The King of Clicks

Andrew Darwis rejected a $50 million offer to keep his Kaskus site independent.

By Aditya Wikrama and Ardian Wibisono

Last year, a major international internet company offered Andrew Darwis $50 million to buy his Kaskus.us site, which would have been the most ever paid for an Indonesian website. After a few weeks of talks, Darwis told them no thanks. (The company was reportedly Yahoo but neither Andrew nor Yahoo would comment.)

Crazy? Perhaps. But Andrew is fiercely independent. “I didn’t like the offer because I’m afraid our brand would have been diluted if we had been bought,” he says, “I cannot accept that.” Andrew says he has rejected no less than six offers in the last few years.

The investor interest in the site is obvious. Kaskus is the biggest internet site in the country, with 2.5 million registered users, 288 million posts and a reported 17.5 million page views a day. It ranks as the country’s sixth most popular site—lagging only global giants Facebook, Blogger, Yahoo and Google (both Google.com and Google.co.id), according to internet ranking company Alexa. Kaskus is well ahead of its nearest rival, Detik.com, which ranks number 11.

Kaskus has estimated revenues of Rp 36 billion, which increased 250% in 2010. Asked about the $50 million valuation, Andrew said the price included factors such as number of unique visitors, membership size, and potential added revenue streams such as payment systems. Another site, 411sites.com, puts an even-higher value of $66 million on Kaskus.

The biggest evolution of Kaskus may be just starting: e-commerce. The site had always had informal buying and selling, with members posting things for sale that others would buy. Now the site is beginning to build its e-commerce capabilities and make them mainstream. Its forum for transactions, called FJB, is strictly between users and Kaskus doesn’t get any revenue from the transactions. However, Kaskus last year introduced Kaspay, which provides secure online payments for users. The site also sells e-pulsa, online credits for prepaid mobile phones, reportedly $3.6 million a year. It has also just added KasAd, which allows smaller advertisers to place ads on the site. The company says its system, similar to Facebook’s ad system, could be used by traders or small businesses to sell goods through the site.

Kaskus has humble beginnings. Andrew, 31, started Kaskus in Seattle in 1999, with two other Indonesian students as cofounders while he was studying multimedia and web design at the Art Institute of Seattle, later getting a Master’s degree in computer science from Seattle University.

Kaskus was initially meant as a simple forum for Indonesian students overseas. Andrew’s startup capital? A web hosting fee of $7 a month. The name is an abbreviation of “kasak-kusuk” or chit-chat.

However, the site long remained a sideline for Andrew, who took a job as a programmer with the Seattle-based site Lyrics.com. The site generated a small profit as Andrew sold banner ads to pay for the hosting and other costs. Users created the content for free. Two other co-founders left to pursue other interests.

Everything changed in 2008, when Andrew’s cousin Ken Dean Lawadinata visited him from Indonesia. He urged him to move back to Jakarta and run Kaskus as a serious business. Ken sensed that Indonesia’s internet community was on the verge of a major boom. The site was morphing into one used primarily by Indonesians back home rather than overseas students, and had 350,000 registered members. Andrew was reluctant: “I had a good living in Seattle, working as programmer for Lyrics.com. So why I should leave behind all these good things in Seattle?”

Andrew agreed to come back but only if he didn’t need to manage the daily operation. “So Ken become the CEO, I’m the CTO [Chief Technology Officer], and Danny become the CMO [Chief Marketing Officer],” Andrew explains. That year, PT Darta Media was incorporated, and the site was located on servers inside Indonesia. Andrew owns 41% of Darta Media, Ken 39%, with the remaining 20% owned by other partners of the site.

The site immediately ran into trouble with the government, which had just passed Law No. 11/2008 against Indonesian sites carrying porn. The Kaskus home page says that it stands for “freedom of speech.” One of the most popular forums on Kaskus at the time was BB17, which included pornographic images and discussions. Other forums posted pirated software, encouraged gambling, or held wide-open discussions on sensitive topics like race and religion, which was also forbidden in the new law.

Andrew took the difficult decision to close down the discussions, ban pornography and hire monitors, known as momods, to keep the site clean. Instead of hurting usage, membership grew and, importantly, Kaskus started attracting top-tier advertisers such as Toyota, Indosat and Bank Central Asia. Before this move, most advertising had come from online gambling sites.

“We had to change from being a community forum filled with porn content, and kick out major advertisers that were online gambling firms,” says Andrew. To also spiff up its image, Andrew moved offices. “We first had our offices in the Kota area of North Jakarta but no advertising agency would come there, so we moved to Melawai in South Jakarta, which is more acceptable,” says Andrew.

This year, Kaskus plans to do major upgrading of the software engine that runs the site, one which was developed inhouse. “Our own engine will give us more scalability,” says Andrew.

To support the upgrade, Kaskus plans to hire more staff, from 40 now to about 100 by the end of the year. Andrew intends to remain profitable, despite the new expenses. “We’ve always been profitable from the start, but most of our profits are reinvested to buy and upgrade our servers to keep up with user growth and traffic,” he says.

Although Andrew doesn’t want to sell the entire company, he is not against selling a piece of it. “We are working on a deal to sell a minority stake to a local conglomerate, which we cannot name yet. The transaction should be completed in a couple months,” says Andrew. “Most investors we’ve met insist on a quick return on investment. We were surprised that this local investor shares our vision to develop Kaskus over the long term.” The local investor is rumored to be the cigarette maker Djarum, although Djarum declined to comment. 

Andrew says the upgrade and added staff will keep Kaskus competitive. Among his rivals are some with deep pockets and major resources, such as a planned local e-commerce site by Japanese e-commerce giant Rakuten in partnership with media group MNC. Another is Plasa.com, owned by PT Telekomunikasi Indonesia. Despite saying no to his own buyout, Andrew is glad Yahoo acquired local site Koprol, as it’s a good sign for the future of Indonesia’s internet community. “We like the Koprol deal, as it will motivate local startups to work harder,” says Andrew. 

(the story is taken from Forbes Indonesia Magazine)