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Start-up Plaxo sketches out business plan

The company releases a new version of its software and details its revenue plans to dispel controversy surrounding the service.

Start-up Plaxo, a developer of a contact management service, released a new version of its software and detailed how it plans to make money.

Plaxo's information networking application attempts to take the pain out of keeping up-to-date with everyone in an e-mail address book. People who join the information network give the company access to the phone numbers, addresses and e-mails of the individuals listed in their Microsoft Outlook contact list. Mountain View, Calif.-based Plaxo then automatically updates information, either by finding it on its own network or sending e-mails to the last known address, requesting information. A Web version is also available.

The basic service is free, but the company plans to charge for more elaborate versions, said co-founder Todd Masonis, who started the company after graduating from Stanford University. A VIP version that costs $19.95 a year offers better customer support, for instance. Future paid-for versions might include automatic synchronization for cell phones and handhelds, he added.

Third-party partnerships will also bring in revenue, the company said. Plaxo version 2.0 incorporates a Yahoo search bar into the Outlook interface. Ideally, subscribers will instigate searches from the Outlook bar. Yahoo and Plaxo share revenue generated from these searches.

In the future, more partnerships could be added by linking to the company's application programming interfaces (APIs). By using Plaxo's APIs, an e-commerce site could, hypothetically, automatically retrieve an address for the intended recipient of a gift, Masonis said.

The company also announced that Cisco Systems has become an investor in a $7 million round that recently closed.

So far, more than 2 million people have signed up for the service since May 2003.

By disclosing its revenue plans, Plaxo hopes to defuse the controversy surrounding the company. Detractors have asserted that information-sharing networks like LinkedIn and Plaxo create a potential for abuse and invasions of privacy.

Earlier this year at PC Forum, critics asked pointed questions to Plaxo board member and former Yahoo executive Tim Koogle about the company's business plan. Koogle's nebulous answers seemed only to heighten suspicion.

Some venture capitalists have asserted that the opportunity for making money through such networks is limited.

For its part, Plaxo asserts that it has taken precautions to avoid conflicts and is now trying to undo the "urban myths" that surround it, said Rikk Carey, vice president of engineering. People do not have to expose their personal information or contact information to others on the network. Thus, subscribers can prevent others from getting information about them or their contacts.

The company has created a privacy policy that allows users to retain the rights to their information, even if the company gets acquired by another, he added. People presumably would have to remember to retrieve their information in the event of an acquisition, but the avenue for protecting the data exists.

The service also tries to limit e-mails requesting information as much as possible. People have to manually click a box for each contact before the service will send out an e-mail requesting new information.

Finally, the company does not have plans to sell personal information to marketing services.

"That has never been part of the plan and never will be part of the plan," Carey said. "The conspiracy theories around Plaxo are almost comical."

Masonis, however, admitted that part of the reason the company has attracted a relatively large contingent of critics, considering its small size, is that these issues weren't addressed appropriately early on.

"The main reason (for the criticism) is that we didn't articulate a business model," Masonis said.