The Knot, Inc.

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The Knot, Inc.

462 Broadway, 6th Floor
New York, New York 10013
U.S.A.
Telephone: (212) 219-8555
Toll Free: (877) 843-5668
Fax: (212) 219-1929
Web site: http://www.theknot.com

Public Company
Incorporated: 1996
Employees: 235
Sales: $41.40 million (2004)
Stock Exchanges: NASDAQ
Ticker Symbol: KNOT
NAIC: 516110 Internet Publishing and Broadcasting; 511120 Periodical Publishers; 511130 Book Publishers

The Knot, Inc., is one of America's leading sources of information and products for couples planning a wedding. The firm operates a web site, theknot.com, which offers informative articles, chat rooms, and personal wedding web pages, plus an online gift registry with more than 15,000 items from the likes of Target, Michael C. Fina, Linens 'n Things, and Fortunoff. The company also owns related web sites, including thenest.com, which caters to newly married couples; promspot.com, for teens; and greatgirl friends.com and greatboyfriends.com, which are subscription-based online dating services. Other Knot offerings include the nationally distributed The Knot Weddings magazine, regional wedding planning magazines that appear in 23 markets, and book series published by Broadway Books and Chronicle Books. Co-founder and executive editor Carley Roney has become a well-known wedding expert, with frequent television appearances and a syndicated wedding advice column.

Beginnings

The Knot was founded in 1996 by Carley Roney, David Liu, Rob Fassino, and Michael Wolfson, who had met while attending New York University's school of Film and Television in the late 1980s. Roney and Liu married in 1993, and the problems they experienced organizing the event left them wishing for a more up-to-date and practical planning guide than they had been able to find.

At this time the World Wide Web was gaining popularity for its ability to house large amounts of data that could easily be manipulated and updated, and made available around the clock. Sensing an opportunity, the friends decided to form a company to develop online content to help couples through the wedding planning process, which typically involved months of planning, hundreds of details, (tens-of) thousands of dollars in expense, and many potential pitfalls. Naming their new venture The Knot (after "tying the knot," an informal expression for marriage), they set about developing a guide to the wedding planning process that would be modern, practical, and stylish, with a dash of urban flair. The potential market was sizable, with some 2.3 million couples married each year in the United States, and the total wedding industry generating an estimated $35 billion in revenues. The four partners had experience in a variety of media endeavors, with Roney and Liu having recently headed a firm called RunTime, Inc., which worked on projects for many well-known clients.

In June 1996 they successfully pitched their idea to America Online (AOL), which agreed to put up funding. In September wedding content developed by The Knot appeared on AOL exclusively for its members. The offerings included articles on wedding planning, cost-saving tips, information about necessities like gowns and photographers, and "chat rooms" where brides-to-be could compare notes. Though primarily intended for women (who traditionally did the bulk of wedding planning), there was also information for grooms-to-be about things such as buying a ring and how to tie a bow tie. After their new company was incorporated, Liu took the titles of chairman and CEO and Roney was designated editor-in-chief.

In July 1997 The Knot launched a standalone web site, theknot.com, and the following April Hummer Winblad Venture Partners invested several million dollars in the company to fund further growth. By now, less than a year after its launch, the firm's site was attracting 250,000 unique users per month, with 300 registering to join the online community each day. The site had grown to feature an extensive database of products and services, including photos of more than 8,000 gowns and a list of wedding photographers searchable by area code and price, as well as honeymoon travel package auctions, more than 3,000 articles on wedding topics, 32 different editorial features that were frequently updated, and chat rooms. The free site was supported by advertisers like Lenox China, Wamsutta, Kodak, and Godiva Chocolatiers, though it was still operating in the red.

In June 1998 theknot.com was rated the best wedding site online by Yahoo! Internet Life, and in November the firm launched an online gift registry, which partnered with numerous retailers to allow couples to pre-select gifts. Items they chose could then be purchased by wedding guests online, with The Knot taking a cut. Revenues for 1998 were $1 million, but the firm recorded a loss of $1.5 million.

In January 1999 the first in a series of three Knot books was published by Random House imprint Broadway Books. The Knot Complete Guide to Weddings in the Real World offered practical advice for brides-to-be on all aspects of the wedding day. The book helped boost the web site's traffic, and during the month the firm recorded visits by more than 900,000 unique users, with 1,000 new members joining per day.

In April 1999 cable shopping channel QVC invested $15 million in The Knot, which made it the company's single largest stakeholder. The deal would quadruple the size of the online gift registry to more than 10,000 products, and the two companies would begin to cross-promote each other's offerings. In the summer The Knot also acquired online wedding products supplier Bridalink.com and online travel planner Click Trips, and signed marketing alliances with the likes of jewelry retailer Mondera.com and NextCard Internet Visa.

Initial Public Offering in December 1999

Internet-based businesses were now gaining the rapt attention of Wall Street, and in December 1999 the firm went public on the NASDAQ with a 3.5-million-share offering that raised $35 million. Major stakeholders continued to be QVC, with 36.4 percent of the firm, Hummer Winblad, with 18.3 percent, and AOL, with8.1 percent. Each of the four original founders owned 5 percent, with the company's 100 employees also given stakes. The Knot recorded revenues of $5.1 million and losses of $9.2 million for the year. Theknot.com now had 500,000 members.

In February 2000 the company bought Weddingpages, Inc. for $8.5 million. The latter firm published quarterly regional wedding magazines in 50 markets, which would be re-branded to incorporate The Knot name. A new annual publication, Wedding Gowns, also was launched by the company. The 400-page magazine showed photographs of 1,400 dresses, with minimal editorial content or advertising.

The spring of 2000 saw The Knot form a joint venture with retailer H. Stern, called The Knot Brazil, which would operate a Portuguese-language Knot site. Stern, which owned a chain of 175 luxury goods and jewelry stores in 15 countries, would be half-owner of the operation, which was seen as a first step toward becoming the leading online wedding resource worldwide.

In April the firm launched a wedding planning web site for the New York metropolitan area, the first in a series for regional markets around the United States. The Knot also began sending new members a free information-packed three-ring binder to use as a wedding planning organizer, which included discreet advertisements like a ring size gauge from Mondera and a budget workbook from MBNA. Although the company's demographic was overwhelmingly female, in the spring of 2000 an alliance was formed with Playboy.com to offer that firm's bachelor party planning content on theknot.com.

In June 2000 NBC-TV's Today Show began running a ten-part series called "Today Ties the Knot," in which a couple's wedding was planned with input from the show's viewers. Boosted by the heightened visibility, in August the company's web site recorded its one millionth registered user.

In the fall The Knot announced marketing partnerships with Linens 'n Things and Fortunoff, and relaunched honeymoon travel planning web site clicktrips.com, which had been purchased the previous year. In November the company was named the premier wedding content provider for MSN, and also signed a deal with Chronicle Books for two books that would focus on wedding gowns and flowers.

The year 2001 saw partnerships formed with a variety of additional firms, including Barnes & Noble, Lifetime Television, Sunbeam Corp., and Yahoo! Shopping, but the company also was beginning to experience problems on several fronts. One was a revolt by most of the regional franchisors of its Weddingpages magazines, who sought a legal injunction against a ban on their use of the Knot name, which was later resolved through mediation. Another was the company's stock price, which, like that of many dot.coms, had taken a tumble. In August it was de-listed from the NASDAQ and moved to the over-the-counter market. New web site members continued to be added, however, and late summer saw the two millionth registration on theknot.com. For fiscal 2001, the firm recorded sales of $24.1 million and a loss of $15.8 million.

Company Perspectives:

The Knot has quickly become America's leading wedding brand reaching out to millions of engaged couples each year through our award-winning website, books, magazines, and broadcast offerings. Our trademark fresh voice and real-world sensibility, down-to-earth editorials, easy-to-use tools, and convenient, comprehensive gift registry and wedding supplies store keep America's brides and grooms coming back time and again.

May Department Stores Co. Buying a Stake in 2002

In February 2002 The May Department Stores Company invested $5 million in the firm, securing a 19.5 percent ownership stake. May operated 439 department stores under names like Hecht's, Strawbridge's, Famous-Barr, and Filene's, as well as 150 David's Bridal stores, and the two firms began to cross-promote each others' products and services.

August 2002 saw theknot.com reach three million registered users. The average member stayed active for 12 months, so this cumulative total included a number who were no longer using the site. In September the firm's national magazine, The Knot Weddings, was distributed to newsstands nationwide. For the year, revenues increased to $29.5 million, while losses fell to $5.1 million.

In January 2003 the Oxygen cable network aired Real Weddings from The Knot, a six-part reality television series hosted by Carley Roney that showed couples' actual weddings. In February the firm extended its content provider relationships with AOL and MSN, and in April The Knot partnered with ABC-TV's The View for a four-week series showcasing the "fantasy weddings" of the series' four hosts.

The spring of 2003 saw the launch of promspot.com, a Knot knockoff that was targeted at high schoolers preparing to attend a prom dance, and the formation of a strategic alliance with Evite.com, an online invitation service. In September, Carley Roney signed with Scripps Howard to write a weekly advice column that would be syndicated to 70 newspapers around the United States.

In November The Knot, which had recently begun operating in the black, sold 2.8 million new shares of stock to institutional investors for $3.75 each. Revenues for 2003 hit $36.7 million, and earnings amounted to $1.1 million. By year's end the stock price had returned to the $5 range, 20 times the figure of several years earlier, though still half of the offering price in December 1999.

In January 2004, another season of Real Weddings from The Knot aired on the Oxygen network. The firm was now also working on developing video content for Comcast.net's Relationships Channel, which would incorporate elements of theknot.com for Comcast cable Internet subscribers. In June, the firm's regional weddings magazines were relaunched. Now serving only about 25 U.S. markets, they featured advice from Carley Roney, photo-stories on weddings in each area, and a directory of hundreds of local wedding-related vendors and service providers. Revenues for 2004 continued to grow, at $41.4 million, with earnings inching upward to $1.3 million.

In January 2005 The Knot acquired GreatBoyfriends LLC, which operated two subscription-based dating web sites, greatboyfriends.com and greatgirlfriends.com, which the firm would later overhaul and relaunch. The Knot had also recently created a site called thenest.com, which targeted newly married couples.

In February, the syndicated game show Who Wants To Be a Millionaire did a Knot-themed week of programs in which engaged couples tried to win money to spend on their weddings. March saw the firm's stock re-listed on the NASDAQ and in April, a major new partnership was announced with retailer Target, whose gift registry was the largest in the world. The Club Wedd registry would be featured prominently on theknot.com, while Target's own registry site would incorporate Knot content. A similar deal had been signed several months earlier with china, crystal, and jewelry retailer Michael C. Fina.

The month of April also saw rival WeddingChannel.com file suit against The Knot, alleging patent infringement. The firm vowed a vigorous defense. In May a compact disc was released by Sony Classical called The Knot Collection of Ceremony & Wedding Music, which was designed to assist brides in choosing music for their weddings.

By the summer of 2005 theknot.com had firmly established itself as the most popular wedding web site on the Internet. It boasted more than one million active members, with a total of2.1 million unique visitors each month. The average user viewed the site nine times monthly, and spent 20 minutes per visit. The firm claimed a "click-through" rate of 15 percent on the site's banner ads, compared with 0.1 percent for the Internet as a whole. Users of theknot.com were 85 percent female and had an annual household income of more than $60,000.

Approximately half of the company's revenues were now derived from advertising, with about a quarter each coming from merchandise sales and publishing. Most of the firm's content was created at its headquarters in New York, but it also operated a technical facility in Austin, Texas, and an order-fulfillment center in Redding, California.

In less than a decade The Knot, Inc. had become one of the best-known brands in the now $70 billion U.S. wedding industry, with its flagship web site boasting more than one million active members. The firm had built up a portfolio that extended to books, magazines, television programs, a newspaper advice column, and spin-off web sites, and it looked toward future growth as the wedding planning industry continued to migrate online.

Principal Subsidiaries

Weddingpages, Inc.; Click Trips, Inc.

Key Dates:

1996:: The Knot, Inc. is founded and begins supplying wedding content to AOL.
1997:: The company launches theknot.com web site.
1998:: Hummer Winblad buys a stake in the firm; an online gift registry is introduced.
1999:: QVC invests $15 million in the firm; Bridalink and Click Trips are acquired.
1999:: An initial public offering raises $35 million.
2000:: The firm acquires magazine publisher Weddingpages, Inc. for $8.5 million.
2002:: May Department Stores invests $5 million in the company.
2004:: Thenest.com web site is launched; a partnership with Michael C. Fina is formed.
2005:: The GreatBoyfriends LLC online dating firm is bought; online videos are added; a partnership with Target's Club Wedd gift registry is formed.

Principal Competitors

WeddingChannel.com, Inc.; Conde Nast Publications, Inc.; Fairchild Publications, Inc.; iVillage Inc.; Martha Stewart Living Omnimedia, Inc.; Amazon.com, Inc.; Yahoo! Inc.