ICQ – A Turnaround Story

A Turnaround StoryTurning a Killer Application into a Growing and Profitable Business

Orey GilliamFormer Head of AOL Messaging and CEO of ICQ

ICQ – A Turnaround Story

The Good and the Bad – End of 2003

Good• Extremely strong brand

• Considerable community in several territories

• Desktop presence – unique value

• History of innovation – the IM pioneers

• Superior product skills and knowledge of the space

• Strong commitment of the organization to the brand and the company• Despite a very rough year

Bad• No active distribution

• Declining user base

• Number 4 out of the four largest global players• Fierce competition from MSN, Yahoo!

and AIM

• American product – translated but not localized

• Very constraining budget

• No ad sales force – the major revenue generator

• No local presence

2

ICQ – A Turnaround Story

The Strategy – Think Global but Act Local

• Viral distribution works much better with the leaders and with little competition• Must have local distribution

• A translated product is not a localized one• Need a localized product with local content

and services

• Cannot close global advertising deals• Advertising sales efforts are territory-based

• Relationship with the Mobile carriers may be global• Yet each local carrier has its own deal

3

Need to have local business presence in each of the target territories

ICQ – A Turnaround Story

Strategy Implementation

Give• Co-branded ICQ client• Access to ICQ community

in the territory• Desktop presence• Share revenue generated

through ICQ properties

Get• Distribution via website• Marketing via online and

offline properties• Local content and services• Access to local Mobile

carriers• Local sales force to sell

ICQ’s ad inventory

4

Form strategic partnerships with leading Media and Communication companies in

strong ICQ territories

ICQ – A Turnaround Story

Implementation Challenges – Partners

• New deal type• Needed to bring together various parts of the organization• Low anticipated initial revenue

• Little attention from the partner’s CEO

• Had already been thinking about Instant Messaging and decided not to go there

• Will ICQ beat the competition?

• IM is one of three basic services with Content and e-mail• MSN and Yahoo! had all three• Partner was usually bigger but MSN and Yahoo! were catching

up• Had to move the “battlefield” from IM vs. IM to Portal vs.

Portal

• 9 – 12 months from lead to contract!

5

ICQ – A Turnaround Story

Implementation Challenges – Organization

• “Already tried it…”• The partners were not excited

• ICQ had to bend backwards to get the deals done

• Product and technology focus shifted to localization and customization

• Considerable development effort to create a “cookie cutter” operation

• “Less innovation” for the end user• More complex version management

• Less attentive partners generated animosity and frustration• Most of the work usually was after the deal was signed

• Major Partner Relations efforts

• Focus on territories• Territory managers responsible for revenue, users and usage

numbers

6

ICQ – A Turnaround Story

Execution

7

ICQ – A Turnaround Story

Results – Users 1/

Jun/

98

1/De

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1/De

c/08

-

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

40,000,000

45,000,000

8

Q1/01: 23.5MMHistorical record

ICQ – A Turnaround Story

Results – Users 1/

Jun/

98

1/De

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1/Ju

n/06

1/De

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n/08

1/De

c/08

-

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

40,000,000

45,000,000

9

2003: 18.5MM

ICQ – A Turnaround Story

Results – Users 1/

Jun/

98

1/De

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n/99

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n/00

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n/06

1/De

c/06

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1/De

c/07

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n/08

1/De

c/08

-

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

40,000,000

45,000,000

10

Q3/05: < 15MM

ICQ – A Turnaround Story

Results – Users 1/

Jun/

98

1/De

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1/Ju

n/06

1/De

c/06

1/Ju

n/07

1/De

c/07

1/Ju

n/08

1/De

c/08

-

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

40,000,000

45,000,000

11

2005: 16.5MMThe first year of growth since 2000

ICQ – A Turnaround Story

Results – Users 1/

Jun/

98

1/De

c/98

1/Ju

n/99

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n/00

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n/06

1/De

c/06

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1/De

c/07

1/Ju

n/08

1/De

c/08

-

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

40,000,000

45,000,000

12

2006: 23MM

ICQ – A Turnaround Story

Results – Users 1/

Jun/

98

1/De

c/98

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n/99

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n/00

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1/Ju

n/06

1/De

c/06

1/Ju

n/07

1/De

c/07

1/Ju

n/08

1/De

c/08

-

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

40,000,000

45,000,000

13

2007: 29MM

ICQ – A Turnaround Story

Results - Users1/

Jun/

98

1/De

c/98

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n/99

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n/00

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1/De

c/06

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1/De

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1/De

c/08

-

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

40,000,000

45,000,000

14

2008: 36MM

ICQ – A Turnaround Story

Results – Users 1/

Jun/

98

1/De

c/98

1/Ju

n/99

1/De

c/99

1/Ju

n/00

1/De

c/00

1/Ju

n/01

1/De

c/01

1/Ju

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1/De

c/02

1/Ju

n/03

1/De

c/03

1/Ju

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1/De

c/04

1/Ju

n/05

1/De

c/05

1/Ju

n/06

1/De

c/06

1/Ju

n/07

1/De

c/07

1/Ju

n/08

1/De

c/08

-

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

40,000,000

45,000,000

15

Q1/09: 41MM

ICQ – A Turnaround Story

Results – Revenue Growth (2003 – 2008)

2003 2004 2005 2006 2007 2008$0

$5,000,000

$10,000,000

$15,000,000

$20,000,000

$25,000,000

$30,000,000

$35,000,000

$40,000,000

$45,000,000

ICQ Direct Revenue

16

ICQ – A Turnaround Story

Strategy vs. On-Going Proceedings

• Several business ideas had been attempted

• The executed strategy was the combination of some of them

• The strategy was continuously adjusted as market conditions became apparent through successes and failures

• Organization had to change to support the strategy

• It wasn’t always about what was done – it was often about what was no longer done• Major challenge with a mature company

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