Atomica, whose reference tool returns definitions, stock quotes and other information from dozens of sources, faces a difficult transition as it tries to extricate itself from its free, consumer-oriented origins.
"I think they can go corporate; I just think it's going to take a lot of time," said Sheryl Kingstone, an analyst with The Yankee Group. "I use the tool myself sometimes, but from a business model standpoint I'm still struggling because I think a lot of people might want to use the free stuff and not want to upgrade."
Atomica's turbulent half-year will sound familiar to surviving Internet companies that had pinned their original hopes on making money from the large audiences of free Web sites or applications.
The 9-figure sale prices of popular, free Web sites such as the Hotmail e-mail service and applications the ICQ instant messenger to the likes of Microsoft and America Online, respectively, spurred start-ups like GuruNet to focus on attracting users first and worry about earning money later.
Later came sooner than expected, and companies such as Atomica that remained independent are now struggling to turn a profit. In November, GuruNet abandoned its consumer focus and name in favor of a drive to attract businesses to license its quick-answer application.
"The monetization of eyeballs hasn't really proved itself," said Atomica President Mike Stangl. "We've had many consumers offer to pay us for it, but we think the bigger value proposition is in the corporation."
Atomica's corporate application, the Atomica Enterprise Edition, is in trials, and the company says it is close to scoring a few Fortune 500 customers.
The Enterprise Edition works much like the consumer application did, with quick answers coming through the "Answer Bar" of a small window on the computer desktop. The difference is the Enterprise Edition taps into a corporation's internal data sources, including parts inventories, human resources rosters and other databases.
The company's targets are sales and marketing departments, customer service and tech help call desks, and resellers that rely on having a steady, updated stream of information about their suppliers' products. Companies being courted by Atomica's sales force include hardware and software manufacturers, financial services institutions, pharmaceuticals and health care companies, and government agencies working on health care.
Atomica's best bets, according to The Yankee Group's Kingstone, are if it can broaden its application to encompass traditional sales, marketing and customer relations capabilities, or if it can partner with providers of those applications to embed Atomica within them.
The Enterprise Edition costs $250 per person per year, earning the company between $25,000 and $300,000 per client. The price includes Atomica's software and services to install and maintain it.
Atomica, which last week discontinued the old GuruNet application, still maintains a free consumer tool--at least for the time being. The consumer application saw more than 2 million downloads, with as many as 100,000 unique simultaneous consumers.
"It's still available for now," said Atomica's Stangl. "It's a great service, and if corporate services can subsidize it, we feel that we're giving back something to the community. But we're not trying to build consumer business. It doesn't cost us a significant amount of money to keep a version out there for free."
Between the free consumer version and the new Enterprise Edition, Atomica in March launched a midrange product called Atomica Pro that was a version of the consumer product for use in corporations. It did not, however, tap into the company's own information stores.
As part of its drive to reach profitability without having to secure another round of funding, Atomica in May laid off nearly half its 100-person staff. Most of the cuts came in the company's research and development wing in Jerusalem, with some cuts in the company's Burlingame, Calif., headquarters as well.
May also saw the departure of Chief Executive Eric Tilenius, who began his tenure in April 2000. Tilenius left for "personal reasons," Stangl said, and company founder and original CEO Bob Rosenschein has resumed his old duties as chief executive. The company has no current plans to replace him.
Atomica's investors include Highland Capital Partners, Flatiron Partners, Wit-SoundView Ventures, Israel Seed Partners, Chase Capital Partners, America Online Investments, Goldman Sachs, Guy Kawasaki's Garage.com, Ron Conway's Angel Investors and Robertson Stephens.