PointCast Chief Describes the Pull of ‘Push’ Media
‘I’m just a boring guy,” says David Dorman, who rose to become the youngest chief executive in the history of 50,000-employee Pacific Bell, then willingly gave up that lofty position to head a 260-person Silicon Valley start-up. Boring indeed.
Last October, 44-year-old Dorman became the chairman, president and chief executive of PointCast, the pioneering “push” media company. Sunnyvale-based PointCast arrived on the Internet scene in late 1996 with the novel concept of delivering, or pushing, news, stock quotes and other customized content via the Internet to subscribers’ desktops. At last count, PointCast subscribers numbered 1.2 million.
Once described by Wired magazine as “the radical future of media beyond the Web,” push quickly lost steam as companies found the concept difficult to execute. Since Dorman came aboard, PointCast has updated its end-user software, expanded its range of services and shifted its focus to corporate clients. As the company considers going public, Dorman shares his perspective on the Web, the migration of senior executives to hot start-ups and the future of push technology.
Question: You come to new media from a successful career in the telecommunications industry. What are you betting on?
Answer: You can’t possibly know everything coming in, but the big bet that I placed was that the growing number of Internet users would create a flow of advertising dollars that, when combined with new ways of reaching target audiences, would make the industry grow very fast. Internet advertising for the year is about $650 million. Almost everyone that we’re working with expects that figure to double in the coming year.
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Q: What other changes do you expect to see?
A: I think you’re going to see consolidation around bigger brands that are horizontally integrated. Since everyone in this industry is using the same product-development tools, Internet companies end up looking a lot alike. The break-even point is about $50 million a year in revenue. That suggests a lot of opportunity for consolidation; you’re not going to have 400 Web sites selling advertising. Second, companies that deliver Web-based services don’t want to be just a distribution vehicle, held captive by the Microsoft and Netscape browsers. People in the business look at [America Online]--an integrated provider of browser, search, owned-content destinations, e-mail services and online real estate--and say God, they’re worth $10 billion.
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Q: Back in spring ‘97, push was touted as something akin to the Second Coming. What happened?
A: The concept of push is still very valid. What people didn’t realize was how hard push is to execute. PointCast’s product had execution problems when it first appeared. Both Microsoft and Netscape [browsers] have push features that, to use Jimmy Carter’s phrase, have been “incomplete successes.” Our editorial VP has a saying: “Content wants to be delivered.” We’re committed to doing just that; improving the user experience with push, making it smarter, more invisible, more user-customizable. Everyone in the industry is trying to figure out what makes a service “sticky”--[what gives it the] utility that draws people back. Well, having a news client installed on 1.2 million computers is a good start.
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Q: For a long time the accepted wisdom was that people wouldn’t pay for content on the Web. Now a growing number of Internet companies--including PointCast--are introducing subscription services. What has changed?
A: There are two things driving subscription services. One is the quest for profitability. The other is testing to see if people are willing to pay for the utility value you are giving them. Reading the newspaper cover-to-cover is really a skimming exercise. When you use a service like PointCast, the marginal utility comes from having smart agents selectively screen only that news which you have chosen and delivering it to you effortlessly.
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Q: Who is using PointCast these days?
A: The average PointCast user makes $110,000 a year and owns $360,000 in investable assets--91% are college-educated, 63% have purchased something on the Web in the last year, 40% have made multiple purchases. When you look at where our customers go--financial news, breaking news, sports and weather are the big four.
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Q: PointCast is considering becoming a public company. What are the uncertainties that Internet companies face in the IPO process?
A: Recently, Yahoo was trading at 2,000 times its fourth-quarter [per-share] earnings. If you could count on those kinds of valuations, it causes you to do very different things--but you can’t. If Microsoft reported that the number of Windows 95 clients installed flattened in the first quarter, or ISPs began to go bankrupt, what would happen? What you don’t want to do is launch an IPO and get clobbered by some external event. As a CEO of a company like PointCast, do you sell, buy, do the IPO or take in more investors? There’s no perfect way of knowing.
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Q: Some analysts have been disappointed with PointCast’s subscriber growth. How do you answer them?
A: We are now much better equipped and the software much improved. . . . We expect to grow from 1.2 million users today to 1.9 million by early 1999. That is a subscriber base double that of Fortune, Forbes or BusinessWeek and about equal to USA Today, with a terrific business demographic. We have a great concept. We need to execute better and we will.
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Q: You come from the telecommunications industry. Isn’t the Internet accounting for an increasing amount of phone usage in this country?
A: No question about it. It’s at least 50% of the traffic on the traditional phone networks. The problem is those networks weren’t designed for this kind of traffic. We need a new [Internet protocol]-based network to be built. Unfortunately, continued regulation, intended to manage competition between long-distance and regional Bell companies, is [discouraging] rapid deployment of IP networks.
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Q: Cable modems, digital subscriber line and other broad-band solutions are in the offing. Since one of the selling points of push is that it provides a solution for working around limited bandwidth, what are the implications for a company like PointCast?
A: In a world of unlimited bandwidth, you don’t have to do as much as PointCast does to protect the use of bandwidth. But we’re not in a world of unlimited bandwidth, and it will be some time before we are. I think you’ll see companies try to integrate more of the value chain, so a company like PointCast becomes a really valuable asset. Our choices are to go public, try to go buy other companies and technologies or be bought by someone else. One of those three things will happen.
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Geirland can be reached via e-mail at geirland@aol.com and Sonesh-Kedar can be reached at ofirk@aol.com
