After a wave of "push" technology companies hit the market since PointCast introduced the concept, the industry is awaiting an inevitable shakeout. And the market leaders are already jockeying for the top positions.
Half a dozen high-profile push companies are peddling their wares, not to mention dozens of smaller firms. The market has already divided into basically two different business models.
On one side are companies like Marimba that make money by selling push technology to help other companies create their own information networks. On the other are companies that collect advertising, subscription, or pay-per-use fees on content they deliver. PointCast, the company that popularized the original concept of Internet broadcasting, or "pushing," is in the second group.
And leaders on both sides are intimating that they'd be worried if they were the other guy.
"I think there will be a shaking out of the market in the next six months. Many of these companies aren't standing on solid ground. They're like plankton," said Marimba chief executive Kim Polese. "We hear repeatedly of technology companies that are paying for content when they don't have a lot of revenues coming in. That's not something that's going to sustain them."
Investors Sequoia Capital, Hummer Winblad Venture Partners, Robertson Stephens, Bay Partners, Stanford University
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Product InfoPaks, InfoFlashes, FunFlashes, SoftFlashes
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Product News and information over the Internet
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Christopher Hassett, PointCast president and chief executive, agrees that the push market is ready for a shakeout. But he thinks that it's companies like Marimba that are in danger.
"Giants like Microsoft and Netscape are looking at offering their push technology, in some cases for free to users. That reduces the need for companies to purchase the software from a Marimba or BackWeb," he said. "It'll be a slugfest with Microsoft and Netscape. Companies like Marimba and BackWeb may find it hard to compete."
Netscape is creating its own push technology, called Constellation, to install information channels on the desktop of every Communicator user. The feature didn't make it into the current beta version but is set for testing in the second quarter and final delivery in the second half of this year.
Microsoft too is working on its own technology, called the Active Desktop, a feature of Internet Explorer 4.0 now in beta. It provides "channels" for information services from news headlines to stock quotes. Right now, Microsoft is looking for partners like PointCast and CNET's NEWS.COM to provide the content that the Active Desktop will broadcast.
Hassett thinks that, eventually, Microsoft will start collecting content on its own and selling ads and subscriptions for that information, a move that would pit PointCast and Microsoft against each other.
"I do think they will look at the PointCast model [of being a broadcaster of aggregated content], but they haven't yet," he said. "It would be naive for me to think they won't go for the broadcast concept."
But he believes that his company has that critical window of opportunity to establish itself before then. In the meantime, the competition won't come from the flock of start-ups that followed him into the push arena but from those established media companies that can afford to create their own networks and broadcast their own content.
In fact, Hassett and other industry observers say several of those start-ups trying to promote their own push technologies are already in trouble. One of the first casualties of the shakeout is IFusion, which recently filed for reorganization under Chapter 11 bankruptcy laws.
Formed in 1995, IFusion was trying to both create its own push technology, called Arrive, and create an information network around it. The plan was to sell Arrive to other companies and compete with them by distributing information directly to readers.
It had started beta-testing Arrive in January but didn't quite make it to the May launch date before being driven into bankruptcy court. Only 10 of 140 IFusion employees still have jobs, although this small group is still planning a comeback.
Former employees says IFusion had its own unique problems: mismanagement and spend-happy executives.
But Kelsey Selander, marketing vice president for competitor BackWeb, said it was a lack of a clear business strategy that led to IFusion's downfall, namely its attempt to be both a technology and a content provider.
"We're in a fast-paced marketplace, and to succeed you need to have a very clear-cut business strategy and good technology," Selander said.
IFusion's founder and former chief executive Michael Recanati did not return phone calls to his home. Calls to IFusion's corporate headquarters were also not returned.
Investors in these privately held companies fully expect to hear other stories like this. But push is so hot that everyone will still expect a handful of companies to make it and eventually be well-received on Wall Street when it comes time to go public.
The question is simply which names will make the cut: Marimba or PointCast? Marimba and PointCast? Neither?
Andy Rachleff, general partner with venture capital firm Benchmark and PointCast investor, sticks by the axiom that the first to market is what really counts. That's not surprising, given that pioneering is PointCast's chief advantage.
Other major venture firms, however, are backing the second wave of push companies, those like Marimba that took the concept and adapted it from a media to a technology model. The only thing that anyone is sure of is that there will be fewer push companies six months from now.
"No one is trying to start a push company now," said Kevin Compton, general partner with Kleiner Perkins Caufield & Byers. Kleiner's Java Fund is an investor in Marimba. "It's a normal process. You get a lot of companies flocking to do the same thing, and then the also-rans disappear or reemerge as something else."