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Helping People on the Move Keep Addresses Up to Date

Todd Masonis and Cameron Ring, two of Plaxo's founders, say they do not fear competitors in the contact information market.
Peter DaSilva for The New York Times
Todd Masonis and Cameron Ring, two of Plaxo's founders, say they do not fear competitors in the contact information market.

By LOUISE STORY

Published: April 5, 2004

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After Jennifer Cahill changed jobs a few weeks ago, one of the first things she did was spend a few minutes "Plaxo-ing" her new contact information to 400 friends and business acquaintances.

"You just go down the list of people'' in your address book, said Ms. Cahill, who now works in the marketing group at Muirfield Capital in New York, "and you click, click, click who you want to send it to."

Will "Plaxo'' become the next ubiquitous Internet verb, like Google? That is the hope of the founders of Plaxo, an online service that helps computer users keep their address books updated with the latest postal addresses and phone numbers of everybody in their circle.

After downloading Plaxo's free software onto either the Outlook or Outlook Express e-mail program, a PC user can choose which friends to ask for current contact information. Recipients can provide new contact information, decline the request or ignore it. They can also click a link in the message and join Plaxo themselves.

Plaxo then automatically inserts any new information provided into the sender's e-mail address book. As people join Plaxo, their contact information is inserted into the address books of other members who have given permission for such updating. The program also automatically transfers any future changes they make in Outlook to the computers of other members they have listed as their contacts.

Even though Plaxo is free now, the company plans to make money by selling a premium version to business users this summer.

About 1.8 million people have subscribed to Plaxo since the company, based in Mountain View, Calif., began offering its software online in November 2002, and the company says it is gaining about 10,000 to 12,000 members a day.

But for all its success at attracting a following, Plaxo has an Achilles' heel. It is just the kind of Web-driven business that fits perfectly with the ambitions of Microsoft and others aiming to incorporate a wide array of business and personal services into their software products.

Plaxo executives say they are not worried. Their success may attract competition, but they say their rapidly expanding network gives them a major advantage.

"What we're essentially building is this network, because it has no value to me unless everyone I know is on the network," a Plaxo founder, Todd Masonis, said. "You can't just go with another network because you wouldn't have the value of so many users."

Mr. Masonis compared Plaxo to instant messaging systems. "It's very hard now to go about starting a new I.M. network," he said, "not because it's technically difficult, but because you have to get everyone in it."

Plaxo was founded in 2001 by Mr. Masonis along with a fellow Stanford engineering student, Cameron Ring, and Sean Parker, who was a co-founder of Napster, the music downloading site. The company has received $12.3 million in investor financing and has 27 employees.

The company says that about 18 million people responded to e-mail update requests but did not become members; 27 million neither replied nor joined - possibly an indication of privacy concerns, even though Plaxo has pledged never to sell any information from the network. Some nonmembers, tired of receiving update requests, say the messages have become like spam e-mail.

At the moment, Microsoft is being supportive of Plaxo, which has chosen to integrate its software with Outlook and Outlook Express, two of the most common e-mail programs and both Microsoft products.

"We offer links to Plaxo from our Web site," a product manager for Microsoft Outlook, Simon Marks, said. "We very much believe in the idea that third parties can add value to our products. We're very happy that there are customers who can get value out of Plaxo and Outlook."

But Plaxo's plan to sell a premium version may put it in more direct competition with Microsoft. Microsoft's recently released Outlook 2003, for example, has an address management feature that helps corporate users keep track of customer contacts. The question is whether Plaxo can survive if Microsoft or another technology giant starts to move into this market.

Jim Carlisle, a managing partner at Graystone Capital Advisors, a venture capital firm in New York, said Microsoft and others were probably waiting to see if Plaxo could expand its membership into the tens of millions -- and generate profits -- before they jumped into this kind of network service.

Peter Lester, Plaxo's vice president for business development, said that ''ubiquity'' was crucial to its business strategy. While some Plaxo members say they would stay with Plaxo because their friends belong to the network and because they would prefer not to give their contact information to Microsoft, others say a more advanced and convenient product would tempt them to switch.

''I've been struggling for years with the idea of contact management, and I really, really am thankful for Plaxo,'' said Vladimir Cole, a project manager for the Scholastic Corporation in New York who is a Plaxo member. ''But I'm sorry to say as much as they've brought me, I have no loyalty. I'd switch to Microsoft.''

Still, other products, like Intuit's Quicken software and Google's online search site have fared well against competing programs from Microsoft.

''No question that it's a stiff challenge,'' said Dan Sheeran, senior vice president for marketing for RealNetworks, which accused Microsoft of blocking its RealPlayer media products from the market by bundling its Media Player in its operating system. ''One of the ways we have succeeded'' in competing against Microsoft, he said, ''is to develop products and services that have brand loyalty for consumers.''

The European Commission ruled two weeks ago that Microsoft must decouple its Media Player from the Windows operating system. Microsoft is appealing that decision.

Plaxo executives said they expected competition but were not concerned even if that competition comes from Microsoft.

''A problem of success for any business is that at some point there will be competitors, and we will have to deal with them,'' said Ram Shriram, a member of Plaxo's board who was an executive at both Amazon.com and Netscape during those companies' early years. ''Our job is to focus on building the best service for users as we possibly can.''

It may not be the big companies that Plaxo should worry about, at least for now. A start-up company called miniFILE Inc., based in Weatherby, Conn., has a similar product, also free. Instead of installing a program on their computers, users can put their address lists on miniFILE's Web site, and the company maintains them. A miniFILE member's information is automatically updated on other members' address lists, but the service does not contact nonmembers to ask them for new information.

MiniFILE's network has about 30,000 members. But the company filed a patent application for its network method before Plaxo filed its two patent applications. Peter Kostka, miniFILE's founder, said that if his patent was approved, Plaxo could not operate without violating it. Plaxo executives said they had never heard of Mr. Kostka or of miniFILE.




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