'Net Gain

When magazine sales guru Charlie Anderson, CEO of Anderson Media, asked Atlanta native Jay Clarke to leave his job in corporate banking at SunTrust to develop an Internet strategy for selling magazines, Clarke didn't hesitate. "The Anderson family is one of those families that have the Midas touch, and Charlie Anderson is one of those guys you want to be involved with," says Clarke, who is now president and CEO of the Franklin-based company Magazines.com. "So even if what we created wasn't successful, the opportunity to be mentored by Charlie Anderson was good enough for me."

Plus, Clarke says, the year was 1998. This relatively new phenomenon called the Internet was white hot, and ".com" spelled millionaire. Amazon had conquered books, Napster had briefly subdued music, and Priceline had conquered travel, but the magazine market was uncharted territory practically begging for a shot in cyberspace.

"We saw that there was an opportunity to build an online magazine newsstand that was robust, had a deep product offering and would allow consumers to discover and educate themselves on different magazine offerings," Clarke says.

So they did. In 1999, with Anderson Media as the primary investor (Time Inc. also became a significant investor in 2000), Clarke purchased the domain name magazines.com, which was owned by a Murfreesboro-based business that helped schools raise money through magazine subscriptions. In the summer of 2000, Clarke moved his family from Atlanta to Franklin. In 2001, the company turned a profit.

With the Internet as his primary channel to customers, Clarke has already built an extraordinary business right here in Middle Tennessee. And through technological innovation, he's constantly looking to improve the Magazines.com customer purchasing experience, and in turn, his bottom line.

Today, Magazines.com employs about 40 people (five of whom work in a publisher relations office in New Jersey). In addition to providing customers with a vehicle to subscribe to more than 1,500 magazine titles, the Web site also allows them to search for a particular title or discover new titles according to specific interests.

Although Clarke declined to reveal specific revenue data, Magazines.com must be doing something right—he says the company has grown at a compounded annual rate of more than 70% over the last seven years.

"We have huge gross margins, no accounts receivable, no inventory and we never touch the product," Clarke says.

In short, it's a commission-based business model that's a CEO's dream. When a customer subscribes to a magazine via the site (or Magazines.com's Franklin-based call center, which is responsible for about 10% of the company's revenue), magazines.com charges the customer's credit card and sends the subscriber's name and address to the specific magazine publisher, along with a remittance that averages about 30% of the sale, which means Magazines.com retains a whopping 70% of the purchase.

Clarke says that about 82% of Magazines.com customers purchase more than one subscription, while 27% have five or more subscriptions. Germain Boer, a professor at Vanderbilt's Owen Graduate School of Management whose expertise includes innovation and entrepreneurship, says there's no doubt Clarke is on to something.

"They've made it real easy for you to order all of your magazine subscriptions by aggregating everything you need into one place," Boer says. "They've also drastically reduced the search time for anybody looking for a magazine."

Yet, Clarke says only about 3% of the site's visitors make a purchase, so going forward, the key is to increase that conversion rate. And that's another area where the company is able to rely on good ol' technology to make it happen. Through an applications service provider called Offermatica, Magazines.com has developed a sophisticated testing platform that enables it to run multivariate tests on the site to collect real-time feedback assessing the impact that tweaks, such as color changes or the position of certain buttons, have on conversion.

"Every basis point that we can raise that 3% means millions of dollars each year in sales," Clarke says. Also along the lines of enhancing the site visitor experience, Clarke says Magazines.com is constantly working to improve the subscription manager function. He would ultimately like for the subscription manager to retrieve data such as the magazine expiration date from the publishing house. He also wants to add a "renew" and "change of address" button. (Currently, such functions are available by way of call center.)

And while a list of Magazines.com's online marketing group already reads like a "Who's Who" of e-commerce companies—with folks hailing from Amazon, Netflix and eBay—Clarke says he still needs marketing professionals with an e-commerce background. The company's second largest need is Open Source developers, and the third is call center customer care representatives.

But Clarke isn't concerned about attracting the necessary talent. One only has to ask the 37-year-old Atlanta native his Nashville sales pitch to see why.

"It reminds me of the Atlanta I grew up in," he says. "Nashville has the best of what Atlanta has to offer—night life, restaurants, family activity, quality of life—without drawbacks like traffic and crime."

The best thing to do, he says, is to let potential employees see for themselves. But Clarke's recruiting power goes well beyond the fact that his company is based in Middle Tennessee. His biggest selling point is a chance to be a part of a privately held entrepreneurial company that's growing by leaps and bounds. And one of his biggest challenges is maintaining that entrepreneurial spirit. "How do you continue to grow without becoming bureaucratic and gaining red tape," he ponders.

But he'll figure it out. After all, his success so far suggests that like his mentor, Clarke possesses a bit of that Midas touch.