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Filter company slashed staff, tightened belt to stay in the game

Integrity Online bouncing back from dot-com bombs

With the current unfavorable economic climate, businesses in all sectors of the economy have had to work hard to trim expenses and maximize profits — and no companies have had more of their share of troubles than the dot-coms throughout the nation.

But one company in Mississippi offers not only an example of how Internet-related companies grew and prospered in the 1990s but a primer for other struggling dot-coms on doing what has to be done to stay in business — refocus your strategy, cut costs and persevere with what works for your company.

According to Skip Matthews, president of ISP filter Integrity Online, the company’s eventual location in Jackson began with the opening of a Mississippi franchise of Integrity Online in 1998. The original company, founded in 1996 by a pastor in Oregon, was among the first to block unwanted material coming over the Internet at the server level — as opposed to software such as Guard Dog and NetNanny, which were installed on individual computers.

In the business, Integrity Online is referred to as a list-based filter, keeping an extensive database of banned sites, sorted into broad categories such as adults-only sites, hate/discrimination materials, pornography sites, sites promoting illegal activity, school cheating sites and downloads of material with graphic nudity or violence, among other categories. After such sites are identified with the computerized sorting service, a review team checks to see whether the sites do actually contain objectionable material.

“As we continued to grow in Mississippi, we began to buy a controlling interest in the franchiser,” said Matthews, who grew up in Jackson and made his career in high-tech fields, first with IBM and later with a CellularOne franchise in Kansas. By late 1999, the Jackson business was the largest Integrity Online franchise in the nation — and the former franchisee completed the buyout in 2000, moving the corporate offices to Lakeland Drive with Matthews as president and Stacy Davidson as chairman of the board.

In 2000, the company had 150 employees, call centers in Jackson and Los Angeles, and a technical operations center in Seattle.

But then the “dot-bomb” economy exploded and took Integrity Online with

it.

Capital markets dried up. Matthews and Davidson had plans to acquire the franchise areas — but found the money supply for expansion had disappeared.

Matthews says the economy forced Integrity Online to move from an “acquisition mode” to a “making-a-profit mode.” Jobs were slashed throughout the company, all offices besides the Jackson location were closed and belt-tightening was the new name of the game.

Rick Schatz, president and CEO of the Cincinnati-based National Coalition for the Protection of Children and Families, said Internet filters face a tough marketplace, whether they perform full-service ISP functions as does Integrity Online or a simpler monitoring service such as used by many companies to keep up with employee Internet usage.

“They’re both very tough businesses,” said Schatz, whose organization keeps ratings on Internet filters online at Filterreview.com.

While Schatz acknowledges that the Filterreview.com list is far from complete, the organization has reviews on 71 different Internet filters, including Integrity Online. “Seventy-one represents a very large sample and certainly represent some of the largest and best filters available,” said Schatz.

Schatz cites research indicating that between 12-20% of connected households use Internet filtering — leaving a lot of growth in the market for companies that overcome obstacles to providing the services.

Reviewing all sites is next to impossible with growth of the Internet and new addresses being created every day and the early versions of filters would often block access to legitimate medical sites — or let objectionable sites through on an inconsistent basis, according to Schatz.

And many residential consumers don’t see the need for filtering because they don’t believe users in their household would deliberately access inappropriate content. “The challenge is to create a sense of need,” said Schatz.

Integrity Online remains the largest filtered Internet provider in the nation, according to Matthews. “We serve about 50,000 separate e-mail accounts. Some customers have several e-mails, some only one. Our customer base is mostly residential dial up, but we are seeing a lot of activity in the commercial markets,” Matthews said.

All accounts are now served out of the Jackson office, located since

May 2002 in the Mississippi Technology Alliance Innovation Center in the JSU E-center. The move to the e-center has proven to be a great profitability move for Integrity Online, now with only 30 employees.

“We would be more of a start-over than a start-up,” said Matthews.

The MTA Innovation Center serves as an incubator for technology companies — either brand new technologies, new applications for existing technology, or those using a combination of technologies to enhance their core product, according to Arthur Doty, executive director. “What we’re trying to do is develop a neighborhood that includes early-stage companies as well as mid-stage companies who may not have reached maturity,” said Doty.

Matthews counts the reduced costs in several areas — efficiency of space, organization and communication between departments. Spontaneous meetings and strategy discussions are much easier with all employees in one place, said Matthews.

And Matthews can move easily within the company due to the telecommunications capabilities built into the site itself. “BellSouth has a good infrastructure here. I can take my terminal to any office, plug it in and have instant access to our internal network,” said Matthews.

Integrity Online looks to stay in the incubator space for at least a full year, more likely two. The biggest benefits of the move to the E-Center may be the intangible synergy among companies such as Venture Systems, Integrity Online and the JSU Computer Department gathered in one place, feeding a creative atmosphere, said Matthews. “We can parlay these external relationships — internal within the building but external to the company —into new ideas,” Matthews said.

Profitability is still the largest concern, as is service to the customer and growth in the commercial markets. “For many companies, (Internet filtering) has become a productivity issue rather than a moral issue. Oddly enough, most of our customers are on the West Coast — L.A., Portland and Seattle,” said Matthews.

According to a report on MSNBC.com, the corporate market for filtered Internet services could grow from $60 million in 1999 to $500 million in 2004. Schatz cites research that indicates that between 25-30% of employee Internet time is spent on non-work-related activity. “That’s a major cost issue for companies,” said Schatz.

Contact MBJ contributing writer at Julie Whitehead at mbj@msbusiness.com.

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