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PointCast pushes a new strategy

As the formula for high-tech success has changed, this pioneer of push technology faces major obstacles today.

SUNNYVALE, California--Two years ago, it was a simple equation: "Push" technology plus PointCast equaled one hot company.

But the formula for high-tech success has changed a lot since then, and several analysts note that this pioneer of push technology faces major obstacles today. Some say simply that the push concept was doomed from the outset, a proverbial solution in search of a problem--and that PointCast was emblematic of this larger phenomenon.

Already, a number of smaller players have fallen by the wayside as industry

n Push technology is software that pumps information directly to users' desktops, rather than requiring them to search for it themselves on the vast Internet.

heavyweights like Microsoft and Netscape Communications have stepped into the fray, developing push technologies of their own to integrate with their Web browsers. At PointCast, subscriber growth has been less than stellar as the company encounters such issues as concern over corporate network congestion.

But PointCast is far from throwing in the towel. The privately held company installed a new CEO late last year, and now is looking to sharpen its focus and strategy.

Launched in 1996, PointCast barged onto the high-tech landscape with an innovative, albeit hybrid, business model--a broadcaster of news and information to the desktop, and a provider of push technology to deliver this material to the corporate market. The company has since gotten out of the market of selling servers for push technology and now gives away its intranet tools for free.

The company's revenues largely are derived from advertising, with a small portion coming from corporations and government agencies that want to license its technology to push ad-free content to their employees. This summer, the company also plans to add subscription services to its revenue base.

PointCast has broadened its sights beyond individual desktop consumers, Dorman Newsmaker seeking to entice companies to use its service to deliver internal information to employees over their intranets, and to customers and vendors over their extranets.

Bob Bertrand, a systems analyst for utility company Houston Industries, said that when his company began its service two years ago, it started using PointCast to put external and internal information on employee desktops. "We're going through deregulation and need to have information get to employees quickly," Bertrand said.

Yet despite this shift toward the content business, PointCast retains the image of a push technology company--a reputation it's been trying to shed in favor of emphasizing its image as a broadcaster of news and information.

Others are following suit, trying to distance themselves from the push technology itself as that market is seen as being in decline. Instead, companies are adopting the term "knowledge management" to replace the term "push" in their corporate strategies and literature.

Perception and subscriber growth play a role in PointCast's success record

Gartner Group analyst Maureen Fleming on PointCast growth
with advertisers, who face an increasing number of options as to where to spend their dollars to reach executives and employees in the workplace. Among those options, analysts said, are services that create personal information portfolios, like "My Yahoo," and Microsoft's "Active Channels" push feature.

"I consider my competitors those people who are matching demographics with us in attempting to get marketers to buy their media product to reach that particular demographic," said David Dorman, PointCast CEO. "So, I sort of feel like, ultimately, we will be successful by demonstrating that we reach this business demographic more effectively than other people."

Viewership is indeed key to the company's strategy. PointCast's advertising revenues are based on its subscriber numbers, rather than on the number of content pages delivered. The model is similar to television, in which advertising rates are based on viewership. For example, PointCast charges a flat fee to deliver a minimum of two 30-second ad spots during either a two- or four-week period.

Analysts are largely unhappy with PointCast's growth rates. The company last February said it had reached more than 1 million active, ongoing viewers. Today, that figure has grown to only 1.3 million active users.

"PointCast achieved a million subscribers probably later than we thought we did. That was because our tools and our ability to count the number of subscribers weren't as good in the early days as they are now," Dorman said. "We probably got a lot of credit for stuff early on that we really didn't deserve. So our ramp has been positive, there's no question about it."

Based on figures from the Audit Bureau of Circulations, however, PointCast had 800,000 subscribers at the end of 1996, and 1.2 million by the end of 1997. "That is not the kind of growth you'd expect from a company that has a runaway product," said Maureen Fleming, an analyst with the Gartner Group.

Two particular factors play key roles in PointCast's penetration of the corporate market: eliminating concern over clogging companies' networks and serving up content that is required reading.

Some of those companies worried that the capacity of their networks effectively have limited the use of PointCast feeds.

"We haven't banned PointCast, but we manage how and when employees can access that information so it doesn't create a problem on our internal network," said Bill Price, a spokesman with Lucent Technologies.

And the company faces mixed reviews over the content that it does manage to analyst David Coursey on PointCast's markets
get onto corporate desktops.

Last September, PointCast announced plans for ten content categories, ranging from automotive to banking, that would be part of its PointCast Business Network. Under the Industry Insider category, for example, news, trends, and information on companies in a particular industry are automatically pushed to the user's desktop. The vast majority of the editions will be up and running by the end of this quarter, with the last two to debut by the end of the fourth quarter.

David Coursey, editor and publisher of, said he likes the concept but thought improvements could be made to the edition on health care. He said the categories should be divided based on physicians' specialties, rather than on industry categories, such as pharmaceuticals.

Others are troubled by more than this kind of detail. "PointCast is offering users information that is either not proprietary or is so widely Dorman Newsmaker available that it makes it difficult to gain a competitive advantage," the Gartner Group's Fleming said.

But Phil Gibson, director or Interactive marketing at National Semiconductor, said the chipmaker uses PointCast to disseminate company news, to supply external information.

Gibson noted that he would not consider using Microsoft's or Netscape's push services to broadcast information because the technologies may not be compatible on all desktops.

"I still have to communicate to all these people," Gibson said, noting that he would like to see an industry standard. "It's easier for me to stay with this PointCast client that plays the middle person."

PointCast's effort to target specific demographics this way may allow the company to charge a higher advertising rate, said Patrick Keane, an analyst with Jupiter Communications.

Assessing PointCast's advertising revenues is difficult because, as a private company, it does not disclose such figures. But Dorman said he anticipates that the company will come close to hitting a "break-even" point by the end of the year, and added that an initial public stock offering is possible in 1998.

The company already has raised $60 million in private financing from venture capital firms as well as media and technology companies, according to Andrew Rachleff, a general partner with Benchmark Capital and a PointCast board member. "We're shipping on an annualized rate that is in excess of $20 million," he said, adding that several traditional and new media companies have made unsolicited inquiries about a buyout.

Benchmark and another venture capital group that invested in PointCast, Mohr Davidow Ventures, said they are in no hurry to cash in. Both firms said they generally average five to six years before reaching that point.

Regardless of its finances, PointCast and push technology in general have created some die-hard fans.

National Semiconductor's Gibson puts it this way: "When we did our project, there was a lot of excitement around using PointCast and push technology and that was just the 'in thing' to do," he said. "If I look at it today, push has suddenly become the unpopular business model. But I think there are still places were push is an appropriate communications tool."