Netcentives
Oct. '98
What we said: Netcentives execs think they can build a billion-dollar company in two years by brokering frequent flyer miles to online merchants to be used as purchase incentives — buy low, sell high. But in this case, Netcentives makes little more than a penny each time it turns a mile over. Meanwhile, competitors such as CyberGold are following similar muses, but putting cash in the customer's pocket. Can chairman Eric Tilenius spin miles into cash that fast? Ernst & Young's global ecommerce strategist Yobie Benjamin says, "It is ridiculous — and Netcentives is doomed — if he believes that he'll create that kind of revenue with frequent flier miles alone."

What's happened since: Although miles are still at the core of the business, the Netcentives plan had evolved and broadened. It is leasing its technology to companies such as American Express and Citibank for private-label customer-loyalty programs. And it has also broadened its off-line reward offerings with tie-ins from Motorola, Sega, and CDnow, and a partnership with Prio, which allows for off-line consumer behavior to add to online rewards from Netcentives.
Key statistic: Jupiter Communications found that airline miles are the most effective incentive for affluent shoppers.
Outlook: Looking up. "They have incredible technology for the whole rewards system," says Jupiter's Melissa Shore. "It's exactly the right strategy." By sticking to loyalty programs they are avoiding costly direct competition with companies such as MyPoints, focused on direct marketing, and Beans, which is more about online currency. And it's made good on an early boast: a market capitalization just under $2 billion.
 
 

Healtheon
Nov. '98
What we said: Serial entrepreneur Jim Clark's third act (behind Silicon Graphics and Netscape Communications) seeks to eliminate $250 billion in waste from health care by standardizing the industry around Net-based software and hardware systems that would streamline insurance, record keeping, and communications. A universe of disbelievers nonetheless thought that Clark was throwing money at an intransigent problem he could never hope to fully grasp.

What's happened since: It's hard to imagine that Clark could have already topped his success with Netscape Communications, but while that company was especially visible, Healtheon has become the quiet giant of healthcare. In 1999 it overcame much of the competition by merging with them. To date the company has secured $750 million in strategic investments and lords over most B-to-B transactions in health care.
Key statistic: Healthon's stock peaked at 126 in 1999 before starting a slow slide that has left it stabilizing in the 70s.
Outlook: The continuing Gordian Knot of managed health care means that not all is rosy at Healtheon. Blackford Middleton of MedicaLogic, makers of an online medical records database, says that most of the healthcare industry waste isn't in the places Healtheon is looking, but right in the doctor's office at the point where patients are seen, exams ordered, and subscriptions written. Still, Healtheon has deep pockets and it has Clark, so Healtheon has more permission than most to make mistakes and survive.
 
 

ImproveNet
Dec. '98
What we said: Bob Stevens made a mint building homes for first-generation Silicon Valley millionaires, but remained frustrated at how hard it is to find a good contractor — what one of his investment partners calls "the second hardest thing after finding world peace." ImproveNet was one of the first independent companies to use the Net to connect homeowners with building contractors. It charges contractors for business leads and takes a hefty finder's fee if it gets the contract. The market looks promising if Stevens can overcome relatively low usage of PCs by traditional building contractors, and an influx of competition from both inside and outside his industry.

What's happened since: Because people with home projects also want information, the site has added tip pages, message boards, and other tools useful to planning, budgeting, and coordinating home jobs. Meanwhile the company has been signing on home-products companies as partners and investors, strengthening its position in the industry if not the marketplace.
Key statistic: Company database contains information on 600,000 contractors, architects, and designers.
Outlook: More building needed. "The competitive arena has gotten so much more intense than it was a year and a half ago," says Fiona Swerdlow, senior analyst at Jupiter Communications. Problem is, this field has its own 800-lb. gorilla. Home Depot has a fairly comprehensive Website now, and is moving toward selling products there, something ImproveNet doesn't do. Meanwhile a new player, Imandi, has moved in to provide referral services for professional contractors and a variety of home-services jobs. Swerdlow says that despite the great job ImproveNet does, it must counter these growing competitive pressures, or suffer dry rot.
 
 

Quokka Sports
Jan. '99
What we said: With perhaps the glibbest goal in the online industry — to become the ESPN of the Net — Quokka Sports garnered much-deserved attention by reinventing coverage of sailing. Its rigorously interactive and immersive coverage of the 1997-98 Whitbread Round the World Race attracted partners and investment from major players in sports marketing and journalism. But Quokka was in danger of becoming a perennial niche player in a market where survival perhaps called for going after the big, popular sports events, but perhaps damned if it did, as well. Said sports advertiser Jefrey Steinhour: "It's difficult to expand out of a core following without diluting the brand."

What's happened since: Quokka quickly expanded event coverage to include international adventure gigs such as the 200-mile Eco-Challenge, motor sports, and climbing events. Then it silenced any early critics by landing the biggest fish in the sports world: the 2000 Olympic Games in Sydney. Quokka will partner with NBC to broadcast exclusive online coverage of the events, which will give both companies a chance to reinvent Olympic coverage.
Key statistic: Quokka reported $6.7 million in revenues for Q4 1999 — nine times Q4 1998.
Outlook: Has the wind in its sails. Dan O'Brien at Forrester Research points out that the Olympics is an awesome opportunity where "Quokka will gain the experience it needs to be the leader. Interface design, user expectations, audience demographics, and quality of delivery. Anyone who gets out in front gets up the learning curve sooner." The payoff for getting out front, O'Brien explains, could be taking their immersive viewer experience into the entertainment sector.
 

Owners.com
Feb. '99
What we said: Founder Hans Koch is after the ultimate online fizbo (an acronym derivative of For Sale By Owner), thereby liberating home buyers and sellers from that 6 percent off the top which goes to real estate agents. Koch is going to have to overcome a desire for the human element before customers flock in droves to his relatively affordable $139 online listings. Even if we learn to click into our dream homes, Owners.com will have to beat out a spate of similar sites more intimately connected to the status quo: industry-sanctioned Multiple Listing Services. If he can pull it off, that would be quite a housing start, indeed.

What's happened since: This site for DIY homesellers wasted no time building an array of important partnerships. It expanded its visibility and service offerings through agreements with companies such as AOL, Chicago Title, Ernst & Young, E*Trade, Ipix, Loanworks, and Yahoo!,. The company broadened its skill base at the same time, says analyst Jim Laird of The Yankee Group, adding more positions for marketing and product development.
Key statistic: More than 200,000 homes and properties listed.
Outlook: Very positive. No matter how deep you drill into the site, Owners.com gets buyers closer to a home purchase than they would otherwise. That's the read of Rob Sterling of Jupiter Communications. "The fact that these tools are available makes it possible for people to find homes and get further along in the process." Laird also emphasizes that the firm has shifted its model slightly to be more like the online investment services offered by Charles Schwab. If you want to do it on your own, you can, but if you want services such as loan assistance, market data, agent contact information, and the like, you can find it all on the site.
 
 

Freeserve
March '99
What we said: In the United Kingdom, local phone calls are metered and billed to the caller. Result: It's expensive if you're addicted to surfing the Net. The Dixons' electronics chain worked out a constellation of deals that allowed it to create a free ISP, market it inexpensively through its stores, and take a cut of the local phone revenue its service helps produce. It's complex, but helped Freeserve quickly pass AOL to become the largest ISP in the United Kingdom. The only trouble is that the revenue model is tied to dial-up Internet access, leaving Freeserve uniquely vulnerable to the almost inevitable emergence of some future broadband access, probably from cable companies.

What's happened since: Freeserve is no longer the only free ISP in town, but with 1.7 million active users it remains the largest ISP in the UK. It even hired a COO away from AOL Europe to rub it in. One key strategic move was an agreement with BT Cellnet to develop mobile Internet services, which may insulate the company against its weak flank, which is broadband delivered over cable.
Key statistic: Market share has increased from 30 to 35 percent.
Outlook: "It's done a good job," says Nick Bubb, a retail and Internet analyst with SG Securities. "With all the competitors that emerged last year that may have knocked them down, they've seen them off. They've proved a lot of the skeptics wrong." It doesn't hurt that the United Kingdom's metered local call model shows no signs of changing.
 
 

About.com (formerly MiningCo.com)
April '99
What we wrote: Even as Websites and magazines devoted to reviewing Websites were folding like a house of cards, MiningCo.com built a business around a personalized Web directory. Part-time, decentralized reviewers form the core of the site, and get paid a commission depending on how vigorously surfers respond to their recommendations. Visitors are more likely to buy things than those who wander onto market leader Yahoo!, making the banners valuable property. Analysts worry, however, that founder and CEO Scott Kurnit is locked into an advertising-based revenue model that could get dicey if the landscape of Internet advertising changes significantly, and the added value of the human touch wears off.

What's happened since: The name changed, for one thing. Nonetheless, About.com was plain hot in 1999. It went public in March and by year-end was trading just under 100. It has consistently finished among the ten most popular sites on the Net, achieving the fast growth it needed to be competitive. From '98 to '99 sales grew more than 600 percent, but in true Net fashion the company still logged a $55 million loss for the year.
Key statistic: Media Metrix ranks it 10th among all Web properties, with 13.2 million unique visitors a month.
Outlook: Analysts are bullish on the prospects. "About.com has exceeded our estimates every quarter since its IPO," says an analyst with Bear Stearns. "We raised our estimate for 2000 revenue from $72 million to $88 million, demonstrating our belief in the company's business model and its ability to execute on it."
WR Hambrecht & Co.
May '99
What we said: Democratizing the investment banking industry sounds about as oxymoronic as a lead top hat, but that's what Bill Hambrecht set out to do. His most powerful swing at the old system (which he helped invent in the 1960s at Hambrecht & Quist) is an online Dutch auction for managing IPOs. It robs institutional investors of their ability to "flip" shares on opening day that were bought for pennies on the dollar.

What's happened since: Hambrecht has taken only three companies public, with mixed results. Salon.com started flat and then deflated, causing many to blame the OpenIPO process. The next offering, however, was a clear success. AndoverNet, which owns a collection of Linux-related Web properties, went public last December and watched its valuation double.
Key statistic: Three IPOs, $108.8 million raised.
Outlook: The company is making progress. It attracted capital from Fidelity Ventures, an arm of Fidelity Investments, and when Prudential Securities bought Volpe Brown & Whalen late last year, Volpe's 22-member research staff jumped to WR Hambrecht almost overnight. It may take a year or two for the Dutch auction to catch on, says Neil Weintraut, partner at 21st Century Venture Partners, but Hambrecht's model "is the future."
 

Digital Entertainment Network
June '99
What we said: David Neuman and his crew of former television executives have seen the future of television, and it's coming through the PC. Digital Entertainment Network (DEN) proposes to produce original entertainment programming for streaming media delivery over the Internet, while it seeks to be the first-stop for edge-hungry Gen Y advertisers. But the proliferation of cable channels has created quite a few programming slots for bored adolescent viewers, and, well, the download pipe just ain't as wide yet as we want it to be, now is it?

What's happened since: DEN is producing some original content, and you can download it with the DENabler application, but the whole product is far from perfect. For one thing, broadband services are rolling out slowly, though a big chunk of the nation's 15 million college students can connect over high-speed university networks. Still, says Jeremy Schwartz at Forrester, "They kind of represent the current state of video over the Internet, which is people experimenting."
Key statistic: DEN has raised more than $65 million in financing.
Outlook: It's too early to tell if DEN is the wrong idea, but early enough to consider that it might be the right idea at the wrong time. "The Internet today is not ready for prime-time programming. It's not television," says Jupiter Communications' Patrick Keane. DEN's revenue model calls for advertiser support, and though a few major brands have responded, it's hard for DEN to raise rates to reasonable levels until it has a sustained and measurable audience. "There is tremendous expense in creating original content," says Keane."They need a lot of patient capital."
 

Accompany
July '99
What we said: Odds are that dozens, perhaps even hundreds of consumers, all want the same product at about the same time. If they could band together, perhaps they could convert the power of numbers into discounts. Tearing a page from Priceline's play book, Accompany maximizes inventory turnover for the vendor and value for the buyer by finding the price it takes to move the most goods to the most people. But by the time it brought this idea to market, Accompany was accompanied by Paul Allen's Mercata, a similar idea that took the next step of establishing its own inventories.

What's happened since: In June the firm raised $3.6 million in an institutional round of equity financing, and in July, man-about-Net Marc Andreessen invested and joined the board of directors. But Mercata has deeper pockets and spends more money using advertising to establish brand identity, and in November Mercata cut a deal that gave it anchor status in AOL's Audio Systems and Home Theater departments.
Key statistic: Raised $3.7 million last June. Five months later Mercata upped the ante, raised $35 million, and began a ferocious ad campaign. In February, Accompany evened the score in the corporate warchest battle by raising $35 million.
Outlook: Very good. "As long as they continue as they have done in the past they will do well," says Martin De Bono, analyst with Gomez Advisors. "The only problem they may run into is if a larger aggregator — someone like Yahoo! or Lycos — decides to enter this type of industry and do it for themselves." That bigger company could be a portal entering the market, or could just be Mercata carrying the day.
 
 

Quixtar
Aug. '99
What we said: This online offshoot of the Amway pyramid marketing empire is as enigmatic as its roots might suggest. On one hand the company's expertise in nonlinear marketing techniques are going to serve it well on the Net, where customer-acquisition costs have bankrupted more than a few smart startups. But on the other hand, Quixtar's parentage could get it into trouble. It doesn't want to plunder its off-line brand, but must to start creating a market. And if there is one thing Net marketers agree on right now it's offline advertising, and that doesn't necessarily sit well with the family business.

What's happened since: Quixtar almost instantly proved its naysayers wrong. It launched in September of 1999, and without spending a dime on advertising Quixtar was already among the most popular commerce sites during the '99 holidays. Media Metrix had it in the Top 20 for traffic, and in December the site was logging $2 million a day in sales.
Key statistic: Generated $100 million in revenue in its first 100 days.
Outlook: Fantastic, but handicapping Quixtar is tricky. "The whole thing takes place behind closed doors," says Jupiter Communication's Mike May. "It's very difficult for those on the outside to see what's happening." He cautions that Quixtar's original weakness remains: that despite the effectiveness of Amway style person-to-person marketing, it's easier to say no online than at a Tupperware party. The message of Quixtar's launch traveled quickly through the ranks of Amway, but that may not add up to long-term sales success. "The traffic levels — which unfortunately are the only data points we've got — are very promising. But traffic does not necessarily equate sales and revenue," May says.
 
 

CarsDirect.com
Sept. '99
What we said: You can sell just about anything online, even cars. CarsDirect.com, which has the confident backing of Michael Dell (and $10 million of his money) still faced the challenge of differentiating itself in a jammed marketplace. And although CarsDirect enjoyed first-mover advantage, the largest stumbling block to the whole category may prove to be people's fondness for walking the lot and kicking the tires.

What's happened since: Even with more than a dozen auto sites seeking traffic, CarsDirect seems to be driving the market. It cut deals with EarthLink in January and Inktomi last September that give access to large customer bases. In October it brought on board Gerald Greenwald, a former vice chairman at Chrysler and former chairman of United Airlines. A partnership was forged with cars.com, which may not be the market leader, but does have the most enviable URL in the field.
Key statistic: A November 1999 round of funding raked in an astounding $280 million, which included new infusions from all the original investors, as well as cash from heavy hitters such as Hambrecht & Quist and Morgan Stanley Dean Witter.
Outlook: In the driver's seat. Ranked as the top auto buying site recently by Gomez Advisors. That's only one end of the proposition. "It's original pitch to consumers — "you hate dealers and so do we" — is very effective for consumers, but doesn't endear CarsDirect to the people they need to impress in order to succeed at a larger scale: the very dealers they accused," says James McQuivey at Forrester Research. "The company knows this and is refocusing to create a model and a message that appeals to both consumers and dealers."
 
 

iPIN
Oct. '99
What we said: The transaction fees charged by credit cards discourage small purchases, but there are potentially lots if tiny items (such as MP3 files) to buy online. iPIN worked out a system where the ISP would facilitate the transaction, take a small transaction fee, and move the goods along. And like any ambitious idea that seeks to collapse a commercial paradigm such as credit card purchases, iPIN needed scads of customers at the very beginning to make the thing work. But its customers are both consumers and ISPs, meaning it has two sales jobs to pitch.

What's happened since: iPIN unhitched itself a bit from a reliance on the ISP by developing for-fee arrangements whereby consumers could bill micropayments through other avenues, such as bank accounts, phone bills, or credit cards. The service is working in France, where surfers can use iPIN to buy document translation, music, electronic books, and copies of Le Monde. A brand-new strategy has the company going after banks as partners, but that play will take time to develop.
Key statistic: iPIN has signed zero partnerships with major ISPs.
Outlook: Not good. The original business plan may well already be deflated, according to Kim Underwood of Gartner Financial Services. "It will probably be impossible for the company to partner with the top American ISP, since most of them are touting their own wallets, as well as additional services." The move toward banks could be the company's last gasp.
 

Kana (was Connectify)
Nov. '99
What we said: The company circumvented the dreaded ecommerce S-word — spam — and created an email-based permission marketing system that targeted individual needs. The technology allows companies to merge customer databases with their bulk emailing capability, then sub-divide customer lists so that messages are laser focused.

What's happened since: Connectify's idea sure beat spam, and was promising enough that only two weeks after launching it was snapped up by Kana Communications, which already had incoming email packages of its own.Kana repacked Connectify as Kana Connect and in came the customers. After Williams-Sonoma and Netcentives bought into it, Kana also sold the package to touchMarketing.com, @once.com, Santa.com, JetBlue, RealAge.com, and HotJobs.com. Kana says that the Kana Connect product accounts for 10 percent of its customers.
Key statistic: The company's value has exploded: After opening in September at 50 the stock was trading four months later at 250.
Outlook: Kana's move to acquire Connectify proved prescient. Now it can approach customers with a complete package of email packages — inbound for customer service and feedback, outbound for marketing and promotions. Competitors are struggling to keep up. "The bottom line is that other vendors in the space will need a very strong outbound message component," says Matt Cain, vice president of collaboration services at META Group.
 
 

BizBuyer.com
Dec. '99
What we said: A buyer-driven site targeted to small businesses, BizBuyer allows small businesses to solicit bids for products and services, then review a set of bids that could be coming from vendors just about anywhere. eBay's Meg Whitman got on board as an investor and advisor, which has given the company experience in dealing with the quacks that sometimes pop up in the bidding world. Next up is a system for rating and reviewing vendors based on previous customer experiences, though there's no telling how kindly the vendors will take to scrutiny.

What's happened since: A huge round of funding in December netted $38.5 million, and in January it welcomed a veteran of Disney on board as its new CFO, but otherwise the company has been focused on building a market for itself by building out new service areas and recruiting customers. It also has a brand-new competitor, Demandline.com, which just launched with angel investment money in January.
Key statistic: Took a 10 percent investment from Staples.com.
Outlook: Although a host of reverse-auction companies now are serving small businesses, they vary widely, ranging from product-focused companies such as Onvia.com, to Simplexity, which narrowcasts on telecom deals. But BizBuyer has the jump. "Its early market entry and partnership are helping to ensure success," says Melissa Shore, an analyst at Jupiter Communications. everdream
Jan. '00
What we said: According to IDC, the average cost of ownership for every PC at small companies (hardware, software, tech support, Net access) is nearly $8,000 a year. The brothers, Russell and Lyndon Rive, are hoping that budget-minded businesses will be attracted to $150 a month for the same, plus stellar service. They'll put a new everdream-branded Pentium PC in your office every 2.5 years, and make sure that it's always working. Its customer-centric approach could differentiate it from potential competitors CenterBeam and Micron PC, but the key to making this kind of business work, however, may be leveraging an existing customer base, which would leave everdream in the cold.

What's happened since: The company raised $15.5 million in a second round of funding.
Key statistic: A partnership with Supercom provides access to 20,000-plus computer resellers in the United States.
Outlook: David Tapper, a research analyst for IDC, was impressed with how much the company seemed to take its customer-centric platitudes to heart. Its San Francisco Bay Area service operation is well wired for quick service calls, Tapper says, and a remote service technology that allows it to troubleshoot PCs off site really seems to work under fire. Best of all, the young company is already getting repeat customers.
 
 
 

All Advantage
Feb. '00
What we said: Everybody has a price. If you are AllAdvantage, that price comes in the form of trading a marketable chuck of your identity in return for a trickle of cash (up to $12.50 a month) and a very targeted ad banner on your monitor. The firm will turn that trickle of cash into a torrent (an Amway-like reward for referrals), but for most users the benefit is better banners. Coincidentally that's the benefit for most advertisers, and the company is betting the farm that they will respond in droves to a base of users who are so thoroughly profiled and watched that they might as well be sitting in the conference room down the hall.

What's happened since: Raised $100 million more in financing.
Key statistic: On PC Data's December listing of Top 100 Web site properties, AllAdvantage appeared at number 17 with 9.7 million users.
Outlook: Some of AllAdvantage's advertising customers are happy with the response they're getting to those targeted banner ads. "The results we saw from our initial tests are better than anything we have seen in three years," says Valerie Laban at Cars.com. "I'm able to serve up banners to consumers when they go to my competitors sites. It's like Burger King getting to put their logo on McDonald's cups."
 

Source: Rick Overton &  Jeffrey Davis, Business2.com, March 2000
              Rick Overton  is a contributing writer for Business 2.0.
              Jeffrey Davis  is the senior features editor for Business 2.0.