Date: June 26, 1999

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The Piper Growth Conference technology company presentations
were held June 14-15 at the Minneapolis Marriott City Center
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Dear Readers, Clients, Partners, Friends:

It was a wild scene: enough blue suits, ties, and short haircuts to make your head spin, registration tables stacked high with fancy freebie briefcases, and endless lines of *more* tables piled with literature, media kits, analysts reports, 10-Ks, 10-Qs, and 10-whatevers--the likes of which I'd never seen.

Be still my heart! "Does it get any funner than this?" I mumbled to myself, trying to control the drooling as I quick-stepped into my first meeting room...to hear Ameritrade, in progress.

These guys at Piper sure know how to draw a crowd--both in numbers of attendees (1000+ from all over the country, plus I heard some guys speaking French, too), *and* in numbers of company presenters (122 technology and Internet companies--count 'em!--almost three times the number of consumer companies, the next largest of their four categories, scheduled for later in the week).

Trouble was, the only way they could accommodate this many presenters was to have *eight meeting rooms going concurrently* all day long, so a guy had to be pretty selective. Here are the companies I managed to catch (in the order I heard them), over a very busy day and a half of note-taking, question-asking, and--okay--some schmoozin', too:

* Ameritrade
* E*Trade
* Concur Technologies
* Broadvision
* Digital River (Minneapolis' own)
* Multex.com
* TMP Worldwide (Monster.com ring a bell?)
* Nextcard
* InfoSpace.com
* Vignette
* Fatbrain.com
* uBid Inc.
* Net Perceptions (Minneapolis' own)
* Net Objects

Would I own any of 'em? You bet I would. (Disclaimer: I already did own three.) But I don't dispense investment advice--I just report what I hear. To wit:

1) Ameritrade (AMTD) - Didn't catch much of this one, arriving late for the 1:00 pm start on Monday. But the most interesting thing Joe Ricketts, chairman & co-CEO, had to say was this: "We're a direct marketing company that happens to be in the brokerage business." Hmmmm....and you thought this was all about technology? He also said they're moving pretty aggressively into Europe, already partnering with a French online trading company. "We know from our research that we want to take the Ameritrade name there, and will by year-end." Look out for some big marketing spending across the pond. Piper has a "Buy" on the stock, saying the firm "continues to add accounts at an incedible rate." [A big announcement happened the Monday morning after the conference, when Ad Age reported Ameritrade would spend $50 million beginning this summer to launch its new "OnMoney" financial services web hub. They also noted that Ameritrade, which only went online in 1997, will spend up to $200 million in marketing in 1999. Overall ad spending by online brokerages has been estimated to reach $525 million this year, Ad Age said, up from only $275 in 1998. The story included a quote by co-CEO Ricketts at a recent industry conference: "The opportunity is enormous, with more and more households coming online. It's like drilling for gold."]

2) E*Trade (EGRP) - Just an online broker, you say? And number two at that. Guess again--their goal is to be nothing less than "the leading personal financial services brand for the 21st century." This is serious stuff, folks. "We will revolutionize banking as we did global investing," said Len Purkis, CFO. "We will be a resonating voice for the online consumer, to take charge." No wonder Piper rates 'em a "Strong Buy," noting they "continue to build momentum and gain market share...and continue to innovate with new services and aggressive marketing programs." There's that magic word again. Which brings me to my most interesting overall observation of this session: the sole presenter, the CFO, spent about 90% of his time talking about marketing! Is this a great country or what? Accountants finally getting religion? Geez, he even showed us multiple TV spots. Now, this guy's originally from Wales--so maybe it's just that these UK guys have something up on us Yanks when it comes to marketing and branding. (I say that, Len, actually being one of you--born as a subject of the Queen me-self, mate!) But, look out for more and more pioneering groundwork from a company that just announced on June 1 a merger with Telebanc, a partner they chose specifically for their "Internet culture, and the fact that they're bigger than the next five Internet banks combined." Oh, and a couple other little details about E*Trade: they have a $1 billion war chest, and no debt.

3) Concur Technologies (CNQR) - This guy had a real challenge holding anybody's attention after the sessions above-- whew! But I was hardly dozing off. Steve Singh, CEO, described his company as "a play in business-to-business commerce, based on the employee desktop." As a leader in corporate service applications, their original focus was in travel and expense management (American Express was previously a competitor, but is now a part owner with a board seat). But they have recently expanded into electronic procurement and employee self-service applications through acquisition. Singh estimates the combined market (all three segments) at $2 billion by 2002, about evenly split into thirds. He sees enterprise portals as "the next wave"--thus their emphasis on "employee-based processes." Piper rates the company a "Buy." It recently passed the one millionth seat mark and has strategic partnerships with three firms, including Cambridge Technology Partners.

4) Broadvision (BVSN) - Also rated a "Buy" by Piper, this company is a leading provider of software for personalizing web sites, using one-to-one marketing. According to presenter Randy Bolten, CFO and VP of operations, personalizing means "tell me who you are, and I'll give you what you want." The process involves the following steps: segmenting (profiling), show what you have (content management), give people what they want (matching), let people service themselves (transacting), and then asking & observing (getting dialog & feedback). The company has 317 customers, but only 130 are currently live with their personalized web site. [From which you can reasonably deduce that it takes a while to implement this complex software platform.] The company recently forged an alliance with HP, who has committed $35 million in total. It will jointly develop and market HP's business portal. Bolten defined three types of portals: the employee portal (an intranet), the partner portal (an extranet), and the customer portal (a public Web site)--not specifying which type HP's is. [But it must be the latter.] He also made an important point about customer-service apps on the Web: they're actually designed to save *you* time--gee, what a concept--as opposed to the earlier generation of apps that just made the call center person's life easier. [Does that drive you crazy like it does me when you're on the phone with these people?] Anyway, fully 40% of Broadvision's revenues are non-US, from some 30 countries. And most of their revs to date have come via direct sales. Their average deal size is $350K, and an impressive 50% of their sales is repeat busines. But the sales cycle is long: three to six months.

5) Digital River (DRIV) - This Minneapolis company only spent 31% of revenues on marketing & sales in the recent quarter-- puny compared to many of their young Internet brethren. But then, according to presenter Perry Steiner, president, "Our branding cost is low, because we only have to promote to the trade." [Meaning consumer/end-user branding doesn't matter to them.] Still, $3.6 million in just the recent quarter is some pretty healthy spending. Consumers may not be important to them, but they do track the numbers, reporting that their cumulative number of customers to date is 565,000--meaning, apparently, everyone with a pulse who's ever downloaded a piece of software that their engine is behind (including me, and probably you). Do end-users care about who the company or technology is behind their downloads? Probably not. But Steiner said they had "about 2800 software publisher/online retailer clients"--2500 of which were "shareware" companies. He bragged about their site "latency" metric--meaning how fast it comes up on average--being in the range of 1-2 seconds. That, he said, is "world class"--on a par with Yahoo! and other leaders. Another bragging point was how they scored in a customer service survey recently done by The Industry Standard. In average time to respond to an email, they came in at 54 minutes, second only to Amazon at about 30 minutes. New intiatives include their "DigiBuy" site, which is an automated, self-service site for downloads of their shareware vendors. And "Commerce Bridge," an end-to-end EC outsourcing business that lets clients offload their web commerce infrastructure. "We will web-enable your business with our development team in a matter of weeks." He said they have "a couple of sales folks devoted to this, and have been at it for four months or so." Their first client, Fujitsu PC Direct, is about to go live, and the All-In-One Division of HP (selling drivers and product upgrades) is coming behind that. I asked afterwards if they plan to add their own professional services staff to build this business, or partner with an outside firm--but the answer was pretty foggy. [My bet is they couldn't do it fast enough themselves, so look for partnering or acquisition.] What's next for DRIV? A digital music download business--"but that's still very early." The company's CFO followed with some interesting stats: they're doing 2700 transactions per day, and gross margins are currently at 16%, with a target of 20%. They have a "capital efficient model," with a 35-day float on their payables. And their cash position on March 31 was $70 million.

6) Multex.com (MLTX) - This provider of online investment research uses the tagline "Enabling the Online Brokerage Revolution". It provides online access to some 1 million research reports on 15,000 companies from 400+ worldwide research providers--for both institutional and individual investors. It serves the latter market with its "Multex Investor Network," a site it launched in November 1998. The company's goals include "increasing its brand awareness"...which is evident by how big they're spending in marketing: 77% of Q4 revenues, and a similar figure in Q1 1999. Most of the firm's content is provided as PDFs, because "that's what people want to download." And it has an "interactive newsletter" with 400,000 viewers [readers?]. The company's cash position is currently $60 million, which it says is sufficient for now, as it invests in acquisitions, international expansion, and sales and marketing. Is stock market volatility a problem for them? "No, actually, it's good--our business rises. And we seen no slowdown." The presenter went on to say, "When the full-service brokers get into this, we'll see not just day traders but sophisticated investors. We think we have only small penetration to date." [And my bet is these guys understand the institutional investor market, where I suspect most of their following has been to date.]

7) TMP Worldwide (TMPW) - The operator of Monster.com--"the number-one career global site"--says there's an unmistakable and unstoppable trend today in the world of employment: rapidly declining employee tenure. And that trend benefits them greatly. "In 50 years," said presenter James Treacy, COO, "you'll talk about what company you work for, not what country you live in." This guy was the best presenter of the bunch, hands down--which figures, since he came out of the ad agency business earlier in his career (he was a senior exec with Ogilvy). And he went rapid-fire, imparting at least twice the information of anybody else in the alloted time. They have 2.5 resumes online now, and their site is basically set up to act as an "agent" for applicants, always watching for the ideal job, "which they'll jump to at any time" since they're so mobile. In this environment, TMP's strategy is to capture its user as "A Customer for Life--Intern to CEO." Monster.com now has 7.6 million consumer visits a month, according to Media Metrix. And 94% of them came straight to the site (not referred by another site). The average visitor spent 15 minutes, viewing 30 pages. Not only does the company have the leading global "careers portal," they also have the world's largest Yellow Pages advertising agency, recruitment ad agency, and internship data base. Plus, recently they acquired the sixth largest executive search firm in the world, so now claim "the sixth largest search/selection network--and growing." They are aggressively moving their clients to the Internet. Their executive search business is just beginning, but their selection business, focused on contract and support jobs, has a data base of 1.3 million unique resumes, which must be updated yearly. The service is used by 37,000 recruiters at 11,000 companies. "It's free now to the applicant, but not for long," Treacy said, adding "We really think it's the beginning of the end for the contingency recruiter." [In other words, now it's TMP who'll be getting the fee--he said 20%]. TMP likes the fact that a high percentage of HR professionals use the Internet--70% of them in '98, now approaching 80%. One third of the people in their employee data base consider themselves "temps," and the company will soon start online auctions for in-demand IT contractors. During peak times on Monster.com, Treacy said there are 1600 job searches being conducted *per minute*. The site has 30,000 paid internship/entry-level listings, and another 200,000 paid listing for midcareer positions--representing some 42,000 employers currently. More than 380 of the Fortune 500 companies now use their services. The company has been profitable since Q2 of 1998. Its compound annual growth rate is 170% for revenues, 61% for profits, and 200+% for net income. Management owns 45% of the stock, and 3000 employees have options. TMP has $100 million in Yellow Pages ad revenue (30% US market share), and $60 million in recruitment ad revenues. It made Red Herring magazine's recent list of "10 Bulletproof Internet Stocks." Treacy said that TMP's services plus Monster.com make it the "dominant career vertical portal," equating it to other powerhouses like eBay and Amazon. Barriers to entry by others include their sales force ("the world's largest Internet sales force") and their strong customer base. He said online employment will become a $30-50 billion market. "Every kid in America will have a personal job agent." Treacy closed by telling us about a big introduction his firm has coming, around July 4--the "Monster.com Talent Market," an online matching service, where job-seekers can consider would-be employers right on line, rejecting any and all they don't like. If employers hire applicants they find on the site, they're on the honor system to pay a $1000-2000 fee. "One million potential employers and applicants are now starting to hear about this web site," said Treacy, "and it will get heavy promotion."

8) NextCard (NXCD) - The first credit card issuer to offer online approval for VISA cards, this company uses sophisticated direct marketing techniques to target profitable customers. Piper just initiated coverage with a "Strong Buy." The company has applied to patent its technology for customization and for managing Internet user risk. According to presenter Jeremy Lent, CEO (and formerly CFO of big traditional card-issuer Providian), NextCard is out to "own the customer relationship, not just be a broker." He says the overall credit card market is $400 billion, but is highly fragmented, with the largest players only having about 17% market share each. CFO John Hashman spoke about the company's marketing plans, which will find them spending $25-30 million this year to acquire new accounts. He also spoke about a key expansion strategy, their launch of "NextBank," which they will be capitalizing from their IPO proceeds. It will be limited to originating CDs of $100,000 or more ("as we did at Providian"), and Hashman said they're looking at $200 million in assets by year end, growing to $1.5 billion by 2001 and $6B by 2003.

9) InfoSpace.com (INSP) - It was fun running into Bernee Strom again (president/COO), right before she began her presentation. [I'd met her at Herring's great NDA conference last November in LaJolla, before she joined InfoSpace--when she was just enjoying living on her farm in Iowa.] InfoSpace, based in Redmond, WA, is in the "content aggregation" business, syndicating content with broad appeal to a network of affiliates now numbering more than 1500 sites, including America Online, Netscape, Microsoft, and Lycos. It's also targeting the emerging Web devices market, including PDAs, cell phones, set-top boxes, etc. "Instant publishing for 'Net appliances," Strom called it. The company's content comes from some 60 providers and includes Yellow Pages, maps, classifieds, stock quotes, sports info, local events, and weather forecasts. InfoSpace serves as a single source of value-added content, aggregating and integrating it with related content, thereby increasing its usefulness. Media Metrix reported that 6.9 million unique visitors accessed InfoSpace content in April, ranking it in the top 20 overall. The company uses proprietary technology; Strom said the firm currently has 15 patents pending. She described it as "distribution technology for scaling content to the masses." For example, using their "desktop portal," you'll be able to add a person to your address book, check your calendar, them find a hotel near that person (viewing first, then booking). The site also has features like "auction alerts," news & reviews, and alerts about "what's on sale" (34% off all purchases are impulse, Strom said). "For our e-retail customers, this allows active promotion," she said. "So when a person is searching for golf information, up comes an ad for clubs, for example." Their desktop portal, which is platform agnostic, can be set up to attach to the browser, or to the Windows start bar. It allows parental control, alerts, targeting of ads, and instant messaging that will "follow you anywhere," Strom said. "It's like a GPS system for our advertisers--they know where you are and what you want to do." In Q1 '99, she said InfoSpace had 1.2 billion page views, which averaged out to an impressive 21 per visitor. Momentum was the next subject: they recently did a deal with Network Solutions, so their portal service can now be offered to anyone coming online. Other partnerships include SBC, US West, and DoubleClick. How do they make money? "We monetize every part of our site," Strom said. They sell ad banners, charge carriage fees to content providers, and set up private-label deals that include charging per query or page view, a percentage transaction fee, or a flat fee. "We don't store any web pages. We do it all on the fly, custom-branding everything."

10) Vignette (VIGN) - Greg Peters, president & CEO, described his company's business as "Relationship Management for the Connected Customer." He said the firm has been growing rapidly, now at some 400 employees and 229 customers--including Schwab, Siebel Systems, LandsEnd, Preview Travel, iVillage, TheStreet.com, various telecoms, and five of the top 12 banks. Peters referred to the industry movement from back office applications (ERP), to front office (CRM), and now Internet Relationship Management (IRM)--which he said has much larger forecasts for growth than the other two. The challenge, what makes the online business different, he said, is that the customer has all the control, competitors are only a click away, and new trading networks are controlling online reach. "In a frictionless world, price goes to zero," he added. A whole new class of customers is being built--"banks are afraid of Yahoo!, for example." As companies get successful with their web sites, they're looking at new trading networks--"customer chains," Peters called them. How do you compete, he asks? "You manage customer relationships, and provide advisory services--an exchange of value will bring them back." Convenience and advice become the "switching costs." You differentiate by providing better advice and advisory services, which will give you greater reach and distribution. Peters described his firm's product lineup as an "Oracle strategy"--platforms, tools, and services. In the first category are their flagship "StoryServer" and "Vignetter Syndication Server (VSS)" products. StoryServer, a business-to-consumer platform, is priced at $50-100K per server; while VSS is a business-to-business platform, priced based on number of affiliates, at $2K per affiliate. Content is distributed from one site to another, with affiliates reselling it in a network. For their second category or products, Peters said they will have packages of tools and applications starting later this year. In the third category, Vignette offers a layer of services for both platform products, via APIs and a "rapid scripting environment." Another future product offering will be marketing/advertising campaign management, via Vignette's recent acquisition of a firm named Diffusion. For its VSS platform, Peters said the objective is to accelerate market share. VSS addresses customer problems with disparate systems, managing different business rules (contractual terms with different sites, for example), and scalability. It lets them manage and automate B-to-B relationships based on an open standard: "ICE" (Information & Content Environment), approved by the W3C in Q4 '98. Peters said Vignette was announcing today a strategic investment in a new firm, i-Syndicate (San Francisco), to provide services related to ICE. The VSS reseller network of affiliates will build on itself, he said. One of the key benefits of their platforms is rapid deployment--the average being only 45 days. It's one of two main buying criteria. "The one thing you take away is the sense of urgency for these kinds of solutions," Peters said. Vignette's employee growth will be primarily in sales and professional services. He gave two examples of customers who have been repeat purchasers: Preview Travel, which started with a $100K purchase, then followed that in a matter of months with a $700K purchase; and the Chicago Tribue, which started at $50K and, within 18 months, spent another $1 million with Vignette. A key point Peters made was that his company does not recognize product licensing revenue until the necessary services have been performed--that is, till the site is live. "So we're not successful till you are." He said their revenue mix is now 51% licensing, 39% services--but the target is 60%/30%. International has accounted for 20% of their revenues, with the target being 35%. He said the firm should show its first profit in Q4 of this year. In regard to competition, he said it's primarily been companies trying to build their own solutions up to now. "We sometimes run in to Broadvision, but not often," Peters said. Target growth in net revenues is 75%, and 95% in licensing revenues. A final interesting point: Vignette's institutional holdings are 80%.

11) Fatbrain.com (FATB) - What do you say about a company with a killer name like this? (And smart enough to change from the previous ho-hum "Computer Literacy"?) One of the first things presenter Chris MacAskill (CEO) said was, "We're delighted with how our new name has worked for us." (The smile on his face belying the understatement.) On the heels of the name-change, the firm recently launched a high-impact advertising campaign in the technology and Internet publications. (And the colorful, tabloid-sized brochure that goes with it definitely stood out the most on the literature tables at this conference!) MacAskill began by positioning his company as the "leading online professional bookstore." He said it has a high average order size, very loyal, sticky customers (like Cisco and Sun), and provides mission-critical professional information. The firm also has some exclusive relationships with publishers. They've targeted mostly technology firms and their employees as customers to date, and have had "a maniacal IT following," MacAskill said. They've built intranet and extranet-type sites for several of their customers, where employees go to order professional books authorized by the company, and where employees and users of the company's products can buy official technical documentation. Fatbrain is now expanding beyond IT titles and into the categories of finance & business and engineering/science/math, which expands their market size by 3X. The company expects revenues this year to be 60% books, 30% training, and 10% print-on-demand (for a customer's own technical documentation, for example). MacAskill cites market size figures of $5B for IT, $5B for business & finance, and $7.5B for "other professional". He says they find that books and training sell better when bundled, so in the latter category they have partnerships with Digital Think and CBT. The CBT relationship is an exclusive, four-year pact that includes sales on CD or over the web. An example of a print-on-demand customer, wherein Fatbrain sells company documentation via the web, is SAP. It has an exclusive to sell 118 SAP training kits on their site, with a typical item priced at $250. Buyers coming to Fatbrain.com need the products they sell for "high stakes, career decisions," said MacAskill, "and we respect their need for speed." Orders placed by 4:00 pm Pacific time are shipped overnight. He calls their business a "category killer model." On the site, a visitor can sort selections by best seller and other ways, and can see stock-on-hand immediately, as well as view personalized recommendations. Sun Microsystems was the first "corporate library" site they set up, and is still their largest customer. Fatbrain hosts the site, which is co-branded and accessible through Sun's intranet. MacAskill said his firm introduced a program in November they call "Find It Now." It is a complete corporate site solution, which they adapted from their Sun experience. They now have 70 large companies using the product, which brings them strong recurriung revenues as the customer company markets the site internally. For example, their site for Microsoft has 1.5 million subscribers. Other firms include SAP and H-P. Fatbrain has no exclusives with book suppliers, but does have exclusives in training with CBT and others, and with IBM, SAP, and 3Com for the company documentation/print-on-demand business for each company. Fatbrain's average order size is $100 (compared to $30 for Amazon), and the average customer buys from them three times per year. Their overall gross margin is now 19%, but the figure for both training materials and print-on-demand documentation is 40%. CFO Don Alvarez said the firm's compound quarterly growth rate is 48%, and that 50% of revenues are from repeat customers. The average book purchased sells for $40, while the average training package is $400. Fatbrain's cumulative number of online customer accounts is now 103,000. The firm's IPO was in November 1998, and Piper has a "Strong Buy" rating on the stock. Alvarez cited some five-year targets for the firm: 95% online sales and 5% retail (they now have retail sites in the Silicon valley only, currently comprising 27% of sales); 27% gross margin (vs. the current 19%); and sales and marketing expense of 11% (vs. the current 76%). They have built a single distribution center in Kentucky. "Our distribution model is just like CDW's," he said. "As average order size increases, the single-site model makes sense." Their target is to have 90% of their inventory in stock. Currently, they buy about 35% of their inventory from Ingram, with the rest directly from the publishers.

12) uBid (UBID) - What do a bunch of smart direct-marketing guys do in the Age of the Internet? Why, start an online auction company, of course. Then grow it from virtually zero revenues in '97 to $44.2 million by 12/98. Greg Jones, CEO, says "we're out to be No. 1--that's why we're in this." And being based in Chicago has its advantages, he adds. The firm specializes in closeout, overstock, and refurbished merchandise, selling both to consumers and to small/medium-sized businesses. So, Jones describes their focus as both B-to-B and B-to-C--"and we can even look at C-to-C." He compares their full-guarantee policy to Amazon, which only guarantees up to $200, and eBay, which offers no guarantee at all. Jones says uBid currently has 11 exclusive relationships, but is seeking more. "Lots of companies want to co-brand with us, partner, or license our technology," he said. They have 100+ direct or "authorized" manufacturer relationships, and more than 300 suppliers. Product pricing begins at $7, and 90% of their orders are shipped next day. Jones said uBid's current marketing strategy is to drive traffic (acquiring customers cost them an average of $18 in Q1), launch a PR campaign, maintain their high rate of repeat sales, and begin building an *offline* presence via an ad campaign to be launched Q3. The firm gets 150,000 unique visitors per day to their site, and logs 200,000 bids per day. They provide online reports with graphs to their suppliers/partners on a daily basis via an extranet, so they can log on anytime to see how their products are selling. Fully 66% of their business was repeat in Q1 '99. Jones said uBid's product mix is currently 76% computers & peripherals, 15% consumer electronics, 6% home & leisure, and 3% recreational/sports (the latter all revenue-share/drop-ship). The firm's gross margin was 8.7% in Q1, but its target is 12%. Of their Q1 revenues, only 7% were what he termed "revenue share," but he said they'd like to see that go to 40%. Sales and marketing expense was 7.8% of revenues, but their target is 4-6%. [I didn't get a chance to ask how that math works, if they're just starting to crank up PR and advertising campaigns.] Jones seemed to try to justify his current 7.8% figure, as if it were high, saying "it's the cheapest time now to acquire customers." Their focus will continue to be on auctions, not in the fixed-price business. "Our model is the direct-marketing/lifetime customer model--we see no other way to succeed in this business," Jones said. He described their strength as in merchandising, and says their average inventory turn is about two weeks. They *buy* their merchandise from their suppliers in large part, because they know what it will sell for. And their secret, said Jones, is *how fast they move it*. "Our 10% is a small price for the supplier to pay to get that speed," he said. Jones also noted that his company's valuation has been low, but he attributes that to the fact they haven't done a good job communicating with the investment community--which he intends to change.

13) Net Perceptions (NETP) - Minneapolis' own star e-commerce software company was a logical candidate for Piper to have present at this conference, since they co-led the firm's IPO in April. Steven Snyder, CEO, talked about how his firm just added a VP for their expansion into Europe, and "Japan will be next." One of their key strategies is now to enhance their professional services group, targeting the most strategic customers with these services. Snyder also announced that Will Lansing, CEO of Minneapolis-based Fingerhut and head of parent firm Federated Department Stores' Federated Direct operation, recently joined the Net Perceptions board. Tom Donnelly, NETP's CFO, then took to the podium, noting that the firm has 46 engineers on staff, out of only some 120 employees to date. He also stated that the firm's business is a software model, leveraging their platform for multiple products. Their growth, Donnelly said, has been 32% quarter to quarter, and the services portion of their revenues is going up. At the end of Q4 '98, Net Perceptions had 70 customers, a number that increased to 87 by end of Q1 '99. The company's long-term product mix, he said, was 50% e-commerce and 50% "other". [He didn't define the latter, but this is a radical change from EC being virtually 100% of their revenues to date.] The CFO also cited some key stats versus targets: sales & marketing expenses were 92% of revenues vs. a target of 33-36%; and gross margin was 92% vs. a 75-82% target. He said the firm "is now leveraging into the intranet and call center markets." Donnelly also spoke about their relationship with Vignette [see report elsewhere], whereby Net Perceptions sells a "linited version" of Vignette's product with them, and receives a perecentage of the license fee. NETP then has rights to "upsell to that customer," he said. A product announcement coming in Q3 is "Net Perceptions for Marketing Campaigns," which will offer targeted outbound email campaigns and web ad targeting. Finally, CFO Donnelly predicted profitability by Q2 or Q3 of the year 2001.

14) NetObjects (NETO) - This firm is an IBM affiliate, and a leading provider of e-business software and services. CEO Samir Arora spoke of how his firm's "core focus is mid-market companies, not developers and designers." Their goal, he said, is to work with the customer "as they transform their business via the web." What is e-business, he asked? Three things: e-publishing, e-commerce, and e-applications. He said a company's efforts used to always start at e-publishing, but that's not always the case now. Services his company provides include eFuse.com, which contains content regarding how a company does EC, and eSiteStore.com, which is complemented by a professional services organization. He said these efforts are to help a company answser the question, How do I get online? Only about 15% of firms are now, Arora said. He went on to say that more than 500,000 copies of the company's product, NetObjects Fusion, have been sold to date, and that Novell had recently selected the product. He said it's targeted to business customers, as opposed to Microsoft Frontpage, which he positioned as a consumer product, while Allaire's Cold Fusion and other products are aimed at high-end developers and designers. Arora said his firm is focusing on the intranet market, and that the advantage is "IT spending is always higher for internal processes." He noted NetObjects is bundling its product with Allaire's ColdFusion and HomeSite, and Lotus is bundling its product with Domino. NetObjects now boasts 500 enterprise customers worldwide, Arora said. The day before, he said his firm had announced a partnerhsip with Sun, whereby the two firms will build the next generation of products for "enterprise portals". They are porting their "Authoring Server" to Solaris, which validates it as an intranet-building system or platform. NetObjects' strategy, he said, is to become a 'Net brand. Milestones they have achieved to date include: one million sites built with its product, 2.5 million site visitors in 1998, and 100,000 people now a part of its online community. CEO Arora closed by noting that IBM, even after the firm's recent IPO, is still the largest shareholder (54%) and has three board members. And he pointed out that NetObjects' "e-Business Platform" includes products, professional services, and online services.

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That's all for now, folks. Thanks for reading, and don't forget -- for info and links to the best upcoming events,
be sure to bookmark our frequently updated Schmoozefests '99 - High-Tech Event Hotline.

best regards,
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Graeme Thickins, Founder & Principal Consultant
GT&A Strategic Marketing Inc.
*Twin Cities *LA *San Francisco *Seattle
Voice: 612/944-1672   Fax: 612/944-1673
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And Editor-in-Chief:
"Branding & Marketing to Win
in the Knowledge Economy(tm)"
http://www.gtamarketing.com
...A Unique Resource for Online Marketers...'Net Startup Founders...
VCs and Analysts...CEOs...Marketing & Business Development
Executives...and Other Shapers of the New Economy....