heady.
1996:: Bankrate.com is launched.
1999:: Intelligent Life is taken public.
2000:: Bankrate, Inc. name is adopted.
2005:: FastFind and MMIS/Interest.com are acquired.

Evans took over a company in Bankrate with $21.6 million in cash and a mandate to grow the business. In 2004 some of that money was used to open new sales offices in San Francisco and Chicago, while the New York operations were beefed up. For the year, sales improved to $39.2 million and net income approached $13.4 million. In 2005 the Bankrate.com site was redesigned to make it easier to navigate and use, and it switched from charging advertisers a flat rate to a cost-per-click pricing method that made the company less dependent on the number of advertisers it attracted and could allow it to benefit from the overall traffic the site received. Bankrate also completed a pair of acquisitions in 2005. It paid $10 million in cash for FastFind (Wescoco LLC), a San Francisco-based mortgage lead aggregator that matched up consumers with as many as four lenders competing to provide a loan. Prior to having FastFind in the fold, Bankrate sold ads to other aggregators, E-Loan and LowerMyBills.com, who benefited from the traffic Bankrate.com generated, collecting the names of visitors and information that it could sell to lenders. Now Bankrate could gather that information through FastFind for its own benefit.

Another addition was Chicago-based MMIS/Interest.com, a rival to Consumer Mortgage Guide that published mortgage information in more than 300 newspapers and also operated the Interest.com web site, providing financial rates and information, and connecting lenders and consumers. The MMIS print operation was merged with the Consumer Mortgage Guide business to form the Bankrate Print division. When 2005 came to a close, Bankrate realized sales of more than $49 million and net income of $9.7 million.

Ed Dinger