It was a scene straight out of the film "Wag the Dog."
We were talking to Harry Gruber, CEO of InterVu, when suddenly he blurts out, "CNN just asked us to deliver the war." War? What war, Harry? "The war, the war with Iraq, you know." Uuuuh, last we heard the war was over. Saddam Hussein caved. No war, no broadcast. "Well, you know, if there is a war."
So goes InterVu's business right now. Big customer, big potential, but
it just hasn't happened yet. All this may soon change.
Let's back up. Phone calls to three different Internet analysts brought the same response. "InterVu? Never heard of it." Little do they know InterVu has the potential to make RealNetworks look like a penny stock.
Feeding the pipe Solano Beach, California-based InterVu (ITVU) is not, we repeat, not, a competitor of RealNetworks. In fact, depending on who you talk to, it may have no competition at all. Unlike RealNetworks, which provides do-it-yourself tools for anyone who needs to encode and deliver multimedia over the Internet, InterVu is a full-service video shop. (RealNetworks made a move in this direction, however, when it announced its RealNetwork joint venture with MCI last August.) It provides all the hardware and infrastructure necessary to deliver video encoding, video on demand, and live broadcasts, as well as a proprietary video ad banner technology, V-Banner. Because its video servers are networked across nine backbones, InterVu claims it can deliver higher performance at lower costs.
This system, which InterVu feels is patentable, has some very attractive qualities, not the least of which allows Web sites and Internet advertisers to add real-time video to their sites and banners without having to invest in any of the infrastructure to make that happen. (According to InterVu, adding video to an ad banner can enhance clickthrough by up to 300 percent.)
According to Bill Relyea, senior vice president with Josephthal and Co., one of the underwriters of InterVu's initial public offering, the
company "is the only one with this type of technology, which is why it has attracted the interest of content providers like NBC and advertisers like Budweiser. It helps solves the problems of speed, scale and reach." But what about bandwidth and the introduction of cable modems and DSL technology? Won't that finally solve the problem of providing video on the web? According to Mr. Relyea, "you still have the problem of how many hops it takes to get it to the pipeline, so @Home is not the ultimate answer. Even if you have a great 'last mile', you still need this service to enhance delivery to it."
Commercial interest
InterVu's business can basically be split in two: advertising and
content delivery, with advertising initially providing the largest
portion of revenues. InterVu's customer list reads like an ad agency's
wet dream: Intel, United Airlines, Budweiser, Volvo, Hewlett Packard,
Yahoo, Sony, Major League Baseball, Turner Classic Movies, and even
Court TV.
On the advertising side, InterVu has formed a joint venture called
TrueVue with MatchLogic, a company now owned by Web directory Excite.
Whenever a customer needs "rich media" and a way of delivering it
faster, they can go to TrueVue, get video with their banners, and,
because they are charged on a CPM (cost per thousand viewers) basis, the advertisers can still walk away happy because they don't pay unless someone looks at the ad. "The MatchLogic deal is great," says IPO guru Francis Gaskins of Gaskins & Co.. "It's not what they went public on but it adds to the story. [Advertising revenue] is where the most visible growth is for InterVu."
For content delivery, InterVu has inked a deal with NBC to deliver its
entertainment video and audio content on NBC's Web sites, and large
outfits like CNN and Disney may be choosing to outsource their video
delivery in the future, war or no. Of course, all Mr. Gruber would say
is, "from what I can tell, it would make more sense for places like
Disney and CNN to outsource the video delivery side rather than spend
money on the servers and the engineers to run them." So can we count on a deal from those companies in the future? "No comment."
The peacock is on board
InterVu joined the public markets back in November 1997 when Josephthal & Co. and Cruttenden Roth took them public in a 2.0 million share IPO. With an offer price of $9.50 and second-tier underwriters, the IPO went pretty much unnoticed.
At the same time that InterVu went public, NBC Multimedia, a subsidiary of the National Broadcasting Co., agreed to purchase 210,526 shares of common stock at $9.50 per share, forming a two-year strategic alliance with the company with the option to renew for another two years. In addition to this, NBC acquired a 10 percent interest in the company with a separate purchase of preferred stock. This was not an insignificant event. NBC is a big name, and not only will InterVu be delivering video entertainment for the peacock, NBC will help introduce InterVu to its affiliates and refer business to the company.
Luckily for InterVu, it already seems to have the customers, technology, and competition (or lack thereof) all locked up. In fact, as Mr. Gaskins notes, "InterVu has been kind of lying there unnoticed, but it's worth buying based on the partnerships with MatchLogic and NBC, and the fact that they pretty much have no competition in this space." Moreover, if you buy the fact that Forrester Research projects that bandwidth delivery will generate $5 billion in revenue by 2001, and the related statistic that 25 percent of that was spent on audio and video in 1996, pretty soon you're talking real money. |
