Red Herring article on Pointcast. This is exactly the point I was making in an earlier post; they are not a software company, they are a news and information company that makes money by selling advertising. This is the business model for TV, Radio, and Newspapers, and now Pointcast is using this model for desktop delivery of news and information to the corporate world. Here is the article.
herring.com
AGGREGATE, THEN
SEGREGATE
PointCast goes vertical in its bid
to attract corporate users.
By Dan Mitchell
November 5, 1997
Before PointCast could even think about an
IPO, it had to get some things in order.
First, it had to solve its technology problems.
Done that.
Then, it had to rearrange its business model.
Done that.
Finally, and most importantly, it had to find
someone to run the joint. With last week's
announcement that former Pac Bell head David
Dorman will become the new CEO, it's done
that, too.
Now, the push-media company can file for its
IPO. But should it?
"Probably," says Steve Harmon, senior
investment analyst for The Internet Stock Report.
"They have a helluva lot of potential."
Mr. Harmon has been less enthusiastic about a
PointCast IPO in the past, but he says now that
the company is focused on marketing its content
as opposed to its technology, it has a real shot.
"Wall Street is big on brands, And PointCast is
like Yahoo or Amazon in that way -- it's a
category killer."
Things might have gone differently if PointCast
hadn't made some shrewd strategic moves.
Foremost among them was the decision to
emphasize content over technology. For instance,
where it once sold its corporate Web server,
I-Server, for $995, PointCast now gives it away.
Part of the reason was to address complaints that
PointCast was clogging local networks (a
problem the I-Server helps solve), but part of it
was because PointCast has decided once and for
all that it's not a software company.
"(America Online) kind of realized too late that
they are not a technology company," and
suffered as a result, says Mr. Harmon. And with
only 250 employees, PointCast would be
hard-pressed to try to compete with software
companies employing thousands.
"PointCast has nothing to do with push
technology," declares Jaleh Bisharat, PointCast's
marketing chief. Despite the fact that PointCast
creates and distributes its own servers and
players, Ms. Bisharat insists the company does
not compete with Marimba and BackWeb, two
other push companies that emphasize their
technology. "We're a news and information
service."
Nevertheless, "It was important for them to
stress their technology early on," says Daniel
Rimer, Internet analyst at Hambrecht & Quist.
"Back then, nobody knew what push technology
was. Now, they're stressing content."
In particular, PointCast is pushing its new
emphasis on vertical markets by customizing
news and information through its "Industry
Insider" channels. The channels -- aimed at
particular industries such as banking and real
estate -- address several concerns at once. Part
of PointCast's problem had been complaints by
corporate managers, the company's targeted
clientele, that their employees were spending too
much time wading through the general content
PointCast had been beaming to their desktops.
The strategy now is to aggregate, then segregate.
"Obviously (Industry Insider) is a better sales
pitch," says Mr. Harmon. "Imagine if you had 25
newspapers delivered to your employees each
day. They'd never get any work done."
PointCast's strategy "is like cable TV," says Mr.
Rimer. "Each channel is geared toward a
different constituency. And it works."
And, as Mr. Rimer points out, it's also a good
competitive move. As Microsoft and Netscape
enter the market with their generalized push
products, PointCast has already carved out a
niche. "(Netscape's) Netcaster and (Microsoft's)
Active Desktop offer breadth -- surface
information -- while PointCast is providing
depth," says Mr. Rimer.
PointCast is just getting started on its business
channels, with 3 of 10 rolled out so far. But if the
company's College Network is any indication,
advertisers will flock to Industry Insider. The
College Network debuted last summer, and has
attracted such big names as 7-Up, American
Express, and Ford. In all, 10 big-spending
advertisers have signed on to the College
Network, none of them previous PointCast
customers.
All signs point to an IPO, but the company's
keeping mum. All Ms. Bisharat would say is that
Mr. Dorman has been meeting with the board of
directors. After heading Sprint Business for 13
years, he became chairman and CEO of Pacific
Bell in 1994. When SBC Communications
purchased Pac Bell last year, Mr. Dorman was
put in charge of long-distance services and the
Internet. "The Internet is one of the most
overhyped things ... in our generation," Mr.
Dorman declared in his introductory conference
call last month with analysts and the media. In the
same call, he said PointCast has seen growth that
is "IPO-able."
Of course, as with all other technologies, serious
growth will come to the push media market when
it can reach into the home market. So far, limited
bandwidth precludes PointCast from making
headway there. But Mr. Rimer says not to
worry. "Technology will catch up to PointCast.
It's just a question of when." |
