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Despite move, Be Free founders vow to maintain, grow their Pittsburgh base

Thursday, February 17, 2000

By Ken Zapinski, Associate Editor/Business

Brothers Sam and Tom Gerace, founders of Be Free Inc., know the story.

 
Sam Gerace, co-founder of Be Free Inc., says his company's technical staff will remain in Pittsburgh. (Bill Wade, Post-Gazette) 

A promising tech company takes root in Pittsburgh. It gets some money, some attention and something else -- a new address. To be closer to its financiers, the company moves its headquarters to suburban Boston.

After a wildly successful initial public offering of stock, the company turns its back completely on its original hometown and pulls all its people out.

That's what happened with Lycos, the Internet portal company founded at Carnegie Mellon University in 1995. By 1999, the last Lycos employee was gone from the city.

And except for the very last chapter, the same story applies to Be Free, too.

Founded here in 1996, the Internet marketing and sales company moved its base to Massachusetts 16 months ago after it captured its first round of funding from a pair of Bay State venture capital firms.

Yes, the Brothers Gerace know the story well. But they swear their company won't be another Lycos. Really.

The Boston market is better for marketing and sales talent, so the bulk of the company's nearly 200 employees are based there, they said.

But the company's technical staff will remain in Pittsburgh because of the region's expertise in that field, said Sam Gerace. Be Free employs 57 at its office on the 20th floor of the Regional Enterprise Tower, and is about to add a second floor in the former Alcoa headquarters to make room for the 40 vacant positions waiting to be filled.

"We felt Pittsburgh was an untapped jewel," Sam Gerace said. He said they couldn't have built up a tech company as fast anywhere else in the country.

And by any measure, Be Free is growing fast.

In its first financial report since its November IPO, Be Free said this week that revenue for 1999 totaled $5.3 million, up from $1.3 million in the previous year. Revenue doubled in the fourth quarter, to $2.6 million, compared with the previous quarter. The net loss for 1999 was $17.8 million, or $2.04 per share, compared with $4.8 million, or 61 cents per share, in 1998.

Those losses haven't scared off investors. Since going public at $12 a share on Nov. 3, the stock has climbed steadily. It closed yesterday at 1061/4, down 17/8 on the day. On Tuesday, the company announced a 2-for-1 stock split, payable March 8 to shareholders of record March 1.

You may not know anything about the company. But it may know something about you, even though it doesn't know exactly who you are.

The company combines technology and direct-marketing expertise to help e-tailers sell more over the Web.

Suppose when you call up a gardening Web site, you see a promotion for a flower book on sale at barnesandnoble.com, Be Free's largest customer. You can ignore it, or you click through and purchase the book. Either way, Be Free knows.

It tracks the surfing habits of your browser to make sure you see a variety of ads, and not the same one over and over. If you make a purchase, Be Free tracks that to make sure the garden site gets its commission (and Be Free gets paid by the merchant.) And it continually analyzes the data to help merchants refine their promotions and place them on the most productive sites.

It may even recruit the affiliate sites and send the ads from its servers to your computer when you click on those sites.

And it does this time after time after time across more than 2.5 million affiliate sites.

During the last three months of 1999, Be Free tracked nearly 13,000 ads per minute, or a total of 1.7 billion during the quarter.

Building the technical guts to do that, said Sam Gerace, the company's 36-year-old executive vice president for research and development, "is no trivial task."

And Be Free is moving into even more sophisticated direct marketing. Yesterday, it announced the purchase of TriVida Corp. of Culver City, Calif., in deal valued at $186 million.

TriVida develops intricate analysis software that will let Be Free distribute ads specifically tailored to a user's behavior and purchasing patterns. If a user has shown interest in buying high-end goods, for instance, she might see a promotion for a top-of-the-line mountain bike when she clicks onto an outdoor travel site, instead of one for a budget model.

Tom Gerace, 29, executive vice president for business development, said that Be Free knows users -- and tracks their behavior -- only through their individual browser signatures, not by name or e-mail.

And he said that Be Free won't ever match up the browser profile with any other data that would identify them. Whether DoubleClick, a New York-based Internet advertising service, broke a similar pledge is now the subject of a Federal Trade Commission investigation and a handful of lawsuits.

"Be Free and DoubleClick are very different companies," Tom Gerace said. "We believe that you can create a completely personalized environment for a user without invading that user's privacy." A well-rounded portrait of a user's likes, dislikes and purchase history can be developed while the user remains anonymous, he said. Be Free is developing a Web site that would allow users to drop out of Be Free's monitoring program. "We can be the star example of self-regulation," Tom Gerace said.

But privacy advocates and others are getting increasingly uncomfortable with trends on the Internet.

"The whole idea is very Orwellian, just the sense that Big Brother is watching over you," Christopher Kelley, an analyst for the tech consulting of Forrester Research, recently told the San Jose Mercury News. "The problem with the Internet is becoming, for some consumers, that the technology allows people to look over your shoulder at every turn."



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