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BizRate.com's Farhad Mohit sees himself at the forefront of an e-tailing revolution

The way BizRate.com co-founder Farhad Mohit sees it, there have been two revolutions in the world of e-tailing. To demonstrate, he jumps up, grabs a marker, and begins writing on the large paper tablet in his office. "V. 1.0: Amazon," he scrawls, referring in techie shorthand to what he thinks of as the first wave. Then he dashes off "V. 2.0: BizRate." Mohit's claim that the king of all e-tailers is outdated compared with BizRate is brazen, indeed. BizRate, after all, is a Web site that attracts a mere 4 million visitors a month with its consumer ratings on e-tailers. Amazon.com Inc. has five times as many customers.

But if there's one trait that has served 31-year-old Mohit well in the four years since he dreamed up BizRate, brazenness would have to be it. Dressed in his standard uniform of jeans and torn sweatshirt, with his long hair loosely tied in a bun, Mohit looks more like a firebrand '60s student radical than the chairman of a corporation. And he acts more like it, too. Mohit frequently climbs atop a cubicle divider to deliver rousing state-of-the-company addresses to BizRate's employees. He has passionate shouting matches with colleagues. And he e-mails his workers inspirational poems to rev them up. The company's slogan is right in character: "Don't get e-screwed."

Acting outrageous is no accident for Mohit. It's part of his master plan to persuade people that they should line up behind him. A self-described "convincing machine," he pounds his fist into his hand as he explains why he believes V. 2.0 is going to change e-commerce for the better. "There's a lot of confusion out there. Pets this, pets that," he says, referring to the slew of Web sites catering to pet owners. By surveying thousands of consumers about thousands of merchants and then publishing the results on its Web site, Los Angeles-based BizRate bills itself as a one-stop resource that helps online shoppers find the best e-tailers and helps the best e-tailers find more customers.

His sermon hasn't fallen on deaf ears. So far, Mohit has convinced more than 3,600 e-tailers to let him survey their customers. Last fall, the company became a shopping portal, providing links from its ratings directly to participating retailers, and taking a cut of sales made through the site. The site now ranks No. 2 behind Shop@AOL.com and ahead of the Yahoo! and the Microsoft Network (MSN) shopping sections in terms of monthly visitors, according to Media Metrix Inc. And he has pulled in $77 million in venture funding. Now he's contemplating V. 3.0: BizRate, the public company. He hopes to launch an initial public offering later in the year. In this climate of skepticism, convincing Wall Street that BizRate is here for the long haul may be the ultimate test of Mohit's persuasive powers.

BizRate's strategy shows promise--but it still has plenty to prove. The company, which is not yet profitable, is on track to pull in revenues of an estimated $10 million this year--more than double last year's take. It has a well-established competitor in Gomez Advisors Inc., which is about the same scope, though it doesn't survey consumers right on the shopping sites. And with the e-tailing shakeout in full swing, some critics wonder if there will be a need for BizRate when there are fewer e-tailers. "BizRate is highly dependent on consumer confusion," says analyst David Cooperstein of market researcher Forrester Research Inc. "As retailers fall out, and consumers become comfortable shopping online, they'll just go back to the retailers they like. That's where the BizRate model starts to fall apart."

Mohit has never been one to back down from a challenge. He came up with the idea for BizRate as a Wharton MBA student in 1995. An avid learner with a voracious appetite for everything from economics to English literature, Mohit left a two-year job as a systems consultant at Andersen Consulting with the dream of working in academia. "I wanted to get a business degree, then a law degree, then a PhD, then teach," he says laughing. That changed the day his friend and classmate Henri Asseily introduced Mohit to the Internet. Mohit became obsessed with one thought: How will this affect business? "Suddenly there was a way for all the world's vendors to compete," he says. What was missing, he realized, was a place for consumers to go to figure out which e-shops they could trust.

Mohit thought he had the answer: BizRate. He laid it out in an 80-page business plan for one of his courses. Then he recruited classmate Asseily and a marketing professor, Dave Reibstein, to help establish BizRate in the summer of 1996. With about $260,000 in funding from friends, family, and Reibstein, Mohit and Asseily set up shop in the Los Angeles home of Mohit's parents, a homemaker and gynecologist. They spent the next two years developing the site and trying to get venture capital funding. In April, 1998, they finally secured $4.5 million in financing from San Diego-based Mission Ventures. Says Mission partner Robert Kibble: "Farhad had this tremendous energy and intensity for his vision. I was instantly excited."

So were the e-tailers. After merchants sign on, BizRate polls each of its customers with a multiple-choice survey that pops up after a purchase has been made. Customers rate factors such as product selection, Web-site performance, and shipping. The results are tabulated on the BizRate site, where consumers can search for a product by keyword and instantly get a list of who is selling it and how the vendor ranks on a five-star scale. BizRate logs more than 100 calls a week from merchants eager to put themselves at the mercy of their customers on the chance they'll earn the designation "BizRate Customer Certified." "We received a four-and-a-half-star rating. We think of that as a stamp of customer approval," says John Herr, vice-president of sales for BizRate client buy.com, which sells electronics, books, and music.

How does BizRate make money? Today more than half of the company's revenues come from commissions. It takes between 1% and 20% of any sale that's made when a customer clicks from BizRate to a retailer's site. It sells monthly customer-feedback reports to merchants for $20,000 a year. So far, about 200 have subscribed. BizRate also licenses its data to magazines as well as to other research sites like Consumer Reports Online. BizRate also has a large cushion of capital. Sources estimate that the last financing round gave the company a valuation of $500 million.No frills. You wouldn't know it from the looks of the place. BizRate is housed in a 24,000-square-foot converted warehouse on a non-descript corner in Marina del Rey. Mohit works in an office that's barely larger than a cubicle, with a no-frills desk, a view of the parking lot, and noise from the construction crews building more offices to house the company's 178 employees.

The digs reflect Mohit's casual style. His house in Beverly Hills is similarly spartan, in spite of the swank address. There's no furniture in the living room. He's single and spends much of his spare time hanging out with friends. "He hasn't changed because of success," says his uncle, Behzad Mohit, a molecular biologist in San Francisco. "He still lives like a student."

That style doesn't always sit well with his investors. Kibble remembers one meeting in San Francisco when Mohit showed up "dressed like a painter but without the blotches," he says. "I told him if he's going to be meeting influential people, he's got to look smarter." Once Mohit picked up a venture capitalist at the airport in his beat-up 1987 Volkswagen GTI. "It had been broken into, driven across the country twice, frozen over," Mohit says. "He was like, `Farhad, this car is absurd. Please get a new one."' He ditched the GTI for an Acura, which he promptly crashed. Now he's got a BMW. Mohit likes to party--maybe too much. He's fighting a drunk driving charge, which he refuses to comment on, but he swears he's sober on the job. Confirms Kibble: "In his business dealings, he's a very responsible guy."

Still, Mohit scoffs at advisers who beg him to settle down. He won't wear a suit and tie--even for an important meeting. "Andre Agassi says image is everything," Mohit says. "I'd like to slap him and tell him image is nothing."

Mohit developed his fierce independent streak as a child. Born in Tehran in 1969, he left Iran with his family in 1978, just before the revolution. They drifted, living in France and England before moving to Marin County, Calif., in 1981, then to Los Angeles in 1984. The hardest part, he says, was surviving junior high in America. "It was the middle of the hostage crisis, and there I am, an Iranian kid with an English accent in eighth grade, of all places." Some of his classmates made fun of him. Recalls Behzad Mohit, "He was very small, he had a funny haircut, and he wasn't taken seriously. But he had a pretty strong ego. His reaction wasn't to withdraw into his shell."

Instead, Mohit vowed to revel in his individuality. "I met a lot of different kinds of people, and the ones I liked most were just themselves," he says. At Wharton, Mohit's lack of conformity made him somewhat of a celebrity. He wrote a satirical column for the Wharton Journal called "Ask Farhad," in which he poked fun at classmates stressing over such MBA rituals as on-campus interviews with famous companies. He wasn't afraid to speak his mind in class either, recalls marketing instructor Reibstein. "While the other kids would just write down what I said in case it was going to be on the exam, he would question me." Mohit questions almost everything. Co-founder Asseily says he debated constantly with Mohit, sometimes until 2 a.m. "We'd be arguing about the color of the logo," he says. "Farhad cares enormously about the smallest of details."

He's persistent, too. Early this year, while in the throes of securing his third round of venture capital, Mohit picked up a copy of Net Worth, by former McKinsey & Co. partner John Hagel. The book sings the praises of Internet "infomediaries," companies designed to guide consumers through the confusing array of services on the Web. Feeling the book validated BizRate's model, Mohit called Hagel's office, hoping to flesh out some of his ideas. Hagel didn't call back. So Mohit wrote a glowing review of Net Worth on Amazon.com and then e-mailed Hagel. "I said, `Go read my review. You owe me a call,"' Mohit says. That caught the attention of Hagel, who is now one of Mohit's advisers. "No one has established this level of credibility and depth of adoption among vendors," Hagel says.

Yet Mohit remains acutely aware of his shortcomings. Six months after Mission Ventures funded BizRate in April, 1998, Mohit asked his board to bring in more experienced management. "I'm good at strategizing, evangelizing, negotiating. But I don't have the foggiest idea how to manage people," Mohit admits. Kibble convinced Mohit to hold out a little longer. "At that early stage we needed someone with fire in their belly who was willing to walk through walls," Kibble says. Six months later, Mohit asked again for a new CEO, and the board relented. In December, it hired Chuck Davis, the former president of e-commerce for Walt Disney Co.'s portal Go.com.

It was a good move. Davis, a 39-year-old who coaches his two kids' soccer teams in his spare time and dresses conservatively, is like Felix Unger to Mohit's Oscar Madison. Still, says Davis, "We're complementary. Farhad loves the debate, but because I've been out there and I know what the consumer wants, I'm able to bring him down to earth."

Now they've got to take their act to Wall Street. If the company files for an IPO later this year, Davis and Mohit are likely to butt heads with financial types seeking to poke holes in BizRate's basic premise that customers will always need someone to guide them to the best e-tailers. Analysts like Forrester's Cooperstein believe that, down the road, BizRate may become unnecessary as the Web becomes just another mall where shoppers keep going back to their favorite stores. Mohit isn't concerned. "We're still adding 400 merchants a month, and we're seeing more bricks-and-mortars going online, which adds to the flow of business," he says.

What's more, he's doing everything he can to make sure shoppers stop at BizRate rather than going straight to Amazon. The site has been redesigned to be more consumer-friendly, with features such as rebates from merchants on products bought through BizRate. In April, the company acquired eBoodle, whose software makes shopping easier, including saving consumers the step of typing in their personal information each time they buy from a shopping site. "I'm very excited about it," raves Mohit. "The more consumers that come in, the more BizRate becomes a perfect marketplace." Now he has to convince a very skeptical crowd--the money managers on Wall Street--or there will be no V. 3.0.e.biz online

For BizRate's tips on how e-tailers can survive the 2000 holiday season go to ebiz.businessweek.comBy Arlene WeintraubReturn to top


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