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RealTime IT News

RealNames: It Takes Money To Print Money

While Network Solutions, The Internet Corp. for Assigned Names and Numbers and the rest of the domain name registries feud publicly among themselves and with the federal government, RealNames Corp. has quietly launched a $70 million end-run that just might relegate URLs to the technology attic alongside WordStar, DOS and other still-functional but mostly irrelevant techno-artifacts.

Based in San Carlos, Calif., RealNames, (founded in 1997 as Centraal Corp.), replaces the URLs slashes, dashes, tildes and alphanumeric soup with plain words. So, instead of trying to remember -- or type in -- http://www3.vw.com/cars/newbeetle/ all a user needs to do in a RealNames-enabled environment is enter: "new beetle" or just "beetle."

"The URL system certainly works," said RealNames founder and President Keith Teare, "But involves a five-part address: protocol, host name, domain name, file system location, actual resource. Human beings were never intended to read these addresses. Now they do not have to."

A consortium of white-shoe VCs thinks URLs bite so badly that they've put in more than $87 million in three rounds of financing. The latest is larger than a lot of IPOs: $70 million which closed Aug. 9. Morgan Stanley Dean Witter Venture Partners led the latest round accompanied by MSD Capital L.P., Goldman Sachs Capital Partners, Bowman Capital, Access Technology Partners (an affiliate of Hambrecht & Quist), Robertson Stephens' Bayview Investors and the J. & W. Seligman New Technology Fund. The round also includes additional investment by five of the company's existing investors, Draper Fisher Jurvetson, idealab! Capital Partners, Amerindo Investment Advisors, New Millennium Partners and Network Solutions, Inc.

A company spokesman said based on the $70 million, the company currently is valued at $300 million.

"They have a license to print money," said Gartner Group analyst Kathy Hale. "They have no effective competition."

She said there is nothing to stop them from linking company names and other RealName words directly to IP addresses, thus bypassing entirely the current system. RealNames, she said, makes ICANN, Network Solutions and other domain name registrars, "irrelevant."

Teare takes a more diplomatic view.

"Our goal would be for total ubiquity in search engines, browsers and portals. It makes sense for us to partner with all these players. As a concept Internet keywords could be used for any IP based device such as a cellular phone or a Palm Pilot. Think of your RealName as an IP equivilant to your social security number. As an individual you could own it for life as your phone, web address etc."

Currently, nabbing a key word or brand name through RealNames is similar to registering a domain name: Log on to the RealNames site, check the word availability, pay your money and get your word. Small businesses pay $100 per year per registered name or word, good for up to 2,500 click-throughs per month. Individuals who are members of free online communities such as GeoCities, Tripod, TheGlobe and others get a free "personal keyword." Internet 1000 companies, on the other hand, cut custom deals with RealNames based on the number of keywords registered and the click-throughs.

"eBay is a good example," Teare said. "They have registered more than 1,200 names with us. The names are free, but they pay us 15 cents per visitor." Teare added that other deals ranged from 2 cents to $1 per click-through depending on the value of a visitor to the paying site.

In addition to eBay, the roster of RealNames customers is long, gold-plated and includes Microsoft, MSN, Barnesandnoble.com, Beyond.com, Egghead.com, Office Depot.com, InsWeb and a lot, lot more.

So many, in fact, that the potential for conflict is immense and mirrors the controversies in today's domain registration world what with cybersquatters, trademark infringements and nasty surprises (like porn site whitehouse.com)

To address this issue, the RealNames agreement gives name owners very few rights. " We may at any time, with notice to you that is reasonable in the circumstances (including immediate notice when that is appropriate) withdraw or reallocate an Internet Keyword previously or currently used by you." And: "You agree that all goodwill in any Internet Keyword as an address in the RealNames Service, and all property rights in any Internet Keyword as an address in the RealNames Service, belong exclusively to us. Your subscription of an Internet Keyword and your use of the RealNames Service confers upon you no property, business, or competition rights." And in the case of a dispute, " you agree that we shall have the right to decide in its sole discretion what actions to take. . . . You understand and agree that you have no vested interest or right in any procedures or rules of dispute resolution."

These draconian provisions, said Teare, are vital to the quick resolution of conflicts which have plagued domain registries.

But while RealNames is sitting atop a compelling idea backed by a Cold-War-sized strategic arsenal of money, they must overcome several formidable obstacles, the biggest of which is widespread adoption. Once someone subscribes to a keyword, the name is linked in the RealNames server farm to the appropriate URL. When someone enters any word (minus the http://) in the address field of a RealNames-enabled browser, the request is sent to the RealNames server farm. If the word is subscribed to, RealNames then connects it to the corresponding content server address.

But "RealNames-enabled" is the current drag: Right now, only IE 5.0 has the RealNames protocol built into it. All earlier versions of IE and all versions of Netscape require the user to download and install a browser plug-in. Gartner's Hale thinks this problem is a non-starter because people upgrade their browsers so quickly.

For context: The VC Watch PC is a two-week-old P-III, 500 MHz, but its Win98 OS shipped with IE 4.0. While RealNames says about 2 million RealNames visits are completed each day, it's clear that their new $70 million jackpot is looking at a point in the future.

A number of search engines such as AltaVista have implemented links to the RealNames system, but they have only incremental value over ordinary search links. Indeed, they currently are less useful because the RealNames links produced by AltaVista lack the brief abstracts found in other search results, thus making it hard to decide which one might be most relevant.

In addition, Netscape has its own version of non-URL access called "smart browsing." And while neither Netscape nor parent AOL have commented on the RealNames system, they clearly don't plan on ceding this market without a fight.

Indeed, in a move resembling the Microsoft/AOL battle over instant messaging, Teare has called for standards in the plain word addressing area. The battle here promises to be at least as hot and divisive since AOL has been using the keyword navigation system since its inception.

RealNames looks to have a license to print money and plenty of capital to buy a big press. But only the future will determine if they can print it faster than they can burn through it.


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