PointCast pushes a new strategy

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, 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.