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Street Talk: Last Laugh

It would be hard to find a more ironic Internet story than Despair Inc. Meet the former ISP employees that turned their despair into profit.
By Helen Shortal |

It’s hard to imagine a more ironic Internet success story than Despair Inc. and its web site, www.despair.com. The antithesis of today’s trendy, money-losing dot.com companies, the Dallas-based publisher is thriving in the very environment it so often ridicules—the Internet economy.

In Despair’s sardonic universe, the joke is on corporate America, which the company satirizes with its expanding lines of “anti-motivational” posters, calendars, note cards, mugs, and clothing. Spoofing the inspirational wares made by firms like Successories Inc., Despair products celebrate an array of hitherto unheralded virtues:  Mediocrity (“It takes a lot less time, and most people won’t notice the difference until it’s too late”); Procrastination (“Hard work often pays off after time, but laziness always pays off now”); and Losing (“If at first you don’t succeed, failure may be your style”).

Co-founded in 1998 by 29-year-old CEO Jason Sewell, his twin, company president Jef Sewell, and COO Larry Kersten, now 41, Despair generates virtually all of its product sales over the Internet. The trio had worked together in the mid-’90s at an early ISP in Dallas, where the Sewells handled marketing and Kersten focused on organizational behavior and management.

His sharp wit notwithstanding, Jason Sewell is a nice guy. The kind of guy who doesn’t want to name names. Specifically, he doesn’t want to name his previous workplace, where “a climate of despair” sowed the seeds for his sardonic spin-off firm.

“The name of the company isn’t really germane,” he insists. After all, the ISP in question is long gone—acquired and absorbed by a telecom giant from Denver, which was acquired by a telecom behemoth from Japan.

What lives on is the humor that was spawned within its cubicles. Begun as the in-joke of three colleagues in a high-stress environment, the trio’s “Demotivator” graphics have evolved from a wry creative outlet into a seven-figure publishing business, by tickling the dislocated funny bones of cube-dwellers throughout America.

“What started as a therapeutic gag has grown into a fully rendered, operational business,” says Sewell, who criticizes the “insane valuations” once accorded to many dot.com firms. “Despair is an Internet brand that means something to people—and that’s making money. What we want to do is build a company with genuine value—with a revenue stream, a customer base, and a strong brand.”

The firm generates much of its humor from the all-around hubris of dot.com mania. Talk about biting the hand that feeds you. The company’s very logo is an Internet joke: the “frowny” emoticon, which Despair has actually managed to register as a trademark. The trademarked frowny “could even generate a new revenue stream—frivolous intellectual property lawsuits,” quips Sewell—a dig at the hyper-aggressive trademarking practices of some Internet companies.

Despair has doubled in revenue growth annually since they started in 1998. By last fall, the company had already reached two-and-a-half times 1999’s revenues, even before the holiday and calendar sales of the fourth quarter. Sewell says they don’t give out revenue figures, but they were “on track for a seven-figure year. Admittedly, this isn’t the kind of explosive growth that a lot of Internet-commerce companies have enjoyed,” he adds. “But we’ve tried to prioritize profitability over aggressive growth.”

The company’s principals never envisioned Despair selling its wares almost exclusively over the Internet. The trio launched its first products at the retailer-oriented New York Stationery Show in the spring of 1998, intending to sell through traditional channels like Barnes & Noble and Wal-Mart.

“Working at an ISP in the mid-’90s, we’d seen a lot of companies try and fail to sell their products over the Internet,” says Sewell. “We were convinced that you couldn’t do it. This was before people felt comfortable making financial transactions on a web site—before there was even a secure browser. We designed a web site using Yahoo Store to handle our e-commerce, but we didn’t really expect the Internet to account for more than 5 percent of our sales.”

Calendar Jeer, Calendar Cheer
 
Despair’s flagship product is its devilishly funny annual calendar, which is considered a hip gift item among Silicon Valley “digerati.” The company sold more than 23,000 copies of its 2000 edition, “a lot more than we’d ever expected,” says Sewell. “People are buying them in quantity and using them as business gifts.” The Despair calendar also copped the “Most Humorous Calendar” award from the Calendar Marketing Association in 1999, beating out established favorites like Dilbert and The Far Side.

Released last fall with a list price of $14.95, Despair’s 2001 calendar commemorates more than 100 red-letter days in human idiocy, with particular attention to Internet-related forms of insanity. May 2, 1999, is jeer-marked as the day that “a fuzzy bag of beans called ‘Peanut, the Royal Blue Elephant’ sells for $4,200 at an online auction.” May 18, 2000, is the date when “Boo.com gives up the ghost. After losing $135,000,000, the founder blames the failure on being ‘too visionary.’” On yet another D-day for yet another failed dot.com, the calendar bemoans “the cruel layoffs [that] spare no one, not even the personal assistant hired to watch the founder’s Ferrari.”

The calendar’s monthly graphics combine oversaturated stock photography with twisted maxims, such as “Quitters never win [and] winners never quit, but those who never win AND never quit are idiots.” Now designed by Dallas-based Group Baronet, the calendar’s ironic images are the heart of Despair’s product line. Once the calendar is launched, the graphics are sold as stand-alone lithographs, note cards, and other items.

Design firm principal Willie Baronet of Group Baronet has played a key role in Despair since its embryonic days, when three disillusioned high-tech workers showed Baronet their very first “demotivator” design. “Failure: When your best just isn’t good enough” laid the foundation for Despair’s ensuing product line, pairing the image of an exhausted athlete with a maxim that inverts the relentless cheer of motivational-product firms like Successories.

“There was magic in their original idea, which was born of their own experiences,” says Baronet. “I felt the concept had legs and could easily become the basis for a company. We immediately began working to help develop a corporate identity. I was convinced they would be successful because the concept was so strong and they were so gifted at expressing their ideas.”

Baronet and his firm’s creative director, Meta Newhouse, have collaborated on virtually every aspect of Despair’s look and branding, from its corporate logo to its calendar design. “From the very beginning, Justin, Jef, and Larry have viewed Group Baronet as part of their team,” says Baronet. It was Group Baronet that devised Despair’s tagline, “Increasing success by lowering expectations.” Baronet’s vote of confidence also extended to voting with his wallet, in the form of providing some of the startup capital for Despair. Baronet is a shareholder in the company, and he sits on its board of directors.

Triumph of Link

By the fall of 1998, Despair had tapped into the Internet phenomenon of viral marketing—the powerful buzz generated in cyberspace by “word of mouse,” through e-mail messages and hyperlinks. “The very first site that ever linked to us was Bluesnews.com, which is a virtual community for game-players,” says Sewell. “We saw a small spike in our traffic, and it was great to have people buying stuff directly from our site, but we were only getting a few orders a day over the Internet.

“October 22, 1998 was the day it exploded,” he adds. “A computer science professor in the Midwest had posted our images on his home page, and Yahoo listed the site in its ‘Daily Pick’ list of cool sites. The guy was immediately deluged with phone calls and queries about the graphics, and he added a link to our site. That first day, we got 153 orders, and the next day we got more than 200 orders. The margins were huge—much better than selling through stores. And they were credit card sales, so there was no collections process. The money was coming in before the order went out.”

The buzz about Despair continued to circulate on and off the Internet—with traffic driven to Despair.com through “Pick of the Week” and “Pick of the Year” listings on Yahoo, plus write-ups in the print and Web editions of The Wall Street Journal. More than 50,000 of Despair.com’s visitors signed up for the company’s e-mailed “Wailing List” and conventional mailing list.

“There was so much Internet activity that we decided to eliminate our channel sales and sell everything online,” says Sewell, “with the exception of a few retailers that had been with us since the very beginning. We expanded the rich content of our site and developed humorous packaging and mailing labels to make the buying experience more enjoyable than shopping in a store. We wanted to reward people who buy directly from our site by increasing the richness of the experience. We also developed a print catalog, which we’re shrink-wrapping with our calendars. The boost in revenues from catalog sales is enabling us to grow without having to go outside and raise money, which would change the company’s landscape.”

Outsource Code

From its inception, Despair has outsourced almost all of its operations, through ongoing relationships with a handful of key vendors—all firms based in Dallas, with the exception of Yahoo Store.

“We get calls all the time from people who want us to move our printing off-shore, but we like supporting local businesses,” says Sewell. “There’s a lot that can go wrong in the printing process, and it’s hard to do a press check if your printer is in Korea. One of the few things we do in-house is credit card processing, and we’re transitioning that over to Yahoo Store as well.”

Irving-based Ussery Printing handles all of Despair’s printing, and the company’s inventory is stockpiled in the 120,000-square-foot warehouse of its fulfillment company, SourceOne in Irving. Yahoo Store, which hosts the Despair web site, sends orders via e-mail, plus redundant faxes, to the fulfillment house, which guarantees 24-hour turnaround for Despair customer shipments.

“SourceOne is a crucial part of our organization,” says Sewell. “On a daily basis, SourceOne does the real work of Despair. Externalizing our fulfillment allows us to concentrate on product development, instead of the challenges and the infrastructure we’d need to do it ourselves.

“I read an article recently that said the ideal company is a CEO, a strong brand, a high-margin product, and a memorable URL,” says Sewell, who clearly agrees. “If you can get rid of your entrenched ideas about organizations, you can outsource a lot of your processes and build a company that’s smaller, less vertical, and more profitable. Today, realizing your vision isn’t contingent on having a lot of people and operations in-house.”

Helen Shortal writes about business, technology, and pop culture for mainstream and alternative publications, including Wired and the Dallas Morning News.