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EZINE_ Online Insider _SPECIAL_
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=============================================================================
Seidman's Online Insider
=============================================================================
Weekly Summary of Major Online Services and Internet Events
-----------------------------------------------------------------------------
Vol. 3 Special Edition Number one June 3, 1996
=============================================================================
Copyright (C) 1996 Robert Seidman (robert@clark.net). All rights
reserved. May be reproduced in any medium for non-commercial purposes,
so long as attribution is given.
IN THIS ISSUE
=============
- Notes from the Publisher...
- Freeloader Acquired by Individual Inc. for $38 million
Notes from the Publisher
========================
Please excuse this extra intrusion into your mailbox, but I get so few
opportunities to scoop the mainstream press, that I figured what the heck.
Before going into the deal on Freeloader, the early returns on e-mail are
in regarding my jump to NetGuide. Several have expressed the concern that
I'll actually have less independence under NetGuide than I had under IBM.
Let me say, that to the degree that I spoke about consumer online services
(AOL, CompuServe, MSN, Prodigy, etc.), I had complete independence while
at IBM. I plan on having the same independence at NetGuide, at least
when it comes to the newsletter, though given their sizable and
experienced editorial staff, I am certainly open to recommendations. But
ultimately, I will choose what to write and not write about in the
newsletter. If it doesn't work out that way, then it doesn't work out
period. I'm optimistic that there won't be any issues on that score.
Freeloader Acquired by Individual Inc. for $38 million
=========================================================
About the only thing I probably won't be allowed to write about at
NetGuide is IBM's infoSage, since I'm affiliated with that project. So,
it's probably good timing for me that Individual Inc., a competitor to
IBM's infoSage announced their acquisition of Freeloader while I am still
in my transition phase.
Massachusetts based Individual Inc. acquired Freeloader, who has developed
an offline Web delivery service that allows end users to automatically
download Web pages and read them offline (or online, for that matter.)
The purchase price is approximately $38 million made up of $2 million in
cash and 1.8 million shares of Individual Inc. stock (Individual Inc.
stock closed on Friday at $20.25. Sounds like a pretty good deal for
Freeloader, a company that was founded only last October and a good deal
for Individual Inc., too.
Like PointCast, a service that delivers news directly to your desktop,
Freeloader's differentiator is its screensaver which highlights
information that has been retrieved. PointCast is still miles ahead of
Freeloader on this front. Late tonight (this morning), I spoke with Sunil
Paul, Chairman of Freeloader and Mark Pincus, president and COO of
Freeloader. Freeloader will become a separate arm of Individual and Paul
and Pincus will stay on in their current posts and run Freeloader.
I believe that this is an important development because ultimately quality
personalized services will be every bit as important as whether Netscape
or Microsoft's Internet Explorer wins. Though it is worth noting that
Microsoft has a minority investment in Individual Inc.
For Individual Inc., this move represents a delivery vehicle for their
NewsPage and potentially, their Heads Up news products. Currently,
Freeloader lacks any real user profiling beyond selecting Web pages, but
that's changing soon.
"Version 1.1, scheduled for beta release in July is entirely based on user
profiling," said Freeloader President and COO, Mark Pincus.
The drawback for Individual is that their "profiling" for NewsPage and
HeadsUp style products only allows profiling based on predefined
categories. The end user can not modify or personalize the categories in
any way. Still, this is also currently the case with PointCast, which
from Freeloader's view is the prime competitor.
The acquisition does however give Individual a benefit they've never had.
"Individual realized they needed to be a much bigger force on the Internet
and Freeloader gives them that critical mass in Internet/Web software
development in the consumer space," said Pincus.
"The other thing that's interesting for Individual is that they've evolved
with each platform, but they were never able to own the platform --
freeloader represents the first opportunity to own, control and develop
the platform itself," Pincus added.
When it comes to personalized news, owning a delivery platform isn't a bad
thing. Still, in the consumer market, the reality is that PointCast,
with its slick software and FREE content is the bogey for the Individuals,
and yes, even the infoSages of the World. In the consumer space, when you
get down to charging for a service, you have to look at a PointCast and
say, "Okay, they're giving everything away, and I'm charging for the
service." Individual Inc. and others would be quick to point out, "Yes,
but our content is much deeper than PointCasts." The question becomes is
it deep enough to differentiate a fee service versus a free service. In
the consumer space, the answer in my mind is, "definitely not!" Though
my answer might be different in the business space, which is Individual
Inc.'s bread and butter.
One of the problems with services like Individual is that no matter how
deep their content is, the majority of the actual content delivered winds
up being company press releases from the PR Newswire and the Business
Wire. There is currently no way with Individual (and in fairness, with
infoSage either) to say, "I want less/no content from the PR Newswire and
Business Wire.) Without that sort of differentiator, if its FEE versus
FREE, and the perception of the end user is that it is the same content
either way, FREE is probably going to win most of the time.
Note: Individual's NewsPage does provide abstracts for Free, but if you
want the full text of the article, you have to subscribe to the service
(though the subscription fee is bundled in with some access providers,
like Netcom and this will be good for Freeloader as Netcom will likely
wind up showcasing Freeloader to its subscribers.)
When you're drowning in the sea of content available for free or
otherwise, in the end, the technologies revolving around personalization
will be some of the most valuable technologies around. But for
Freeloader, its about more than technology.
"I like the fact that they (Individual) have a group of some 30 editorial
people who are reviewing the topics to get rid of the garbage, I think
that gives a higher degree of accuracy than if the process was totally
automated," said Pincus. "I like the approach that combines people with
technology, that's been Freeloader's approach," he added. Of the 40 or
so Freeloader employees, about 30% are focused on content, according to
Pincus.
Freeloader and PointCast both are delivery platforms with screensavers.
Today, as a pure delivery platform, in terms of presentation, PointCast
has the edge in a big way. However, PointCast lacks the ability to "suck
down" Web pages, and with all the Web pages available, this is an
important differentiator for Freeloader. I suspect it is one PointCast
could quickly catch up on though. To highlight this benefit for
Freeloader, think about something like the Interactive Wall Street
Journal. You subscribe to the Interactive Journal, but you still have to
go retrieve it. If you have Freeloader, you can set it up to pull the
Interactive Journal automatically. You can't do that with PointCast, at
least not yet.
On the other hand, there's no way PointCast could be had for as cheap as
$38 million. Someday, PointCast will do an IPO, and if they do it soon,
while the hysteria lives, there's probably a LOT of money in it for them.
Probabably at least 10 times the price Individual paid for Freeloader.
Even if they wait a while, the PointCast IPO will be one to watch. It
will become increasingly obvious, even to investors, that delivered,
personalized information is a powerful, desirable, and important Internet
tool.
It's an uphill battle for both Freeloader and Individual, who are both
facing a lot of competition. But, it's an uphill battle in a booming
market. According to Sunil Paul, over 30,000 downloaded Freeloader's
software in May. If they make improvements to the product and can get 10
times as many users within the next six months or so, and I think they
probably can, Individual will come out looking pretty good on this deal.
In the final analysis, this move makes Individual "an Internet company."
Owning an information delivery platform, may, in the end, prove more
important than the filtered news technologies they've developed over the
last 7 years.
In short, this seems like a good deal for both Freeloader and Individual,
at least based on "real world" standards. Based on Internet standards,
perhaps Freeloader could have held out for more. But this deal does give
them cash to fund the next phases of development for the product now, and
in a competitive market, that's critical.
Relevant Web sites:
Individual Inc: < http://www.individual.com/ >
Freeloader: < http://www.freeloader.net/ >
PointCast: < http://www.pointcast.com/ >
infoSage: < http://www.infosage.ibm.com/ >