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Active.com and the morphing of media

It's hard to understand the media business in the age of the Internet. This company for athletes and Boy Scouts shows how quickly it's changing.

By David Kirkpatrick, Fortune senior editor

NEW YORK (Fortune) -- As advertising increasingly becomes the means by which technology companies make money, the very definition of the media business is rapidly changing.

Active.com, for example, is an Internet company which started by developing software for people organizing local sports teams or events. That allowed it to get users and start growing. In effect it created a community.

Then it started showing advertising to the members of its community - users who were signing up for Little League teams or Boy Scout troops. Some are its own ads, which aim to promote its services to users who then spend more money by signing up for more activities. Active.com takes a cut of the fees when they do. Now it's increasingly selling ads like CBS (Charts) does, to national advertisers like Nike (Charts) and T-Mobile.

Is this a media company? A software company? A service company? It's something new. Old media ignores companies like this at its peril. Media doesn't just need to "get on the Net." It needs to understand software. Good software is what enabled Active.com to get into this appealing media business.

Active.com started in 1998, in the old bubble days, but hung in there during the bust, and by 2006 had revenues of about $64 million, says CEO Dave Alberga. He claims it has been profitable for the past three years. Investors include Interactive Corp., ESPN, and Austin Ventures.

Dot.com survivor

This private company has deliberately kept a low profile, but Alberga was among those sybarites who joined me at Richard Branson's Necker Island back in November. More recently he and I sat down and he explained his business to me.

Here's what Active.com does: Using its own software, it hosts the Web site for events like the New York City Triathlon. To register, an athlete pays an entry fee and a transaction fee of $4. Active.com keeps the $4. It does this for about 19,000 events a year. No wonder Interactive Corp. likes Active.com - the model is not unlike that of its own Ticketmaster.

Active.com also has relationships with about 4,000 sports leagues in the United States, Alberga says. Little League, for example, uses Active.com nationally. The company works with about 2,000 community organizations including YMCAs and Boy Scout troops, and about 2,000 sports camps. Of the top 100 cities in the country, Alberga says 71 use Active.com to help organize events for their parks and recreation departments.

If you want to sign up for the Soccer Squirts in Elwood, NY (10 am session), or book a tee time at the High Point Golf Club in Montague, NJ, this is the place to go.

Active.com has about 11.5 million registered individual members, and during the fall or spring can get 4.5 million unique visitors per month. That's a chunky Web property.

But the secret sauce is the promotions Active.com is able to show to its community - the Little League parents or community golfers or 10K runners or swimming club members who sign up and manage their memberships using its service. Alberga says that the cost of servicing all these different small organizations in multiple different sports and activity segments is high. "Unless you can generate a media business with it and sell ads and marketing programs," he says, "you can't make a real business out of it."

"We actually bring new business" to the groups who use Active.com, he says. That's because the ads he runs can make the Little League parents aware of the upcoming swim team, or the golf tournament, or other event, and therefore more people sign up for it. That is good for the organizers, and good for Active.com, which gets more fees.

"The media properties drive audiences into the activities," says Alberga, "and at the same time the activities are driving people into the media."

In addition, Active.com sells classic Internet ads. Ads for companies like Wheaties, Sony (Charts), T-Mobile, and Nike generate about 25 percent of its revenues.

For all the site's virtues, Alberga says it will get considerably better around April when it relaunches with many more features. "We spent years building systems for our clients- the organizers - because that's what it took to get this thing off the ground," says Alberga. "We're just now putting significant efforts on improving our consumer experience." In the company's next phase, it will layer in user-generated media - like Dad's video of Junior's Little League game. That will be yet another platform for the display of advertising.

I confess that even though Active.com is a major Internet property, I'd never even heard of it until I met Alberga. Its story makes me realize just how many big opportunities are still out there for online businesses. But they are available mostly to those who are willing to take a tech-centric view. That's why I still put my money more on new media companies encroaching on old media rather than the other way around.

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.