The Active Network Stops for Overhaul Following a Decade of Acquisitions
About as far back as I can remember, The Active Network usually has made at least one acquisition by this time of year.
But it’s been a silent spring over at Active HQ in San Diego’s Sorrento Valley, where the venture-backed company develops software that customers use to manage recreational sports events, including online registration, payments, and marketing. Combining a business that’s focused on helping people to get out and about (triathalons, campground reservations, tennis tournaments) with strong capabilities in software development (I’m imagining code written by pudgy and translucent-skinned programmers who feed at night on bear claws from the snack machine) makes me wonder sometimes how active The Active Network’s 2,200 employees really are.
But I digress.
Until recently, The Active Network has been pursuing an aggressive growth-through-acquisition strategy that I once compared to kudzu, “the vine that ate the South.” To fund its growth, the company has raised more than $200 million from VC firms and other investors, including ESPN, Canaan Partners, Tao Venture Partners, Charles River Ventures, North Bridge Venture Partners, Comdisco Ventures, and Performance Equity Partners. But The Active Network made its last noteworthy acquisition more than a year ago, when it bought the online campground reservation provider Reserve America from IAC, (NASDAQ: IACI).
So what happened? Is there a reason for The Active Network’s inactivity on the M&A front?
As it turns out, there is.
CEO Dave Alberga tells me that while the company has made some very small, undisclosed acquisitions, it began an ambitious program in late 2008 to overhaul and replace its legacy software as a service infrastructure with a more sophisticated SAAS architecture. The new software technology will establish a common approach for many billing, financial, and back-office functions, while also giving The Active Network more flexibility to rapidly develop software tools for a new customer and to expand the capabilities of customers with high-demand events. He estimates the cost of the
four-year development effort at $80 million to $90 million, and calls it “a very, very big spend, especially at a time when the economy is through the floor.”
The project makes sense, especially for an Internet company that has made roughly 50 acquisitions of varying sizes since it was founded in 1998. Or, as Alberga puts it, “It feels like we’ve ingested a lot and now we need to be doing some digesting.”
He explains, “Of the technologies we’ve built from the ground up, much of it is 10 years old now, and much of what we acquired is older than that. We need to start all over, hit reset, and take this services-based approach to the infrastructure.”
Alberga says the company has added “hundreds of developers, who are working exclusively on the project,” which is headed by Andy George, The Active Network’s vice president of technology. “It does represent a shift in spending priorities in that we are spending a far larger percentage on development than we have in the past,” Alberga says, but it doesn’t mean the company has stopped making acquisitions. The company operates primarily in North America, with a small business in Europe (less than $10 million in annual sales), as well as offices in Europe, Australia, New Zealand, and Singapore. “Everything we build now is built with internationalization and globalization in mind,” Alberga says.
The private company also provided a few numbers that give an indication of the scale of The Active Network’s operations:
—45 million: The number of transactions done last year on Active Network systems.
—7 million: The number of unique visitors each month to the company’s consumer websites, which include Active.com, eteamz.com, LaxPower.com, and others.
—75,000: The number of customers using Active Network’s Web-based services.
—$245 million: Annual revenue in 2009. (The year the company became profitable.)
—$173 million: Annual revenue in 2008.
—44 states: The number of states for which the Active Network’s ActiveOutdoors division processes hunting and fishing licenses and/or campground reservations.
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