Tuesday, July 26, 2005

Feed me.

It is all about binning and winnowing. RSS will tell the tail.

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RSS Goes Corporate

Information overload also affects companies, and they're more likely to pay for a cure.

July 18, 2005 Issue

When Charlie Wood started looking into the idea of remaking a consumer newsreader product for the enterprise, he had no idea how to price it. “Desktop RSS aggregators are available for free or for 39 bucks, but enterprise software is different,” says the former vice president of enterprise solutions at NewsGator.

So he took a risk, and asked beta participants to pony up five-figure payments for their 1,000-user deployments.

The response? “They just say ‘OK.’ Nobody has blinked.”

NewsGator helps its customers collect RSS feeds, which are web content summaries. RSS, generally agreed to stand for “really simple syndication,” is especially useful for reducing the information overload of spam-riddled email inboxes and frequently updated web pages. Users subscribe to feeds of their choice, and receive batches of new content without leaving the comfort of the reader.

While a newsreader is a lightweight project—not much of a business—NewsGator has been aggressive about synchronizing a wide array of platforms, from Microsoft Outlook to the web to a desktop client to a mobile phone application. Slap on behind-the-firewall security and you have all the trappings of an enterprise product.

That’s why JupiterResearch analyst Michael Gartenberg suggested in his blog last month that Denver-based NewsGator is “poised to become ‘the RSS company.’”

“I want ubiquitous RSS and it looks like these folks might just be the ones to get it to me,” he wrote of the two-year-old startup.

Enterprises Take Note

Until the last year, RSS was nearly impenetrable for all but the earliest of adopters, due to the complexity of reader setup, the narrow assortment of available feeds, and disputes over standards. Though NewsGator has one of the most popular reader packages, it’s all relative. Pew said in February that just 5 percent of U.S. Internet users used RSS aggregators, while Jupiter put the number at 12 percent in March.

However, MSN, Yahoo, Ask Jeeves, Google, Amazon, and AOL are integrating RSS into their portals, and all major browsers will have an aggregator embedded when Microsoft comes out with the new version of Internet Explorer. Various estimates put the number of active feeds at slightly over 5 million.

Whether they’re leading or following the bandwagon, enterprises are starting to realize that the strengths of RSS are great fits for the corporate environment. Email, web browsers, and databases often fall short when an enterprise wants to send a message to hundreds of thousands of global employees, to measure buzz about its products, to filter industry news for relevancy, or to synchronize employee’s web needs between work, home, and travel use.

Targeting the Big Spenders

NewsGator CEO J.B. Holston says his company is best positioned for corporate sales because it “focused on selling to the enterprise from the start. Our first claim to fame was an RSS reader for Outlook.” NewsGator is set to release its first enterprise newsreader package in August. The young company has yet to take a hard line on any one pricing model; it has tried standalone software and subscriptions, but the enterprise product will probably be per-seat.

Though NewsGator has explored the realm of content with its partnership with Factiva, offering Factiva feeds for existing subscribers, the company firmly plants itself as an aggregator. Sunnyvale, California-based KnowNow, however, wants to sell the package deal, with both creation and aggregation.

KnowNow’s roots are in enterprise messaging—pushing content behind the firewall. That’s the opposite of NewsGator’s starting place: pulling content to an individual. Last fall, one of KnowNow’s flagship customers, Amsterdam-based ING Groep, presented it with a laundry list of requests.

ING Chairman Michel Tilmant wanted to send a message to 115,000 employees without getting blocked by spam filters. The treasury department wanted instantaneous updates to worldwide company phone directories. The corporate leadership wanted to get outside information into its portal, but wanted to control the available channels and feeds.

KnowNow CEO Michael Terner says RSS is the solution. “It’s in between integration companies and the blogosphere—connecting databases together, but with wide distribution.” The success of the customized ING product spawned a new KnowNow “Enterprise Syndication Solution,” to be released this month, which strengthens the company’s four-year-old, high-performance server offering with feed reader and feed creation. The product will be priced by server, not by the user, for a typical fee of $50,000 to start.

Like NewsGator, KnowNow uses centralized servers to poll feeds, rather than letting individual readers overload publishers’ bandwidth. But Mr. Terner boasts that the company has an additional patent-pending technology advantage over competitors. “Our software is embedded in the portal. It’s not request-reply; we keep the connection flowing to update the browser.”

But Mr. Wood criticizes KnowNow’s focus on real-time delivery. “One of the real benefits of RSS is that it’s asynchronous—you can get all the stuff overnight and then read it in the morning.”

Other Startups

Most startups that have expressed interest in the enterprise are on the aggregation side of the dichotomy, but Sligo, Ireland-based Nooked and Los Altos, California-based SimpleFeed facilitate feed creation and management, with products targeted at marketing departments for customer relations.

While Nooked and SimpleFeed are in the very early stages of funding, San Francisco-based Moreover, which helped write the first version of RSS in 2000, is healthily profitable. “We’ve been making money off of RSS and XML [Extensible Markup Language, which RSS is written in] distribution of news for five or six years,” says Jim Pitkow, CEO of Moreover, which aggregates news, adds metadata, and outputs feeds not only to portals, but also to corporate clients like CitiGroup, Microsoft, Adobe, and Verisign.

Like Moreover, New York City-based PubSub Concepts and Austin, Texas-based Pluck are pushing what they call “prospective” and “persistent” search, respectively—comparing queries to new information as it emerges. This is similar to news and blog alerts from Google and Technorati, but expanded to all sorts of web content. PubSub has built immense computing power to match new information existing queries at a rate of 3 billion comparisons per second.

“The enterprise is very much a market that we expect to get into,” says PubSub CTO Bob Wyman. “We’ve been thinking about that from day one.” Yet he’s steering his startup wide of the big deals—for now. “We want to assure that our technology is bulletproof before we get there,” says Mr. Wyman. “In 12 to 18 months we’ll be able to start moving in that space.” Pluck investor Allen Morgan, a managing director at Mayfield, is more cautious, saying Pluck will sell a non-ad-supported enterprise product within the next five years.

“It’s a mistake to sell newsreaders straight to the enterprise at this point,” says Mr. Morgan. He thinks grassroots adoption is the only way to drive the corporate buying cycle. “When the CIO is the last person not to have it, the CIO decides to buy a license.”

Mr. Wood is happy that NewsGator’s competitors are holding off on enterprise sales. “It’s not the little departmental deals that I’m seeing; these are executive-sponsored, big global budgeted projects. I’m more than happy for [Pluck, PubSub, et al] to wait.”

Future Business

If there’s a major independent player in the RSS space, it’s NewsGator, especially after its acquisition of the No. 1 Windows desktop client, FeedDemon, in May. The company maintains that it wants to do one thing and do it well: aggregation. In fact, Mr. Wood’s interest in integration and authoring is leading him to spin off an independent consulting firm, Spanning Partners, which will complement NewsGator by working on feeds for internal corporate information.

Some might say that Mr. Wood, who had only been on the payroll since February, picked the greener pasture.

“Feedreading itself is ultimately going to become a commodity,” says Christopher J. Alden, CEO of San Francisco-based Rojo, which incorporates aspects of social networking into a browser-based reader. “You really want higher order services on top of that.” Rojo, whose users can view their contacts’ RSS feed selections, add metadata tagging, and bookmark posts, supports itself through ads, for now, but Mr. Alden says he wants to customize his product for enterprises and publishers.

“Content is the third ‘killer app’ of the Internet, after email and search,” says Mr. Alden, who, after founding Red Herring and running it for 10 years, knows how to talk the talk. “We’re in the really early days of the industry.”

But RSS is just a tool for delivering content—and it is a “simple” one, at that. A better avenue might be content creation; for instance, Palo Alto, California-based Socialtext makes corporate collaboration software with RSS feed outputs.

Furthermore, selling to the enterprise isn’t the only way to make money off of RSS. According to Forrester, 57 percent of U.S. online marketers are interested in advertising on RSS, in a market worth $14.7 billion in 2005. However, the onset of marketing and its evil twin, spam, will find their way back to devaluing RSS in the enterprise. ING employees could soon be inadvertently blocking Mr. Tilmant’s company-wide announcements with RSS spam filters.

The MSFT Elephant

But this utopia of enterprise RSS startups is about to be jolted, and they all know it. Mr. Wyman wrote in his blog in March, “I’ve regularly argued against PubSub investing too much in aggregator development since it is inevitable that Microsoft would eventually blow away whatever we created.” Microsoft’s disgracefully long product cycle will keep it out of this emerging space until Longhorn’s RSS reading and publishing tools are finally released next year.

In the absence of Microsoft, RSS startups have had the breathing room to develop their technology. And the enterprise software market, a Microsoft weakness, may be the best place to fight off the software giant.

“The whole notion of enterprise RSS is extremely nascent,” says Jupiter’s Mr. Gartenberg. “There’s a lot of opportunity.” The sector is dynamic, with two-way communication in both form and function. Yesterday’s pet peeve can be today’s new feature and tomorrow’s best-selling product. The executive checkbooks are ready and waiting.

© 1993-2005 Red Herring, Inc. All rights reserved.

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