CEO Scott Koerner hopes the aggressive use of social media will help turn around uBid.
Photo by: Erik UngerAngel investor Bob Geras paid $1.9 million for Itasca-based uBid.com in a foreclosure sale, wagering that the auction site's brand name and 6 million registered users can be worth far more.
Now he's enlisted a who's who of backers that spans Chicago's turn-of-the-century tech heyday and its current boom. They include Howard Tullman, who was a director of uBid during the late 1990s; John Walter, ex-CEO of R. R. Donnelley & Sons Co. and former Groupon Inc. board member, and Brian McCormack, a founder of InnerWorkings Inc., a Chicago online printing broker. Some have invested only time; others have invested money as well.
They're testing the idea that battered websites are a better bet than new ones as the Internet gets more crowded. The odds are long, even for a veteran turnaround investor such as Mr. Geras. Growth in e-auctions has peaked, and the space is dominated by eBay Inc., a $9.2-billion-a-year giant based in San Jose, Calif. These days, discounts such as daily deals are what excite consumers.
“There have been plenty of companies that have tried that (turnaround) strategy, and there have been a number of them that failed,” says R. J. Hottovy, an analyst at Chicago-based Morningstar Inc. “The auction business is very competitive.”
PEAKS AND VALLEYS
Founded in 1997, uBid has twice been a public company and has had six owners— including serial dot-com buyer CMGI Inc. of Delaware and Minnetonka, Minn.-based Petters Group Worldwide, whose founder was a convicted Ponzi schemer—and nearly as many CEOs and variations on its business plan. It enjoys the dubious distinction of having been both a penny stock and a shooting star with a market cap of more than $1 billion.
Mr. Geras, 74, got involved in uBid in 2007 and was its largest creditor when the company defaulted on its loans in 2010.
It might have been easier for Mr. Geras to cut his losses. Annual sales were headed below $16 million from a peak of $103 million in 2003. Since it was founded, uBid piled up more than $200 million in operating losses.
' The company is in the right place at the right time.'
But Mr. Geras doubled down, submitting the winning (and only) bid for uBid in a court- ordered auction in October. He then hired CEO Scott Koerner, a former merchandising executive at Boca Raton, Fla.-based Office Depot Inc. who had been working on a turnaround plan with uBid's previous management. — Bob Geras, president,
LaSalle Investments Inc.
LaSalle Investments Inc.
“It was a fairly easy decision for me,” says Mr. Geras, president of LaSalle Investments Inc., who declines to disclose his own investment. “I saw tremendous potential here. The company is in the right place at the right time. It's countercyclical. Everyone's looking for a bargain.”
UBid's core business is auctioning refurbished computers and other electronics that it buys from manufacturers such as Hewlett-Packard Co. and Sony Inc. Of uBid's 6-million subscriber base, more than half are men, with an average age of 45 to 55.
“We want to skew it younger,” says Mr. Koerner, who's betting that aggressive use of social media could quickly open the door to 25- to 35-year-olds who buy plenty of computer gear.
He says uBid is unique because sellers are companies, not consumers, and its auctions often feature multiple-item lots that attract a different type of buyer. That differentiates uBid from popular discount sites such as Overstock.com or Tiger Direct.
UBid will have to beef up marketing, and it's already spending to update the look and feel of the website itself, which is a technological patchwork pieced together over the years. But Mr. Koerner says the core business is solid, and financials already have shown improvement, though he declines to disclose them.
“It's a restart with a lot of assets in place people would be happy to have,” Mr. Tullman says. “Turning it around is no easy job for anyone. We're going to see whether uBid can re-envision itself in a new world of social media and reinvigorate users.”
Also on uBid's board: Chicago lawyer and investor Richard Doermer; Basil Falcone, a former vice-chairman of local pharmaceutical distributor General Drug Co., and Cars.com Senior Vice-president Alex Vetter.
© 2011 by Crain Communications Inc.