What Stays in Vegas (11 page)

By early 2008, a year after starting the site and half a year after Brian quit school, they were making $300,000 to $500,000 a month in sales. That amount left roughly $50,000 in profit, which they reinvested. Leaving Harvard looked like a smart decision.

Few things could draw away the brothers' attention from work, but Brian planned a rare break to fly to Boston for Valentine's Day, which fell on a Thursday, because he hoped to continue his relationship with his college sweetheart. His girlfriend had recently returned from a semester in Paris, and Brian wanted to rekindle the romance. On the big day, the couple strolled across Harvard Yard. He felt happy to spend time with her, but that winter's day, with temperatures just above freezing, did not provide an especially romantic setting. Rain fell from gray skies; the tall bare elm and oak trees provided little cover.

A message on his cell phone interrupted their walk. Matthew had bad news. Intelius, a leading competitor, had just slashed its caller ID
lookup prices dramatically. Not 10 or 20 percent less, or a few dollars less. A full three times cheaper than
reversephonedetective.com
. Brian called back at once. “Dude, Intelius just dropped their prices to $5. We are looking at the conversion rate, everything is plummeting,” the older brother blurted out, referring to how many of the visitors to their site actually paid to look up a phone number.

Alarm bells sounded in Brian's mind. Just a few weeks ago, Intelius had unveiled plans to take the company public. By cutting prices so dramatically, the firm could put the brothers out of business. Both realized all their sacrifices stood a hair's breadth from miserable failure. Not only had they turned down many thousands of dollars' worth of scholarships, but they also had spent far more trying to build their company, burning through much of Matthew's savings along the way. On the regular job market, they were just two dropouts with enough college credits between them for one diploma.

Brian, overcome with guilt that he had left Silicon Valley in the middle of a workweek, put his date on hold. He rushed in from the rain to Lamont Library to get online. He read everything he could about what had just happened. He plotted with Matthew on what they should do next. The people-search war was under way, a fight that would last for years. Brian's relationship with his girlfriend proceeded on a terminal path.

As the Monahans expanded their business, they faced many competitors, but none more ambitious than Intelius. Founded in January 2003, the company initially played up patriotic themes sweeping the country after the 2001 World Trade Center attacks and the 2003 Iraq War. A photo composite on the company's home page in those early months showed fused images of the Statue of Liberty, the US Capitol, and an American flag. The site quoted founder Naveen Jain as saying, “The next war will not be won based on who has the most powerful weapons, but by those who have integrated intelligent information.” The Bellevue, Washington–based company became a dominant online vendor of public records. It advertised itself as the “world's largest and most accurate public records source.” Revenue soared from $18.1 million in 2004, a year after it started business, to $122.9 million
in 2008. Even more remarkable for an Internet startup, it reported a profit throughout that time.
³
To gain market share, the company advertised heavily. Eventually one million people were visiting the site every day.
⁴
Coming up with the core product—personal data on adult Americans—came relatively cheaply. Gaining attention proved more costly: advertising represented more than half of total expenditures for Intelius between 2004 and 2008.
⁵

In January 2008—the same month two private equity firms purchased Caesars in a leveraged buyout—Intelius filed paperwork for an initial public offering. With investors looking over its financial numbers carefully, the company hoped to boost sales and subscribers. In 2007, it had started allowing people to search for private cell phone numbers (the Monahans and others would only allow people to look up numbers received via incoming caller ID, but not names). Outraged citizens and some important voices in Washington complained. Intelius withdrew the service. Weeks after announcing its plans to go public, Intelius lowered the cost of its reverse phone lookups to $4.99—or 99 cents as part of a monthly subscription.

The dramatic price reduction hit the Monahan brothers hard. The original $1 million in the bank had dwindled to $200,000; they started losing money every month. They ran fewer ads and hoped to weather the crisis. They outsourced some of their programming to a small team in Kiev, Ukraine. Five months later they were also hit by the unexpected death of their father, who collapsed at age fifty-seven while exercising on an elliptical training machine. Not long after that Matthew looked at what remained in his bank account. “Where did all the money go?” he wondered.

Still embracing their “Burn the Boats” philosophy, the brothers pressed on. Eventually, Intelius and some of the other data brokers experienced setbacks. The media and government authorities began looking into reports that some firms unfairly roped people into expensive subscription plans without their knowing consent. Some companies also suffered black eyes by exaggerating the quality of their information. The Federal Trade Commission and other authorities stepped up scrutiny. In 2010, Intelius agreed to pay a $1.3 million settlement after
the Washington State attorney general alleged the firm had acted unscrupulously by enrolling one-time users as subscribers without their consent.
⁶
The company did not admit any wrongdoing as part of the settlement.
⁷
“The only reason we get these things is that we were the biggest. We are the biggest,” said company founder Naveen Jain.
⁸
“Our customers love us as is evident from our A+ BBB rating,” he added, referring to the Better Business Bureau, a nonprofit, nongovernmental group that monitors consumer complaints.
⁹
In 2009, Jain won vindication in an earlier legal tussle. In May 2003 a federal district court had issued a summary judgment that Jain had purchased stock in his previous company, InfoSpace, within six months of selling the shares, a so-called short swing that was not allowed because he had been an officer of the company.
¹⁰
He appealed the ruling, and in 2009 the US Court of Appeals for the Ninth Circuit dismissed the case.
¹¹
But in 2010, a second Intelius cofounder was jailed for perjury related to having sex with strip club dancers.
¹²

Other data brokers got into hot water as well. The same year that the Monahans started
reversephonedetective.com
, several Stanford graduates set up Spokeo. Business picked up considerably after 2010, when the site started adding data from more than ninety social networking sites.
¹³
But in 2012 Spokeo agreed to pay an $800,000 FTC fine for advertising its services as a way to check out potential job hires, a violation of the Fair Credit Reporting Act.
¹⁴
“We wanted to put this behind us,” said Emanuel Pleitez, Spokeo's chief strategy officer. “Any company goes through their own internal calculations of how much legal fees and things they cannot do for X amount of time, where they lose productivity and they lose the ability to create new products, and you make an assessment on whether you settle or not.”

Other people-search sites faced lawsuits over their marketing. A 2011 class-action lawsuit charged that
MyLife.com
, which advertises that it will tell “who's searching for you,” was sending out emails suggesting people were looking for users even when nobody had expressed any interest. To gain access to the site and learn how many people are looking for them, users provide their name, age, and ZIP code. To test how
MyLife.com
works, I randomly picked a name, age, and city to see what
would come up. The site said that more than twenty people were searching for my imaginary person—James Parker, a nineteen-year-old with a New York City ZIP code. More than fifteen of them were female. Perhaps there is a lucky guy in the city called James Parker with a lot of lady friends. The lawsuit quoted one web developer who had tested the site: “I went to the site and put in a fake name like sfsf sdgfsdgf and a real age and ZIP code, and guess what?! 7 people were searching for sfsf sdgfsdgf !”
¹⁵
The lawsuit also charged that the company hacks into users' email address books and invites their contacts to join
MyLife.com
. That feature is given in the fine print of a user's privacy policy: “Contacts who are not registered. Members will receive an email invitation from us on your behalf inviting them to join. We may follow up such invitations with a limited number of reminder emails to some contacts if they do not respond.” Jeff Tinsley, the company founder and CEO, said the case was settled out of court in 2012: “There was absolutely no merit to the case, and the claims are outright false.”
¹⁶

Such tactics, even if spelled out in the fine print, rubbed a lot of people the wrong way.

Many people-search businesses did not always seem on the up-and-up, and their reputations suffered. Rivals continued to struggle in the following years. In 2012, a former CEO of LocatePlus Holdings Corporation, which sells personal data to professional groups such as law enforcement, pled guilty to conspiracy to commit securities fraud and was imprisoned through 2017.
¹⁷
In a related case, in 2013 a US district court sentenced another company official who had served as chief financial officer and chief executive officer to five years in prison for securities fraud that included an effort to inflate revenues.
¹⁸
He is also set for release in 2017.

As rivals ran into turbulence, the Monahans began to recover. They had avoided some of the industry's more dubious tactics, such as subscribing users to the service after one mistaken click. They also tried to differentiate themselves by offering a money-back guarantee on searches. Between 15 percent and 20 percent of users took advantage of the offer. Sure, some users complained, but the Monahans escaped high-profile lawsuits and inquiries. “As the site got better and
as our customer base grew larger and as we made more updates and understood the customers better, that's ultimately how we survived the Intelius price drop. We had enough customers that kept using us,” Matthew says.

Building on the cell phone ID service, the brothers started gathering more information on people. They wanted to compete against the more comprehensive offerings of rivals but in what they called a privacy-friendly way. They figured out who were the personal data wholesalers and started frequenting the annual conferences big data firms attend, like that of the Direct Marketing Association. Some vendors initially resisted working with the baby-faced brothers, but they gradually warmed as the Monahans established a track record. For their part, the Monahans found some of the personal data aggregators sleazy and some of their rivals a bit unsavory. But they thought transparency would help them win market share over the long term.

“There are a lot of people, they are not bad people, they are just aggressively trying to make money, very aggressively,” Brian says. “You're talking to these people who are like, you know, creepy and weird and not someone that I would ever invite to my home and not someone I would want to spend time around, but not evil. They are not trying to hurt people even if their business practices do, and a lot of that is because they're only scraping by too.”

Matthew says dealing with such people was not the most fun aspect of the job. “It has also been an industry—direct marketing as well as data providers—that attracts maybe a little bit more of an aggressive or, I don't know, renegade style,” he says.

In September 2010, the Monahans launched their first full-fledged name lookup service,
PeopleSmart.com
, the core of their business today. They raised $30 million in investor funding and christened their parent company Inflection. “By aggregating billions of public records into one easy-to-use interface and managing the information with cutting-edge privacy technology, PeopleSmart makes it fast, easy, and safe for people to find and learn about one another online,” it advertised.
¹⁹

In gathering public records from government agencies, the Monahans also discovered a deep well of historical documents. Prodded
by their mother, who became interested in genealogy after their father's death, the brothers set up
GenealogyArchives.com
in 2009 to help people research their ancestry. Eventually they bought the domain name
Archives.com
for $170,000, an incredible investment at the time, which ended up paying off big. In 2012, rival genealogy site
Ancestry.com
bought
Archives.com
for $100 million. The brothers planned two trips with their share of the windfall: to the Burning Man festival in Nevada, which they attended in 2012, and into space, a journey that still lies in the future.