It’s got a catchy name and trendy offices, but exactly what Balihoo does can be hard to grasp.
The company, at 404 S. 8th St., Suite 300, in BoDo, started in 2004 offering a search engine to help media buyers and others looking for places to advertise.
In 2008, Balihoo developed a second product: a software platform that enables national advertisers to customize their advertising campaigns locally across print, radio, television and online media.
About the same time, the economy slid into the worst recession since World War II.
Pete Gombert, who started the company with about $200,000 of his own money, received $1.5 million in venture capital in 2007 and $4 million in the beginning of 2008. Soon afterward, investment funds dried up.
Not yet profitable, the company lacked the money both to continue with the search engine and the new software. Balihoo had to choose.
Gombert and his top staff went with the software. They saw great potential for its development. But the choice meant deep layoffs.
Time proved the decision prescient. Balihoo revenues have been growing annually at more than 100 percent since then, Gombert says.
Companies representing more than 25,000 affiliates and more than $180 billion in revenue use Balihoo’s software platform. The company doesn’t work with small businesses.
Gombert based the software on a platform he had designed in a previous career in energy trading.
That platform was aimed at organizing transactions after the deregulation of energy trading led to new companies and introduced new trading complexities. Gombert saw parallels between energy trading and national advertisers’ desire to target their local advertising more effectively.
Balihoo’s automated technology and services allow national brands to provide guidelines, creative material, marketing planning and best practices that local affiliates, such as franchises or agents, can use to tailor ads for their markets and the various local media.
After the affiliate creates the ads, Balihoo staffers identify the best media outlets for their needs, and negotiate rates and placement. Automated information about the local market drives decisions about how and where to target ads.
The software also allows the national brand and its affiliates to analyze results and apply them to future campaigns.
Q: Describe your business.
Our mission is to help national brands market more effectively at the local level. We believe that the use of technology will allow us to automate that process so the right message is delivered to the right audience at the right time through our platform in conjunction with our media partners like Google and Yahoo and Facebook and our proprietary digital technologies.
Q: How have you evolved?
The initial concept was built off of a premise that I had from my prior company called Enerx here in town in the energy-trading space, which is: As markets evolve and become more liquid, transaction sizes tend to decrease, and transaction volumes explode.
What happens in that type of marketplace is inefficiency needs to be squeezed out of it. With Enerx, what I did was build a transactional trading and risk-management platform for the wholesale energy-trading business, which is completely different than marketing, but in looking at the market dynamics from macro perspective in the media portion of advertising, it looked very similar.
The market was fragmenting. It was massively inefficient. Still is today.
So I said, “A lot of the same principles that existed in my prior business, which was successful, exist in this new industry that we’re looking at.”
So we went about building a similar-type solution for media planning and buying. The first four years were focused exclusively on that [the search engine].
Just into that fourth year, we were reached out to by an advertiser who said: “What you guys are doing for media is really interesting. I need to combine creative customization with that as well.”
We were doing really well with the original product and decided we were going to build another one. That happened during 2008. We were out raising a big round of venture capital all through the summer and had a couple of big Bay Area firms and Boston firms around the table when Lehman Brothers failed, and all of those firms went away in a matter of 10 days.
We were sitting there with two big products and a relatively big company, and a difficult decision to make.
So we had to take a hard look at where we had come from. We had one product that had just launched, that’s Balihoo as it is today, and one product that had been around for a couple of years, and we had great traction in the market.
We had to be intellectually honest with ourselves and say: Which is the better opportunity?
We made the decision ... to shut down the part of the business that had been our first four years, because the other product that we had built in the last nine months looked a lot more promising.
The growth from that point on, which was the fall of 2008, has been tremendous.
I consider the company 3 years old, not 7 years old, because the first three years were all flushed down the drain.
Q: How hard was it for the organization?
There were two big things that we had to do. We cut the company in half in a matter of two weeks. [The company had about 75 employees in 2008 and 40 in 2009, and it has 47 today.]
That was extremely painful. You never want to ever go through something like that.
And then we had to go out to all of the clients that we had on the first side of the business (about 12) and tell them that we are phasing out the product. That was difficult as well, but not as difficult as having to let people go.
I’m now going back and having conversations with those original customers, because our platform has applicability to them again now as we’ve developed out the overall solution, and the reception I’m getting from them is extremely warm. So I don’t think there are any hard feelings.
Q: Do you have a competitor?
Lots. One of the things that all startups struggle with, and we certainly struggle with as a platform, is our software spans a couple of different industries.
So there are point solutions for certain aspects of what we do, and competitors for all of those point solutions.
Nobody that we know of does everything that we do, and that’s a difficult story to tell. No matter who I talk to out in the marketplace, they recognize one piece of what we do and say, “Oh, you’re like them.”
And I say, “Yes, we’re like them for this one piece, and we’re like these guys for this piece, and these guys for this piece.” The reason it’s important is because we do all of them together [advertising for print, radio, television, digital media], and that’s a big differentiator. There are things we do that nobody else does in those point solutions. Most ad-builders just do print. Almost nobody does video.
Q: What did you do previously?
I graduated from Villanova University with an accounting degree. I worked in Arthur Andersen (a Chicago-based accounting firm) for awhile in their audit division and operational consulting division. Six of us left and started a company that was doing consulting. We then built some software to help support our consulting. That’s how I got into software, to help support our consulting.
Then we turned it into a product, and the company exploded. So it went from the six of us to 75 people. It was massively profitable, and I happened to run the energy vertical. One of my clients ending up being Idaho Power. [When wholesale trading was deregulated,] I saw opportunity to focus on that particular problem. I had my partners buy me out and used that capital to start a software company.
It grew over three years in Boise. I sold it to a United Kingdom-based software company, ran its international operations from London as part of the deal and quit on my three-year anniversary. I was going to take some time off, but after three months, I started looking at the advertising company [Balihoo].
Q: What made you decide “Boise is where I want to be”?
I just fell in love with it. I love to be outside, and the accessibility is tremendous. I was living in Scottsdale, Ariz., looking to get married and start a family, and didn’t want to raise kids in a big city. ... I wanted a quality of life that was better than the other places I’ve lived, which were Chicago, Philadelphia and Phoenix.
Q: Do you have advice regarding your challenges that other businesses may be able to benefit from?
Focus is the key to success in anything you do, really, but particularly in a startup.
One of our benefits as a startup is agility, being able to move quickly, adapt to a scenario and beat the competition. But that’s also dangerous, because you can change things so rapidly within a startup ,environment that if you’re really not focused on your end goal and on a concentrated market, you become too diluted, or you start running around chasing after too many different things, and you end up with a product that is too big, that doesn’t do anything particularly well, and the market doesn’t care about you.
We suffer from that. There’s so much opportunity in what we do. Customers come to us asking for things to make our platform do, or different markets to get into. Saying no to any revenue when you’re growing is difficult but sometimes necessary. The hardest thing to do is remain focused on the core of your idea, on a target segment within a market that you’ve deemed to be valuable.[0x0b]
Q: Are there ways you found to do that?
I think to clearly define what that vision is. We set annual, quarterly and then monthly goals. As we go through that process, it helps to reset you to make sure the most important things you do are aligned within that strategic vision.
Q: Where is Balihoo at in its development?
I’d say that under classical definitions we would be early-expansion stage or late-stage venture.
Q: What do you hope to achieve in the next three to five years?
Three to five years is an eternity in a startup. I want to see a couple of different things happen in three to five years. I want us to be recognized as a market leader in the space that we’re in, and I think we’re not too terribly far from that because we’ve kind of created the space that we’re in.
I want to continue our growth or even accelerate our growth that we’ve seen over the past three years.
One of the most important things: I want to see us continue to grow in Boise.
I want to build a really solid business that’s profitable, growing fast, great to work at. And I want to do it all in Boise.
There are some inherent limitations to that. Engineering talent is difficult to find here. It’s difficult to recruit into here. That’s the primary challenge that we see in terms of growth.
Those types of things worry me a little bit, but I’d love to be the next big success story in Boise and have Balihoo remain as an anchor tenant the way that, or even better than, a Micron or an HP has. I don’t want to shrink. I want to grow and be a meaningful success story in technology and particularly in software in Boise.
Questions and answers have been edited for space and clarity. Sandra Forester: 377-6464.
