Ivillage

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IVILLAGE

iVillage was the first site on the Web devoted to the concerns and interests of women in the prime of their lives. But during the first six years of its existence, iVillage also came to epitomize the quicksilver nature of the Internet economy. By late 2001, the firm had experienced the entire dot.com boom-and-bust cycle. It launched one of the most wildly successful public stock offering in history, swallowed its main competitor, and was recognized as the leading site for women 18 and older on the World Wide Web. But after the dot.com crash of late 2000, it was teetering on the edge of bankruptcy.

Besides the Web site iVillage.com, the iVillage media organization included Business Women's Network, Lamaze Publishing, The Newborn Channel, Astrology.com, and iVillage Solutions. The Web site offered members email, message boards, chat rooms and access to some twenty content areas, including Astrology, Babies, Beauty, Books, Diet & Fitness, Entertainment, Food, Games, Health, Home & Garden, Lamaze, Money, News & Issues, Parenting, Pets, Pregnancy, Relationships, Relaxation, and Work.

With well over one million registered members, and nearly seven million unique visitors in 2000, iVillage was well-positioned to deliver an audience—and advertisers appreciated it; by 2001 more than 90 percent of iVillage's revenues were derived from advertising and sponsorship deals. Nonetheless, more than six years after its founding, the company's future remained a question mark. The firm had not enjoyed a single profitable year in its entire existence, though it promised its investors to show a profit in fall 2001. From 1995 until 2001, it flitted through a series of business concepts and problems retaining employees. The departure—resignation or dismissal—of iVillage's visionary founder in early 2001 only put the company's ultimate survival more deeply in doubt.

Candice Carpenter conceived of iVillage in 1995. A graduate of Stanford and Harvard, Carpenter was hired as a consultant by the fledgling America Online (AOL). She knew next to nothing about computers or the developing Web culture, but she was immediately impressed by the various online communities she found lurking under the surface at AOL: a community for gays, one for pet-owners, another for quilters, and so on. Carpenter's insight was that such communities would be a determining factor for the Internet's future; her genius was to take that realization and create a business brand around it.

With New York media veterans Nancy Evans and Robert Levitan, Carpenter sketched out her ideas about Web community. In September 1995 they planned out three online comunities centered on health, family, and careers. They took the name iVillage because "i" as in "Internet" was the online prefix of choice at the time. iVillage's first incarnation was not aimed at women surfers in particular. However, it was soon apparent that Carpetner, Evans, and Levitan had found the bait to lure an elusive audience—women in the prime of their lives made up about 80 percent of iVillage traffic. AOL was interested in those numbers; so were the Tribune Company and Kleiner, Perkins, a venture capital firm. All put up money for iVillage. AOL's backing represented its first investment in an independent company.

Parent Soup, iVillage's first interactive community, went online on AOL in January 1996. The site's content included articles and polls on a broad spectrum of parenting topics, as well as chat rooms where parents could exchange advice or consult experts. At the same time, the company began forging deals with product manufacturers, like KidSoft, a maker of software for parents and children. Products were featured on the Web site and could be purchased at iVillage's Parent Soup General Store. A second community, At Work, devoted to career and work issues, debuted later in 1996, followed by Better Health & Medical, and a general community for women, Life Soup. Life Soup was designed as a site where women could exchange ideas on a broad range of interesting topics, including finance, fitness, food, sex, and relationships.

By fall 1997 iVillage boasted an average of 51 million page views per month. It represented, according to iVillage, a bloc of women more than twice as big as any other on the Web. With experts at the time predicting that 34 million women were about to begin using the Web, iVillage's prospects looked bright indeed. Soon it was attracting established advertisers, such as Polaroid, Compaq Computer, and Astra-Merck. Other companies wanted to partner with iVillage. In May 1998 it was the beneficiary of a $32.5 million infusion from one group of companies. AT&T partnered with iVillage in November 1998 to launch an Internet service provider targeted specifically at women. Shortly thereafter, NBC was given a stake in iVillage in return for promotion on its regular and cable networks. By the end of 1998, iVillage had 14 channels online, one million registered users, and was reporting nearly three million visitors every month. It was by far the most popular site for women on the Internet and the stage was set for one of the most spectacular stock offerings in modern financial history.

Nonetheless, there were skeptics when iVillage announced in March 1999 that it would go public. Some said the company was not well known enough to generate interest among investors; others said its business was not sufficiently rooted in the "real world," of the traditional economy; that is, it was seen as too heavily tied to the virtual New Economy. At first shares were to be offered for about $13 a piece. Then, just before the offering, iVillage's underwriter upped the price to $23. That would have given the company a market value of about $556 million. Against most expectations, though, the stock opened at a blockbusting $95.875 a share. At the end of the first day of trading, iVillage was worth over $2 billion and its share price would continue to climb, eventually topping off at $130 a share.

It was a bubble waiting to burst. By mid-1999 the company had yet to earn a penny of profit. By design or default, iVillage had begun shifting its focus away from its original business plan. No longer was it a pure community—nearly 30 percent of its revenue was coming from e-commerce, mainly its online shops. On other fronts, it was sued by ex-employees who charged, among other things, that they had been bilked out of promised stock options. Worst of all, from an investor's point of view, was the fact that iVillage was still hemorrhaging cash. It lost $86.7 million in the first nine months of 1999 alone. By the end of the year, iVillage's share price had plunged to $9.50.

In April 2000, in an attempt to stabilize the company's fortunes, Doug McCormick, a member of the iVillage board, was named president. Three months later McCormick replaced founder Candice Carpenter as CEO. Shortly after, Carpenter resigned her board position—or was pushed out—and left iVillage altogether. Various reasons were put forward for Carpenter's surprising and rapid departure. Some blamed her abrasive management style, which some said was responsible for the high turnover among iVillage staff. iVillage's five CFOs in just four years time, coupled with charges that Carpenter fired one CFO after she had questioned Carpenter about irregularities in the company's books, gave rise to questions about Carpenter's handling of company finances. The most important factor, however, was undoubtedly iVillage's poor showing on Wall Street, a downturn Carpenter was unable to turn around. By spring 2001 the firm's shares were hovering around the $1 mark and were threatened with delisting by NASDAQ.

McCormick's appointment raised questions of its own, most prominently about the wisdom of installing a man as the head and public face of a Web site aimed at women. However, McCormick made changes right away. He signaled a move away from e-commerce by selling off iBaby, iVillage's online baby shop. In early 2001, he oversaw iVillage's purchase of its main competitor, Women.com, for $25 million in cash. Publicly it was referred as a merger because the Hearst Corporation, Women.com 's primary shareholder, made a $20 million investment in iVillage. The move created a mega-women's site and made iVillage the default choice of advertisers looking to reach women through the Web. As of fall 2001, iVillage had still not had a single profitable quarter.