By Susan Lahey
Reporter with Silicon Hills News
In her early 20s, Erica Douglass seized every opportunity that arose—taking jobs instead of finishing college, rescuing discarded bits of servers from her employer’s dumpster to sell on eBay—and wound up building a successful hosting business.
It was a roller coaster ride that sapped her physically and emotionally. In the end, she almost went under, but managed to sell the business at the eleventh hour for $1.1 million.
Now she wants to do it again.
Douglass is co-founder of Whoosh Traffic, a Search Engine Optimization or SEO firm whose software tools help businesses not only improve, but also understand, their search engine rankings. Many of her customers are small businesses, but she also serves Gannett Inc., a Fortune 500 company. She wants to remove some of the mystery in which SEO is enshrouded. And unlike her last business, which she built in the Silicon Valley, she’s building this one in the Silicon Hills of Austin.
Douglass is originally from Indiana. She moved to the Bay Area for college to study management information systems. Part time, she handled desktop support for Cobalt Network. Then, Sun Microsystems bought Cobalt, announcing they only wanted full time employees. So Douglass dropped out of school and became one of six developers behind Sun.com.
While working for Cobalt, she discovered the company was pitching servers that had issues in the dumpster. She repaired them and sold them on eBay for extra cash. There were so many, she had servers and server parts piled up around her in her cubicle. That’s when somebody noticed her little enterprise and decided to put the kibosh on it. She still had one server. And, it dawned on her, she could make a lot more money renting out the server than she could selling it, anyway. That was the birth of her hosting business.
In San Jose, data center space was cheap, largely because of the bankruptcy of Metromedia Fiber Network which had taken up a ton of space and now announced it was more than $3 billion in debt. Douglass snatched the opportunity to build her hosting service in the void. She built the number of servers over time and traded project work for a 20-year-old switch to connect all her servers to the data center’s network and wound up picking up some of MFN’s former customers.
At the time, she was still making a living as a freelance web developer. She’d advertise in Craigslist and create websites up and down the coast. But income from her hosting service was rapidly overtaking income from the web hosting business. Near the end of 2002, her grandmother invested in her hosting business. She helped her buy more servers and space. By the end of 2004, she transitioned from a web developer to a hosting company. She hired her first employee in 2005 and bought an entire set of office furniture and equipment from a bankrupt firm for $1,500.
After that, things grew so rapidly. They got out of hand. She hired more people. Secured loans and racked up $120,000 in debt to suppliers. The company was working constantly but she wasn’t watching where the money went. And it went faster than she realized.
“I thought we were going to go out of business,” Douglass said. “I had to delay my tax payment to the IRS and lay off half my staff. That was the worst day of my life.”
The data center gave her a strict payback schedule of $20,000 per month. The only way she could make it was to double customers’ rates. She didn’t tell customers they were going to go out of business. She figured half her customers would leave, even though their new rates brought them in line with everybody else. As it turned out, 95 percent of their customers stayed.
“By working 16 hours a day, we pulled through. The revenue shot up by so much I thought this would be a good time to start the conversation about selling the business.” She contacted all other data centers to ask if they had any extra space and quickly started filling up racks of servers. She had a good reputation. And she was becoming an expert at SEO.
She figured she could sell the company for $700,000 or maybe even a million.
“I had watched this Oprah episode (my guilty pleasure) where Jim Carey said he was a struggling comedian and he decided to write a check to himself.” The check was for $10 million and dated 1995. That year, he made $10 million. Douglass wrote a check to herself for $1 million dated 2007 dollars. “You have to be clear with what you want,” she said. “I wanted a million dollars.”
In the end, she got $1.1 million. Ten percent of it went to employees. Sixty thousand dollars went to debt.
Douglass, meanwhile, had worked herself sick. She felt horrible but could never get a diagnosis. It turned out to be Celiac’s Disease. She took a year off and changed her diet. When her body started to recover, she began to dabble in SEO.
She read a lot about affiliate marketing and discovered a system by Ritoban Chakrabarti called Profit Instruments. The system identifies the search keywords customers use when they’re ready to buy a product, which are different from those used when they’re just browsing. With his product, she spent a year writing her book and blog about how to make money on the Internet. Within 20 minutes of offering it online, she’d made $90. By the next day she’d made $3,000. By the end of day five, she’d earned $22,000. She then sent out an email to 70 people on her list who had bought the product and asked what other product they were looking for. For example, if they offered Chakrabarti’s link building service for $79, would they buy it? Yes.
That’s how it started. Whoosh evolved to helping customers with SEO and transitioned to selling software that helps website and business owners get the rankings they want. There’s a keyword research tool, a tool that shows where you rank compared to competitors–and why competitors outrank you–and a tracking tool to show your progress. It’s all cloud-based. And prices for all tools start at $19 a month.
But the biggest advantage as far as Whoosh’s customers are concerned is the company’s flexibility.
Alexander Jovicich, director of Search Engine Optimization at Gannett Inc., said his company had evaluated something like 200 tools before discovering Whoosh.
“We had been in the market for quite some time looking for a company to fulfill both audits and fulfillment for thousands of clients,” he said. “Whoosh was the only one flexible enough to accommodate our needs. It was really a joint development…a partnership role.”
Adsense Flippers, a company based in the Philippines, builds small niche websites using Google Adsense as the monetization tool. Cofounders Justin Cooke and Joe Magnotti agree that if there’s an issue or a change in the Google rules or Whoosh’s software, they can get straight answers right away.
“We like to work with companies that have real people behind them,” said Cooke. “We can email Erica and make feature requests, ask for bug tracking. It’s fun. We feel like we’re part of the experience.” With Whoosh he can track their more than 2,000 sites but still provide reports on a single site his company is thinking of selling. Whoosh provides reports and graphs along with a daily email.
Previously, the partners said, they dealt with a lot of lesser options.
“There are a lot of bad tools,” Magnotti said. “We’ve weeded through the good and the bad and there is a lot of bad….or they start out fine but if the company doesn’t continue to keep them updated and they break down. Whoosh is cloud based. We don’t have to worry about keeping it updated.”
This time, Douglass isn’t letting anything escape her notice. Especially finances. After starting the company in 2011, she and cofounder Parnell Springmeyer moved the business to from the Silicon Hills to the Silicon Valley. Basically, California business taxes were too high. Now the company, including developer Brian Bigelow and senior designer Brian Fryer, operate out of the Capital Factory.
She hasn’t said what number her current dream check has written on it.
Editor’s note: Interesting video interview with Erica Douglass on Women 2.0