Hoosier cooks up Internet hit, with help of Mark Cuban

In 2002, Reggie Renner graduated with a computer degree from Indiana University and eagerly jumped into the raging tech scene.

It’s been an unnerving but promising ride for the Carmel native. He built a bank account into the six figures working for one company and then spent it dry creating another. Along the way, he persuaded tech investor Mark Cuban (yes, the billionaire on the popular “Shark Tank” TV show) to become his major investor.

You probably haven’t heard of the website Renner runs. It’s an audience development company called ZergNet.com that’s proven popular among online publishers. Renner hopes to tweak ZergNet to give the public reason to use it, too.

Renner’s tale shows how Indiana’s tech industry can be open to innovation, investment-worthy and consequential, despite being far removed from the tech capitals of Silicon Valley, Austin, Boston and Seattle. His startup story also proves again the decisive roles played by those old business intangibles like lucky breaks, frugality, and having a moneyed benefactor.

Renner, 34, described his path to becoming a tech company CEO while sitting on the patio of a Northeastside Starbucks on a recent sunny afternoon. He wore a polo shirt, shorts and running shoes with a hole in one toe. With him was his co-founder Michael Langin, a 26-year-old Canadian who commutes to Indiana from his home in Toronto.

During the two-hour interview, neither so much as orders a cup of coffee — a sign that maybe they really are as frugal as they say.

Renner suggests meeting at Starbucks because ZergNet still has no local office. Or, for that matter, revenue. That puts ZergNet in the category known as a “pre-revenue startup,” though it has 1,600 customers.

ZergNet’s founders met online playing video games while Renner was in college and Langin still a teenager.

After leaving IU, Renner landed a job at an Internet domain seller called eCorp. He hung around for several years, earning enough to buy an all-black Mustang Cobra and see his savings top $100,000 while still in his 20s.

His eCorp experience persuaded Renner that he should put some skin in the game with his next job. He and Langin, a software design whiz despite not attending college, concocted an idea for a startup business that would help video game sites build their online audiences.

“It was so far-fetched it was almost comical,” Renner says. “We didn’t know a single publisher on the planet that would use our services. We had no marketing experience. And we didn’t know any investors. So we pretty much had nothing going for us.”

So they went for it. They used the name ZergNet, after the gamers’ term for annihilating a foe with overwhelming force. By late 2011 ZergNet was up and running, but not exactly zerging anything. Only a few game sites had signed on by early 2012.

Which is when Renner decided to pitch ZergNet to fellow IU alum Cuban.

Cuban (IU class of 1981) reaped a fortune by co-founding Broadcast.com and selling it to Yahoo! in 1999 for $5.7 billion in stock. He’s founded other companies since, and invested in dozens.

Without even meeting Renner or Langin, Cuban agreed to put $30,000 in ZergNet. “Why he was interested in us,” said Renner, “I have no idea.”

The initial money, plus another Cuban check for $100,000 in summer 2012, kept the little startup alive. The funding also let ZergNet expand to movie and entertainment sites. Everybody was liking it.

“People were trying our service and not leaving it. We had no churn at all,” Renner said.

Or revenue.

From the start, ZergNet’s model called for posting its customers’ stories for free on its website, slapping a clever headline and eye-catching photo on each story, then using online come-ons to promote the stories among multiple customer sites.

The result: The traffic-trading boosts customer visitor counts, which are the Holy Grail of online publishing. Visitor counts are used to sell ads online, just like subscription numbers sell ads in newspapers or Nielsen ratings draw commercials on TV.

Among nation’s top 50 sites

In the world of e-startups, being a company without profits or even revenue is often OK as long as other metrics are looking up. Which happens to be the case with ZergNet.

The company that started as an ill-defined notion in the minds of a couple of gamers has now grown into the nation’s 48th most-visited U.S. website. Quantcast, which ranks websites by traffic, puts ZergNet’s latest monthly U.S. visitor count at 21.4 million.

Not even three years old, ZergNet now out-draws the websites of Fox News, the New York Times and Mapquest and is closing in on urbandictionary.com and walmart.com.

Notably, ZergNet has also passed ChaCha, the online Q&A site owned by Carmel tech entrepreneur Scott Jones, to become the largest website based in Indiana.

ZergNet’s 1,600 customers include some of the biggest names in the publishing world, including AOL, MTV, Condé Nast and Fox.

Condé Nast, a New York-based magazine publisher and digital and film producer, began using ZergNet about a year ago and credits it for increasing monthly traffic on its websites by the hundreds of thousands of new visitors, said Peter Cheng, director of business development and innovation.

Cheng said ZergNet offers publishers “traditional traffic-trading made easy...plus the content recommendation algorithm of an OutBrain, and the human curation and headline writing of a BuzzFeed. Their secret sauce is combining all of the above into one.”

Going for ‘ultra-premium’ traffic

Unlike other referral news sites, ZergNet has drawn the line at promoting sexual content and “click-baiting,” which puts intriguing-but-vague headlines on articles to lure readers into clicking on them.

“We don’t promote any sexual content...of any kind, even in the dark underbelly of the site,” Renner said. “And we don’t do a lot of stories that are too controversial. We play it safe.” As a result, he said, “We have ultra-premium traffic that is worth a lot to publishers.”

Also key to ZergNet’s success so far, said Renner, was overcoming the technical challenges from building a high-volume system that ranks as one of the largest referrers of traffic on the Internet. ZergNet smoothly handles hundreds of millions of clicks on its links, despite the fact that its tech team “is mostly just Mike,” Renner said of Langin, who serves as chief technology officer.

Langin, who lets Renner do most of the talking during the patio interview, said he’s so committed to baby-sitting ZergNet that he doesn’t go anywhere he can’t get a good Internet connection.

In the past two years, “Most of our efforts have focused on... making sure everything works,” Langin said.

ZergNet’s business model relies on cheap bandwidth from computer server companies like Amazon that have continually slashed prices to attract business from high-volume users.

“It’s absolutely amazing when you think of the numbers of bandwidth we are doing and how little it costs,” Renner said. He said ZergNet pays server fees of just a few thousand dollars a month.

Staying frugal

Only recently has ZergNet hired a second engineer, giving it a total of 12 employees. Two are in a tiny New York office and the rest work out of their homes, including seven in Indiana.

Renner’s held off on opening an Indiana office to keep costs down — something he’s clearly proud of. “The two of us built everything from scratch. We didn’t outsource a dollar of anything — no marketing, no PR, nothing.”

Frugality describes their personal lives, too, Renner said. “We don’t have girlfriends, We don’t socialize. We don’t go out to bars. We don’t drink.” This year they’ve given themselves salaries of between $50,000 and $75,000, he said.

Langin said he’s bought a Corvette with some of his money, but still lives with his parents in Toronto while he’s applying for a U.S. work visa. Renner said he lives in a townhome in Noblesville, still drives his 2004 Mustang, and has spent down his once hefty bank account while building ZergNet.

Renner confesses he’s had to learn that frugality sometimes doesn’t pay in business. Last month, at the urging of investors, Renner took top executives from one of ZergNet’s largest customers to a $400-a-plate dinner in New York.

“I am completely out of my element in that environment, but it goes a long way in building relationships and comes with the job,” Renner said. “I would much prefer meeting at a Steak ‘n Shake, but that doesn't fly in New York City.”

ZergNet’s now on its fourth and largest round of fundraising, which topped $1 million. The money came from Cuban and others.

The next phase of ZergNet’s growth aims at finally generating some income, though not by charging customers for promoting their stories. The company sees a way to make money by selling the 17 percent of all of its generated clicks that occur on its own website.

By selling just a fraction of the ZergNet visitor clicks for 5 to 10 cents each, “We can make quite a bit of money,” Renner said.

Readers who click on a ZergNet widgit placed on a customer site see the story they clicked on, plus related stories. But visitors who come directly to ZergNet.com see a mishmash of boxed stories about unrelated subjects that scroll on and on seemingly without end. Three top-of-the-page stories on a recent day: “Things you probably don’t know about cucumbers,” “In defense of the 1998 Godzilla” and “Melissa Rivers breaks silence for the first time since funeral.”

ZergNet’s money-making plan aims to put order to the chaotic look. It calls for letting the public create personal profiles on ZergNet so they can log on and see only stories tailored to their interests.

Finally meeting Cuban

Two years after he responded to Renner’s email plea with $30,000, Cuban remains ZergNet’s largest investor, with over $1 million invested.

After communicating with Renner and Langin only by email since 2012, Cuban finally met them. The in-the-flesh meeting came at the company’s first board meeting, held in New York in July.

“Mark was awesome,” Renner said of the occasion. “He wore a T-shirt and shorts.”

Cuban, who lives in Dallas where he owns the NBA Mavericks, used email to explain his commitment to the tiny Indiana startup.

He invested with Renner, Cuban said, because “it was a great idea and he was obviously smart. For $30K how could I not?”

Asked why he likes ZergNet, Cuban offered up a list: “Smart. Fills a need. Dependable. Took the high road and didn't resort to salacious content. Amazing algorithms. Great editors.”

And Cuban had a one-word answer for how long he’d remain an investor in ZergNet: “Forever.”

For now, at least, he joins Renner, Langin and another investor on ZergNet’s inaugural board.

Before wrapping up his Starbucks interview and hopping into his Mustang, Renner offers a parting comment about Cuban’s importance to his revenue-less startup.

“Without him,” he said, “there would be no ZergNet.”

Call Star reporter Jeff Swiatek at (317)444-6483. Follow him on Twitter: @JeffSwiatek.

ZergNet

Business: Website audience development company for online publishers.

Founded: 2011.

Base of operations: Indianapolis area.

Employees: 12.

Majority owners: Reggie Renner of Noblesville and Michael Langin of Toronto.

Sales: None.

Principal investor: Mark Cuban.