From Passion Project to Corporate Casualty: The TNC Saga

Summary

Business Lunch Podcast: Episode Summary

Title: From Passion Project to Corporate Casualty: The TNC Saga
Host: Roland Frasier
Release Date: November 26, 2024

In this compelling episode of Business Lunch, hosts Roland Frasier and Ryan Dice delve deep into the intricate journey of the Traffic and Conversion Summit (TNC), transforming it from a humble passion project into a regrettable corporate casualty. This detailed narrative uncovers the triumphs, strategic decisions, and unforeseen challenges that shaped the fate of TNC.

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1. The Genesis of Traffic and Conversion Summit

Ryan Dice recounts the inception of TNC, highlighting the initial reluctance and eventual commitment to creating an exceptional marketing event.

Ryan Dice [05:32]:
"Back in, I think it was 2008, 2009, our business partner at the time, Perry, and I decided that we were going to put on a marketing event."

Despite Ryan's reservations about the immense effort required and his introverted nature, the determination to create an event that truly resonated with attendees prevailed. The initial vision was not profit-driven but focused on delivering an unparalleled experience.

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2. Upholding the Original Vision

The early years were characterized by dedication to making TNC a standout event. Roland emphasizes the shift in focus towards enhancing production quality and attracting high-caliber speakers.

Roland Frazier [07:54]:
"We were focusing on creating a professional atmosphere, doubling the production costs, and ensuring that the speaker lineup was top-notch."

Ryan Dice echoes this sentiment, acknowledging the transformation from a modest gathering to a professionally run event.

Ryan Dice [10:04]:
"You just brought in the elements of sponsorship revenue. So that allows us to monetize the event without having to necessarily pull from those folks who we want. Leaving saying, wow, that was the best event."

This elevation not only enhanced the attendee experience but also opened new revenue streams through sponsorships, essential for the event's sustainability and growth.

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3. Strategic Partnership and Expansion Plans

As TNC gained prominence, the opportunity to partner with Clarion Events arose. This partnership was seen as a strategic move to scale TNC internationally, leveraging Clarion's expertise in event management.

Roland Frazier [14:30]:
"Clarion offered us Geo cloning, allowing us to replicate the event model globally. This was our chance to expand with a partner that knew what they were doing."

The partnership was structured to retain control over key aspects of TNC, ensuring that the original vision remained intact while benefiting from Clarion's global reach.

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4. Navigating the Sale and Business Strategy

The negotiation process was pivotal in securing a favorable deal. Ryan details how carving out specific assets was instrumental in achieving a higher multiple for the sale.

Ryan Dice [15:43]:
"We sold only the event's essential assets—its URL, trademark, event footage, and customer list—ensuring that Digital Marketer remained intact and profitable."

Roland Frazier introduces the concept of "thin slicing," akin to real estate's fee simple rights, allowing them to sell only the parts of the business that were valuable to the buyer.

Roland Frazier [18:51]:
"By identifying what the buyer truly wanted and discarding the rest, we maximized our returns without relinquishing control over our core business."

This strategic approach not only secured a lucrative deal but also preserved Digital Marketer's integrity and operational momentum.

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5. The Unforeseen Impact of the COVID-19 Pandemic

Despite meticulous planning and a strong foundation, the outbreak of the COVID-19 pandemic severely disrupted TNC's trajectory. The shift to virtual events in 2020 provided temporary relief, but subsequent attempts to return to in-person gatherings faced insurmountable challenges.

Ryan Dice [32:32]:
"We were planning for a massive expansion in 2020, but the world effectively closed in March. The pandemic derailed everything."

Roland Frazier reflects on how the pandemic exposed vulnerabilities in their business model, particularly the reliance on large-scale in-person events.

Roland Frazier [34:57]:
"TNC was a content experience driven event, for marketers by marketers. When corporate overlords took over, the essence was lost."

The inability to sustain attendance amidst global restrictions and shifting market dynamics led to diminishing returns and eroded the event's reputation.

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6. The Downfall and Corporate Decisions

As the pandemic persisted, Clarion Events made strategic decisions that ultimately led to TNC's downfall. The initial safeguards, such as the put-call options, failed to protect Roland and Ryan's interests due to the unprecedented nature of the crisis.

Roland Frazier [27:11]:
"Clarion exercised all their options based on zero profits, effectively rendering our 20% stake worthless."

The termination of contracts and the enforcement of buyout options left Roland and Ryan with no financial gains and watched in dismay as TNC was shuttered.

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7. Lessons Learned and Strategic Insights

The saga of TNC offers several critical lessons for entrepreneurs and business strategists:

• Strategic Structuring:
  Separating core business assets from event-specific components can protect and maximize returns during acquisitions.

• Flexibility and Resilience:
  Building adaptable business models that can withstand unforeseen disruptions is crucial for long-term sustainability.

• Preservation of Vision:
  Maintaining the original essence and quality of a product or service is vital, even amidst corporate restructuring.

Roland Frazier underscores the importance of understanding buyer intentions and protecting valuable assets through meticulous negotiation.

Roland Frazier [19:53]:
"We were able to get a higher multiple by selling only what they valued, ensuring that Digital Marketer remained profitable and intact."

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8. Conclusion

The TNC Saga serves as a cautionary tale of how strategic growth, despite initial success, can falter under unexpected global crises and corporate maneuvers. Roland Frasier and Ryan Dice's honest reflection on their journey offers invaluable insights into the complexities of business expansion, partnership negotiations, and crisis management. Their story emphasizes the importance of strategic planning, adaptability, and unwavering commitment to one's core vision in navigating the tumultuous waters of entrepreneurship.

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Notable Quotes:

• Ryan Dice [10:04]:
  "You just brought in the elements of sponsorship revenue. So that allows us to monetize the event without having to necessarily pull from those folks who we want. Leaving saying, wow, that was the best event."

• Roland Frazier [18:51]:
  "By identifying what the buyer truly wanted and discarding the rest, we maximized our returns without relinquishing control over our core business."

• Ryan Dice [15:43]:
  "We sold only the event's essential assets—its URL, trademark, event footage, and customer list—ensuring that Digital Marketer remained intact and profitable."

• Roland Frazier [34:57]:
  "TNC was a content experience driven event, for marketers by marketers. When corporate overlords took over, the essence was lost."

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This episode of Business Lunch not only chronicles the rise and fall of TNC but also equips listeners with strategic frameworks to safeguard their ventures against similar pitfalls. It's a testament to the unpredictable nature of business and the enduring importance of strategic foresight.

Transcript

[Ryan Dice]

Yeah, no, I mean, what. What you brought to it was an elevation of the original vision, which was, let's continue to have everybody leave saying, wow, that was the best event I've ever been to. You just brought in the element of sponsorship revenue. So that allows us to monetize the event without having to necessarily pull from those folks who we want. Leaving saying, wow, that was the best event. And you gave them a new reason to say, wow, that was the best event because it was so elevated from an experience perspective.

[Roland Frazier]

Hey, everybody. Welcome to another episode of Business Lunch with your hosts, Ryan Dice and myself, Roland Frazier. Ryan, how are you today?

[Ryan Dice]

I am, I'm good. I had a. Had kind of a rough night last night. I know you did too, but I was sitting in bed. I don't know if you've ever had this experience. And I was all alone. So Emily, my wife and the girls, they actually flew out to Toronto to go to the Taylor Swift concert. And then my youngest decided he wanted to sleep over at his Mimi's house, at my mom's house. So I'm like, by myself, which I'm actually very okay with. But I'm sitting in bed, I'm trying to get some work done. All of a sudden I smell some smoke and I'm like, that's probably not great. I'm like, maybe it's just the heater turning on, starting to get a little chilly. I'm like, but it's not on wet. And right when I'm starting to think, what could it be? All hell breaks loose in my. I mean, it's like fire alarms going off like everywhere, like in the house. I'm like, now running around all over the place, trying to figure out like, what in my house is like on fire, like, what's going on. Fire trucks come, like, had to call 91 1. Never could find anything. I guess there was like a short somewhere, never could find where it was. But yeah, like, so this happened around like 11 o'clock midnight and. Yeah, yeah, so.

[Roland Frazier]

So there's a decent chance it happens again.

[Ryan Dice]

Yeah, good chance I get back home because again, nobody's there and it's just a smoldering mess. So I've been checking the news, local news to see if that was the case, but. So, yeah, little. A little sleepy because I got no sleep. How about you? You feeling spry today?

[Roland Frazier]

Well, I'm drinking a.

[Ryan Dice]

That's because I know you're not.

[Roland Frazier]

I'm drinking a cherry Coke, which I haven't had since I was a kid. It just Happened to be the only thing with caffeine that was in the refrigerator that I could find to try to get myself to come to life. Because we were up until like, three something in the morning and had a 7am start today, meetings at 7am so it's been kind of crazy, but nobody really probably cares about that for us. So. One thing that I do know, though, that a lot of people have been asking about is that one of our events, Traffic and Conversion Summit, has announced officially that it is no more. And a lot of people would love to know that story. And I was wondering if we might want to talk about it a little bit here.

[Ryan Dice]

Spill the beans. Sing like a bird. Tell all the dirty, dirty backstory.

[Roland Frazier]

Yeah, yeah.

[Ryan Dice]

Name names. Throw people under the bus. Is that what you're thinking?

[Roland Frazier]

Give me some dirt.

[Ryan Dice]

Yeah, no, it might be. Might be good. Kind of cathartic, if nothing else. I'm sure there's probably some business lessons in there, too. Yeah, no, I think it's good. I think it's something definitely worth talking about. Yeah, it might be good maybe to kind of take it in three parts, like, talk, maybe kind of give the backstory, maybe what happened sort of post acquisition and in that interim phase, like, you know, kind of what happened when we owned it, what happened after we sold it, you know, and then where do we see maybe the future going? Okay, what do you think?

[Roland Frazier]

I think it's great. Okay, let's start at the start. What are your thoughts?

[Ryan Dice]

Yeah, I mean, so for those who don't know, just to give you, I guess, a brief history lesson. Back in, I think it was 2008, 2009, our business partner at the time, Perry, and I decided that we were going to put on a marketing event. And actually, we didn't decide it. He decided that we were going to put on an event for marketers. And I just remember thinking, I don't want to put on an event because I just didn't want to. It seemed like a lot of work. I'm an introvert. The idea of, like, hey, let's have a bunch of people in a room who I have to talk to sounded terrible. And it seemed risky. So it was like everything I hated all wrapped up in a ugly, expensive color. Foe. Yeah, terrible. But he's like, no, no, we'll do it. We'll make so much money. All these people are making a lot of money. Which, by the way, was not true at all. But I. So what I told him, I was like, okay, we can do this. But the reality Is most events suck. They're just a pitch fest. You know, you go to these events as an attendee, you sit in the crowd and just one speaker after another giving some faux content. At the end, they try to sell you their stuff, and then another person comes up and does the same thing. I was like, I don't want to participate and contribute to that. So if we're going to do this, our goal is not going to be to make a lot of money. Our goal is going to be to have everybody leave saying, wow, that was the best event I've ever been to in my entire life. And so we did it, Put on the event. 289 people showed up. Year one, and true to the goal, we made no money. In fact, we lost a lot of money. But people did leave saying, wow, that was the best event I've ever been to. And so we said, let's do it again. And if I'm not mistaken, you actually came out. You were an attendee at that second event that we did, right?

[Roland Frazier]

I don't know if it was the first one or second one. It's a really good question. I honestly don't remember which one was the first one, but I believe it was at the very first one, But I can't.

[Ryan Dice]

Okay. Yeah, so you're right. Yeah, you probably were at the first one. All I remember we decided to call the event Traffic and Conversion Summit, because I just remember thinking, really, businesses need two things. They need traffic and they need conversion. And so what we'll do is the first day will be about traffic. The third day will be about conversion. I'm sorry. The first day will be about traffic. The second day will be about conversion. Conversion. And we'll figure out what the third day will be. And we truly had no idea. Just like classic, right? Classic. And so. But you know what I think was cool is it is that classic entrepreneurial experience, right? Where that accidental entrepreneur, let's start a little business. Let's see what happens. And you wake up and you turn around, and I remember it was year three. And by the way, the only reason that we did an event the second year was because the hotel brought us the bill at lunch on day three. And I remember it was a big bill. And I remember we did not have the money to pay it. And so we came out after lunch, we're like, hey, everybody, we're doing it again next year. And the only reason that I agreed to do the event next year was because we needed money to pay for the event this year. Just. That's the truth of the matter. And so we did it. Year three, it was clear that it was a thing. Year three, there were 800 something people in the room. And I remember talking to our team and thinking, this is a thing. This is not just an event. This is a thing. This is a community. This is a company. This is a business. We should make this a thing. And it was actually out of that event that we launched digitalmarketer.com, the business that we still own today. And so eventually, Digital Marketer became the brand that owned tnc. A couple years later, you wound up partnering with us, investing in that company, joining with us. And you really were an integral part of taking this business from. Taking this event in particular, from something that really was just, you know, Perry and I going up there and sharing stuff into an event that really could kind of stand alone. I don't know if you kind of want to pick up what you saw at the time and some of the changes that you made really, to make the business more scalable and ultimately more sellable.

[Roland Frazier]

Yeah, I mean, I know that we talked about production value, and really, it was a significant increase. I think it was double the already reasonably significant production cost to go in. 2013 was my first one as a partner with you guys. And then 2014 was when we said, let's up the game. And it was very different. It was the exhibit. The exhibitors were miles ahead of where they were before we brought in, you know, focus to how do we sell? You know, how do we get exhibitors? I think there were eight. You know, it was like. I remember it was like 40 grand or something of sponsor revenue. The first time that.

[Ryan Dice]

Yeah, I mean, the first couple of years, it was a couple of folding tables. And I think, like, literally just a couple of people were like, hey, if I give you some money, can I just set at a table? We're like, yes, have at it.

[Roland Frazier]

So we had a whole team of people doing that, like, with. With a focus. And. And I remember walking into the exhibit hall in 2014, and I was like, man, if they only knew that. It was just three people that didn't really know what the hell they were doing that were putting this on. It looks professional. I was like. I walked in, I told my wife that I said, this actually looks like a thing. And then I went in. An AV was like, the whole AV production spectacle was, you know, amazing. And we took out selling from the stage at all and said, no more selling from the stage. It was, you know, it was that the speaker budget to attract higher quality speakers to come was pretty cool. And. And I think, like, those. Those things and a focus on those things and all of the ways that we could create monetization outside of selling stuff to the people that attended and actually make the event make money on its own, which turned out to be why it was saleable. And I thought. I think. I think those were probably the major things. Do you have any other things?

[Ryan Dice]

Yeah, no. I mean, what you brought to it was an elevation of the original vision, which was, let's continue to have everybody leave saying, wow, that was the best event I've ever been to. You just brought in the elements of sponsorship revenue. So that allows us to monetize the event without having to necessarily pull from those folks who we want. Leaving saying, wow, that was the best event. And you gave them a new reason to say, wow, that was the best event because it was so elevated from an experience perspective. And yeah, I mean, so the people that were there the first one, two, three years when it was just a single ballroom event with just kind of us going up there talking about, you know, God knows what with no real formal agenda. I mean, I remember walking out on stage and saying, we have an agenda. It's for entertainment purposes only. We're kind of going to take breaks when we want to, you know, good luck, you know, to actually having an.

[Roland Frazier]

Hours with no, I mean, like one break. It was. Yeah. Insane.

[Ryan Dice]

Yeah. I mean. Losing voice. I mean. And I remember just, you know, it going to where it was a very structured, very professionally run event where everybody was still very, very happy. But then as the event was growing and I think this happens to a lot of businesses, it felt like it was getting big and scary, like, to me at least. I mean, I remember when we're getting 6, 7, 8,000 people coming out to this event, you know, when the budget is getting to be, you know, millions and millions of dollars, I would have these recurring nightmares of, like, something going wrong, you know, at this event. And I remember it'd be, you know, I'd walk out of the event and there's literally nobody in the audience and we've gone completely bankrupt or, you know, just some horrific thing like taking place.

[Roland Frazier]

And your nightmare was what actually happened? When they failed to announce my session a couple years ago and I walked out into the main ballroom that sat 5,500 people and there were like six people there.

[Ryan Dice]

That is true. That did actually happen to you. That was my nightmare. But. But yeah, so we were fortunate in that we've been running the event at this point, I believe for nine years. And then we were approached by the second largest event management company in the world, Clarion Events. They reached out to us and said, hey, we love what you built. We want to expand into the digital marketing space. They had already acquired another related event affiliate, Summit. And they felt like our event traffic and conversion Summit really could be sort of the platform event into this broad based strategy that they had to really create this festival of marketing kind of thing. And I remember thinking like that the vision that they had was really, really cool. Like something that was really cool, something that we all wanted to be a part of and something that they were uniquely qualified to pull off.

[Roland Frazier]

Plus the concept of we had tried going international and gotten totally screwed over by the promoters in Australia that kept all of the money and basically went bankrupt. And another one, I think also before we did the sale, that was kind of our second attempt at Australia that was at best break even, if not a slight loss. And we realized that we just didn't have the skills to take an event international. And what Clarion offered was, that was one of their models was what they called Geo cloning, where they just clone the event that is in. At that time, I think San Diego was. We had moved Austin to, to San Francisco, to San Diego. And so we're in San Diego and they're like, we'll do maybe a east coast TNC and then we'll do one in the UK or, or Europe, Western Europe and we'll do one in maybe China. And so. And we're like, yeah, this is our chance to have somebody that actually knows what they're doing, that has a global team, global experience already operating those events and a model that is going to make sense for us to expand this thing like a true partner. Because I don't, I mean we weren't really thinking, gosh, we need the money then. I mean it's always nice. But that wasn't the primary motivation. The primary motivation was to stop your nightmare and to actually have a partner that knew what they were doing to expand. And so that's kind of what we were thinking when we entered into that. Right. Is that your memory as well?

[Ryan Dice]

Yeah. And it did help that the offer that they made was a pretty significant offer at the time. One of the largest multiples that they had ever paid for an event. So that definitely didn't hurt. But yeah, we were genuinely excited to be a part of the event moving forward. And I think that's important because a lot of Times when people sell a business, they're selling it and they want to get rid of it and they want to ride off into the sunset. We really did see it as these are our strategic partners now. I think it's worth kind of pointing out because there's a really cool kind of business lesson in this because at the time, Traffic and Conversion Summit was not a separate business. Traffic and Conversion Summit was a product. It was a business line underneath Digital Marketer. It operated on its own P and L, but it was a separate product line. And so when they came to us originally, they were basically, we want to buy your event. And they were kind of expected, expecting to get Digital Marketer the business for free. And pretty quickly we were able to sort of squash that. So can you kind of speak to just from a strategy perspective, how somebody, if they're thinking about selling their business, how maybe sometimes it's better to carve off a part of that and more of a goose and eggs type model.

[Roland Frazier]

We're going through that now with somebody that we're helping with an exit because we help people sell their businesses too. And I think it's something that most people don't think of. And so I like to kind of call it thin slicing. And so it's two concepts together. And one of them I was trying to think of how much detail. But in real estate, there's a thing called fee simple real estate. And that's all of the. It's the legal concept that a fee simple piece of real estate is all of the rights. It's a bundle of rights. The rights are like a bundle of sticks. And there's air rights and water rights and mineral rights and usage rights and land rights and all these other things. And they're all included. But what you can do with real estate is you can break up the bundle and sell off different bits of rights. One of the most famous would be our president elect, as we are recording this, Donald Trump, who bought the air rights above the Tiffany store in New York City and built Trump Tower and made an insane amount of money. It's because that was a right that Tiffany could sell. Similarly, they could have sold the mineral rights underground and somebody could have side drilled for oil or something like that and that would be. That would be okay. So I started taking that legal concept and applying it to businesses when we're selling it and saying. What I noticed was that a lot of businesses get bought because the buyer wants one particular thing that business has and they don't want or know how to operate or know or want to operate the rest of it. So they'll basically buy a business and take the thing that they wanted and then all of the rest of it just gets shuttered, mothballed, shut down. And that when you're negotiating to sell a business, if you can identify what is it that the buyer actually wants and what will be of no value to them, then you can very often carve out the things that they don't value and not take any less for the business. And so in this case, they had actually done a study, they hired a consultant to do a study to see did they choose buy, did they need to buy Digital Marketer. And the consultant took a whole bunch of money and said, nah, it's a nice to have, but not a have to have. Which is good because Digital Marketer was quite profitable on its own and it would have been a significantly higher purchase price to buy that as well. But, but we didn't really want to sell it. So what was interesting about that was we said, okay, well let's split TNC off into another company. Let's figure out the assets that this company wants to buy. Which as it turns out was what they considered the event was the URL, the website.

[C]

Right.

[Roland Frazier]

The trademark for the name Traffic Conversion Summit and the back catalog of event footage and the customer list. That was, that was pretty much it. And so we negotiated to sell only those things and we still received, I think they told us it was the highest multiple that they had paid for an event and we were really, really happy at that. And, and I think the multiple worked out to be almost two times the low multiple that they first came. They come at you with a range and they'll say between, you know, x and Y. And we ended up just a hair under 2x. And so, so what we actually sold was only those few, few, few things. And, and they were happy with it because they didn't want to pay more than they had to. And we were able to come to an agreement to sell those. Anything you want to add before I take that on farther?

[Ryan Dice]

No, I think that kind of gives the structure to the deal, you know, kind of the backstory. So that, I guess just more from a context perspective at this point, we sell the event in 2018. We then had our earn out. Part of the way that we were able to generate such a high multiple is one, you did a great job negotiating a high multiple. But then we also had a significant earn out which was due to be earned the next year in 2019. So a lot of this is just kind of luck and good timing. Obviously, had our earn out been in 2020, the story from our perspective would have been very different.

[Roland Frazier]

Yeah, and it was a. They basically came at us with a typical deal which was a carried interest or a rollover interest where we, they would purchase a majority. It was, I think 80% was the, was the first offer. We went to 90% for a little bit. Obviously now we wish we had stuck with that. And then we ended up settling on 80%. So we sold 80% to them and that was cash plus one year earn out. And we blew through our earn out, meaning we met it and then some. And so we got the absolute maximum that you could possibly get under the deal, which was almost twice what they had paid for anything else, which was pretty great. And that's. I guess I'll talk a little bit more about that structure. As part of it, we did a contract with our event management company because we had the goose and eggs is that if you've got momentum, if you can keep the momentum in one place in one entity, and the momentum is the ability to generate customers at scale and you can then take the other things that you can focus the faucet of the or the fire hose of those customers on and turn those things into different businesses that those customers might be interested in, then that's a great way to scale super fast. And so we turned the fire hose that digital marketer was for accumulating customers onto multiple things, including traffic and conversion Summit. And then to service the business, rather than having all of the businesses have to have their own separate teams, we created a bpo, a business process outsourcing company that basically housed all of the people and functions that made all of these things go like accounting and HR and sales and marketing and all that. So none of those people had to go when we sold it. And we got to keep all of them, plus we got to keep all of our momentum entity, which was digital marketer, to be able to prop other businesses up. And it was also good because they didn't need any of the people because they already had a team. And so all those people would have lost their jobs and been fired. So when you're structuring deals, if you have a momentum entity and create the can create these others, that's a really cool way to do things because you'll probably save everybody's jobs in addition to not giving away a really valuable asset that the other folks might not appreciate. So that was the structure. We also on our 20% so that we weren't stuck in a minority position forever with the company. We negotiated what's called a put option, which would allow us to force them to buy us out after five years and five years after the sale, which, if you're doing your math, would be 2023. And they also had a call option. It's called a reciprocal put call. And the call option allowed them to force us to sell. And it was a sale, as is common in the industries, at the multiple that the original sale had happened at. So if we were bought out of our 20% interest, we would get whatever that 20% of the profits was times the multiple that we sold the business for.

[Ryan Dice]

Do you want to talk about the big dumb mistake we made there?

[Roland Frazier]

Yeah, I am. So we were. Which I had never seen before because I guess there hasn't ever been a pandemic before in recent memory. But so that was it. And we felt very good and we felt covered and protected on our ability to get out. And we felt very good about going forward. We also had, with our BPO and our different other entities, we had a marketing agreement, we had an event management agreement, we had all of these other agreements with our companies that they didn't buy to do everything that made that business go. And that's a really cool strategy too, because again, those companies can do all those things for any other company as well. So we lost none of our momentum at all. And then Pandemic happened.

[Ryan Dice]

Yeah, just. Sorry, just. Just kind of put, put the point in the other one. Just kind of set the, set the tone. So here we are, it's 2019. We've sold this event, We've pocketed enormous amounts of millions of dollars. Right. We still own the core business asset. We still own Digital Marketer, which is the company that was essentially running this business. And the beautiful thing is the way it was negotiated, we still effectively controlled significant aspects of the event. We controlled, you know, in many respects how the event was going to be marketed. We controlled the programming of the event so who was going to be on stage, which. Which meant we still got the benefit of the platform of the event for other brands, for strategic partnerships. I mean, you want to talk about having your cake, the cake of the person next to you, and the cake of the person across and eating all of everybody's freaking cake. I mean, that is basically how this deal went down. And so, Roland. Oh, there's more.

[Roland Frazier]

There's cake on the cake too, because we also got first choice of the best booth space on the expo floor for Free. And we were the only people that could sell anything from the stage, the.

[Ryan Dice]

Only people as the presenting sponsor, we were the only one allowed to actually make an offer from stage. So we got the full benefit still of the platform for all of our other businesses. So it felt at the time like we had truly pulled off, you know, this, you know, this master stroke and you know, ideally had. And if this event was now going to continue to grow and flourish and be internationalized, it was going to be the high tide that pulled up all of the respective ships. So how did everything go so horrifically wrong? Because here we are today, we own, we get bought out of this company for literally nothing. So our 20% gets taken from us and we made $0 off of that and then the event gets shut down completely. And here we are today. So that's the backstory. Now let's talk about how everything went so horrifically wrong. Again, swimming the crap. We're going to name names, we're going to throw stones. I'm just kidding, kind of. And then that last feature too, like.

[Roland Frazier]

How did that happen? So we had this put call option and that allowed us to force them to buy us out or vice versa. The challenge was that if you do your math and say a five year option from 2018 selling put us at 2023, which was right on coming out of the pandemic and a unfortunately timed move of the event to the convention center format which was significantly more expensive but which the Clarion people had planned to do. And they knew, they know, you know, they know that business at least with Expos. So, so when our, when the agreements that we had to help program run, etc, the event expired at the end of 2022, the, the next step was to renegotiate the contracts. And so we started talking about that. But they said, hey, all of our events we've shut down. I think they owned like 153 events or something and they had shut down 50 of them. They shut down like a third of their events that they had paid hundreds of millions of dollars for. And, and so they just, they just killed them. And they did not kill Traffic and Conversion Summit. And what they did with all of the people or I believe they said what they did, I don't know that it's, you know, I'm not saying this is a fact. This is what I understand to be true. The, that they bought, they exercised all the options. Blackstone said, hey, want to pick up a bunch of equity for free? Let's just exercise all our Options which are based on multiples of profits because the profits are literally zero for 2022 or you know, 2021, when we couldn't really.

[Ryan Dice]

Yeah, I think it was a two year look back, right?

[Roland Frazier]

Yeah. When we couldn't really do anything with the events. So let's just buy everybody out. And the multiple, no matter how high it was, it could be a multiple of 100 times. Profit of 0 is still 0. So they bought everybody out. They were not going to buy us out. But ultimately we felt like it made more sense to do that and then talk about renegotiating than it did. It was more. Made more sense just to say, treat us like you're treating everybody else. We appreciate that you love us. And then let's figure out maybe a path forward at some point in the future. So they do that and we end up with nothing. And we're having conversations about a bigger deal where they're gonna buy events. They might buy digital marketer. They're going to have us do the magic that we know how to do with all these other events and it's gonna be a big thing. I think it was. They were going to fund the acquisition of five large scale events and we were going to be 2080 in that. We would have 20 and they would have 80, but they would pay for everything. And then they were going to fund a media company which was going to be 8020 with us owning 80 and them owning 20. So it was a pretty significant deal. And then what happened?

[Ryan Dice]

Well, then as we were coming out of. So I think it's interesting. So the deal gets done in 2019 and then when we're going into. There was obviously the pandemic and it's safe to say that that slowed events down a tad. But I would just, I would love to hear from your perspective because I don't know that you and I, we really haven't had a chance to talk about this. If you were to go back and look kind of doing a post mortem, you know, on the event itself, you know, trafficking conversion summit coming out of the event. You know, we were originally planning on there being 10, 12,000 people in 2020, you know, fall in 2019. I mean, it was going to be the biggest ever, the move to the convention center. We're going to kind of begin this festival of marketing. There was going to be external events related to podcasting, basically shutting down, you know, a street in the Gas Lamp district in San Diego. I mean, it was going to be a whole big thing. The only problem yeah, the only problem is that this event was due to take place, you know, the, I think the third or fourth week in March. And the world effectively closed March 13th. So it was not to be, let's just say. So I'm curious from. And then, so that that happened then 2021, it got pushed out until, you know, we did a virtual event in 2020, which actually was fairly, you know, successful from a, from a profitability standpoint, but it wasn't. TNC 2021 finally able to gather back in person, had the deal with the convention center, so came back to the convention center. Unfortunately, even though it seemed like the world was going opening up, the delta variant spiked like the week before the event. And so there were tons of cancellations. And what was already going to be not a 10, 12,000 person event. We were like, maybe there'll be like 5, 6,000, which was still going to be small for that space. They wound up being like 3,000, which is a big event by most standards, but by TNC small and certainly by the event small, then the next year kind of the same thing. So what were you saying?

[Roland Frazier]

The feel of the event was, was like it was very small. Like it felt like 3,000 people was 300 because we were in the convention center and the convention center is massively scaled larger than the hotel space. We, there wasn't a hotel that was big enough to accommodate us. So that was why it made sense to move to the convention center. But the space was just so cavernously massive. And because of what had happened with ticket sales, the budget, they tier budgets, which is smart. They're like, you know, well, if this many people, this many tickets are sold, we can spend this much on AV and all the, you know, decorating and stuff. And if this, this and this and if we sell out completely, we can spend, you know, 5 million on it. So we were at the lowest of low, like the bare bones budget, branding and badging. And it was so small compared to the scope of the size of the convention center that everything looked like it was dead. I mean, that was really, really tough.

[Ryan Dice]

And then the next year, because again, remember the soul of this event was everybody leaving saying, wow, that was the best event I've ever been to. For the first time ever, people left and went, what the heck was that? That wasn't very good at all. And so not only did they not tell their friends, they didn't come back themselves. And so getting people to come back in 2022 was tough. Wound up kind of taking a, I think Almost took a year off to sort of regroup and to, and to move it, to get, to get back in, wound up moving it to Vegas. That was when, you know, we essentially got, you know, got bought out of the event. So yeah, you're right. Well, before that it felt like maybe it was starting to come back. Obviously they felt like they did it. We can get into why that happened. I would just love to know from your perspective, why do you think? I mean, Covid, blaming Covid, the pandemic, you know, obviously that, that, that is a part of it. But plenty of events were here before the pandemic and they're here after. Why didn't TNC make it, in your opinion?

[Roland Frazier]

I think.

[Ryan Dice]

Why do you think it failed?

[Roland Frazier]

I think that the business model changed that, that TNC was a content experience driven event and it was driven by people who knew the attendees because they were the attendees. It was driven by marketers for marketers and that when the corporate people took over despite. I remember, well, sitting when we had the very first like sit down dinner conversation with the folks from Clarion in the wine room at the Marriott San Diego and we're talking, they're talking about, you know, well, this is what it looks like for us to buy an event. And we said, I mean the challenge is that this is an event that is for marketers by marketers and it's the heart and soul. And they said we won't change anything. Literally said that we won't change anything as long as you guys continue to be profitable. We're totally hands off. Yes or no. Remember that or no?

[Ryan Dice]

Oh yeah. And that was why they were happy to do a programming, you know, production agreement with us still.

[C]

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[Ryan Dice]

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[C]

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