Enterprise RSS at NewsGator is Alive and Well

I love ReadWriteWeb.  I respect Marshall Kirkpatrick.  But I’m completely baffled by his article R.I.P. Enterprise RSS

Marshall says “It’s with a heavy heart and a sense of bewilderment that we conclude that the market for enterprise-specific RSS readers appears to be dead.” 

Huh? Marshall, are we living in parallel universes?

NewsGator has built its business on Enterprise RSS.   It has two primary revenue generating products around Enterprise RSS: Social Sites Professional and Social Sites Enterprise.  There are now over 120 companies using these products representing over 800,000 users.  Per the press release NewsGator issued today, customers that bought these products in 2008 include:

  • Two of the world’s top three banks
  • Two of the three largest banks in the US
  • The world’s largest private public relations firm
  • The second-largest advertising agency in the US
  • Two of the top three US manufacturers of network and communications equipment
  • The world’s second-largest law firm
  • Four of the top 15 US pharmaceutical companies
  • Two of the top seven US aerospace and defense companies
  • One of the top five investment banks in Canada
  • The fourth-largest generator of electricity in the US

In addition, NewsGator had a spectacular Q4.  They solidly beat the plan for Q4 that they had established at the beginning of 2008 (and met their 2008 overall plan on the top line and were ahead of plan on the bottom line.)  NewsGator added around 30 new customers in Q4, including six in the financial services sector, one of the areas most impacted by the economic downtown.

How many enterprise software companies can say that? 

Marshall goes on to say “Newsgator, one of those three companies, announced today that it has closed another round of funding. Years after the company launched, it appears to us that the funding is a life-support line for a company that has largely left enterprise RSS behind and has been humbled into selling advertising widgets.”

For starters, when we did the first round of financing of NewsGator in mid-2004, the company consisted of one person (Greg Reinacker).  4.5 years later it is 55 people and dominates the market it plays in.  You can call it “Enterprise RSS” or “Social Computing for the Enterprise” – I don’t really care.  What I do care is that the customers that have bought NewsGator’s products love them, are using them, and are realizing Marshall’s words “Any company that steps up to make serious strategic use of such software should be at an immediate advantage in terms of early and efficient access to information.”

The notion that NewsGator’s funding “is a life-support line” is totally absurd.  One of my goals with all of my “more mature” (e.g. older than three years) portfolio companies is to make sure they are “fully funded through becoming cash flow positive.”  This financing unambiguously gets NewsGator to that point with plenty of room to spare.  NewsGator still had cash in the bank prior to this financing; the last time I checked an incremental $10m of financing is a meaningful amount for any company.

Marshall, I invite you out to Denver anytime (or we will come to you) to spend the day at NewsGator, really understand their products, and get a deep understanding of how NewsGator is spreading “Enterprise RSS” to the corporate masses.  Seriously, come spend some time, do some real research, and help the industry understand the value of this stuff.

  • http://intensedebate.com/people/BradNickel BradNickel

    I agree that RSS as it is now will not replace all email and of course adoption issues make that even less likely with how we currently compute, but I believe that RSS as it is and RSS as it could be are entirely different things. If you treat RSS as personal bi-directional channels of data exchange, then you have an entirely new paradigm of secure, close channel communications. They key will be adopting what is into what can be when it comes to the tools we already use. Make RSS personal and group based and you have something very exciting and powerful that eliminates the problems of email, because every connection with other people is based upon a subscribed and shared channel as opposed to a publicly available email address. The values of this model though, go far beyond the reduction of the problems of email. Email need not be eliminated either and could be incorporated into such a system.

    Switching our use of technology to being ME centric and corporations allowing it are difficult as well, but the ability for a corporation to shit down the channels I discuss above, means it becomes far easier to allow me to centralize my computing environment to my needs personal and corporate and create my own views to data. A smart channels based system then would let companies present data to users how they want it and pull it back when the employee leaves.

    The recession may very well push the computing environment further along as more people are laid off, become freelancers, and corporations use more outsourcing, etc. We'll see.

  • http://www.intensedebate.com/people/BradNickel BradNickel

    I agree that RSS as it is now will not replace all email and of course adoption issues make that even less likely with how we currently compute, but I believe that RSS as it is and RSS as it could be are entirely different things. If you treat RSS as personal bi-directional channels of data exchange, then you have an entirely new paradigm of secure, close channel communications. They key will be adopting what is into what can be when it comes to the tools we already use. Make RSS personal and group based and you have something very exciting and powerful that eliminates the problems of email, because every connection with other people is based upon a subscribed and shared channel as opposed to a publicly available email address. The values of this model though, go far beyond the reduction of the problems of email. Email need not be eliminated either and could be incorporated into such a system.

    Switching our use of technology to being ME centric and corporations allowing it are difficult as well, but the ability for a corporation to shUt down the channels I discuss above, means it becomes far easier to allow me to centralize my computing environment to my needs personal and corporate and create my own views to data. A smart channels based system then would let companies present data to users how they want it and pull it back when the employee leaves.

    The recession may very well push the computing environment further along as more people are laid off, become freelancers, and corporations use more outsourcing, etc. We'll see.

  • http://www.intensedebate.com/people/BradNickel BradNickel

    I agree that RSS as it is now will not replace all email and of course adoption issues make that even less likely with how we currently compute, but I believe that RSS as it is and RSS as it could be are entirely different things. If you treat RSS as personal bi-directional channels of data exchange, then you have an entirely new paradigm of secure, close channel communications. The key will be adopting what is into what can be when it comes to the tools we already use. Make RSS personal and group based and you have something very exciting and powerful that eliminates the problems of email, because every connection with other people is based upon a subscribed and shared channel as opposed to a publicly available email address. The values of this model though, go far beyond the reduction of the problems of email. Email need not be eliminated either and could be incorporated into such a system.

    Switching our use of technology to being ME centric and corporations allowing it are difficult as well, but the ability for a corporation to shut down the channels I discuss above, means it becomes far easier to allow me to centralize my computing environment to my needs personal and corporate and create my own views to data. A smart channels based system then would let companies present data to users how they want it and pull it back when the employee leaves.

    The recession may very well push the computing environment further along as more people are laid off, become freelancers, and corporations use more outsourcing, etc. We'll see.

  • Marshall Kirkpatrick

    Thanks for your reply, Brad. I'm going to watch the screencasts on those product pages to start with. If in fact the company's competitors have all shriveled up and Newsgator alone is still selling RSS readers, at a brisk pace, then I'll happily admit I'm wrong. I'm going to look around and see what more I can read to get a feel for the state of this market. Coming to Denver to visit the company sounds like a great idea, RSS is certainly very important to me and I'd love to know the market better. Will comment more tomorrow after I get a chance to look at the Newsgator links you posted.

  • http://intensedebate.com/people/bfeld bfeld

    Super. I’m also happy to get you online asap with the NewsGator guys to give you a deep demo of the products in the short term to extend what you’ll get out of the screencasts.

  • http://intensedebate.com/people/bfeld Brad Feld

    Also – in addition to the screencasts, take a look at the Webinars at http://www.newsgator.com/download/webinar.aspx.

  • Peter Cranstone

    Brad,

    This is a fascinating post. One other point of view might be related to Will Price's blog on "When it goes right what does it take to build a software company". His answer was two rounds and about $10m. Obviously Newsgator has had more than $10m (a lot more) – so by now according to the Read/Write article it should be generating measurable, sustainable, profitable revenue from volume. It isn't quite there yet – hopefully this will be the transition year. Of course the next problem to be faced is the exit. With over $30 million in funding the cap table will be (probably) greater than 10m shares outstanding. Probably around 15m by now – so an exit of $50 – $70m (reasonable in today's and the next few years climate) would garner a $3 – $5 a share return on investment. I expect that the price per share paid over the last few years exceeds this amount (all up rounds). Therefore Newsgator now becomes a long term hold vs a short term (2 year) exit. This means two things, it has to get to profitability otherwise more rounds will increase dilution and lower share price and or they have to find a willing buyer.

    Is RSS here to stay? – no question. The next question is can it be profitable? No one knows yet, NewsGator may be the first to prove that out. The key is can they do it fast enough without increasing the dilution to make them attractive in say 2 – 3 years (without needing more capital). If they can – and if they can get their share price above $5 a share then the invested capital will be able to exit with a reasonable win – however the IRR over the life of the investment will not be that great.

    • http://intensedebate.com/people/smilbandit smilbandit

      I don't see that you can say RSS can be profitable any more that saying HTTP or HTML can be profitable. It seems to me that it's not RSS that's made Newsgator Enterprise products sell, but the features and layers of value they placed on top of RSS. If you click on Enterprise RSS on Newsgators site, "RSS Subscriptions & Notifications" is one of ten features that the newsgators products list. I'm sure the back end of most of those features is RSS but it's the functional value that has been layered on top that is being sold.

      • http://intensedebate.com/people/bfeld bfeld

        Well said – I completely agree.

  • http://novanewcomer.wordpress.com Nova Newcomer

    Brad, I really believe that using RSS to provide information customized to what's relevant to each individual employee is what internal communicators should be doing. Many of the communicators in my workshops say they use RSS to serve news and/or information to their entire audience, but few of them talk about using it to help employees create their own newsfeeds. Do you see any trend toward this?

    • http://intensedebate.com/people/bfeld bfeld

      The beauty of RSS is that the vast majority of people that are using it have no idea they are using it! For example, anyone using SharePoint is likely generating a lot of content that can be consumed via RSS. One of the use cases of NewsGator’s Social Sites product is to sit on top of SharePoint and make the feeds generated throughout SharePoint much easier to use and consume.I think of RSS as “wiring for feeds” in the same way I think of SMTP as “wiring for email”. It’s not a perfect analogy, but it’s a helpful one. No one talks about SMTP anymore – we just expect email communication to work a certain way (which it does – most of the time.) Same with RSS / feeds – in some ways the more “hidden” RSS is, the more widespread it becomes.So yes – I’m seeing a very significant trend through many of NewsGator’s customers to “help employees create (and distribute, share, tag, and consume) their own newsfeeds.” This is one of the features of the Social Sites product that is heavily used.”

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  • http://intensedebate.com/people/rickgregory Rick Gregory

    Um, Marshall… before you use a prominent blog like RWW to declare a market dead… didn't you CALL any of these companies? Talk to people? Do research? You didn't even watch their screencasts? I get the pressure at RWW to remain current, but stuff like this is worrying.

    • Marshall Kirkpatrick

      Rick, I've talked to all three of these companies multiple times over the last 3 years.

  • http://blogs.zdnet.com/Howlett Dennis Howlett

    @brad: I hate to say this but one of the really BIG problems for the current blog tech community is that they may understand the tools for themselves but have little or no idea about the way enterprise works. It's one of the reasons I almost never look at either TechCrunch or TechMeme. Marshall tries but enterprise is not his focus. Doing that job properly requires years of being in the trenches. It's absolutely right to get him out to Denver. Might be a shock.

  • http://www.rossdawsonblog.com Ross Dawson

    I have no doubt that a significant proportion (though minority) of organizations will use RSS/ feeds as a core part of their information dissemination and workflow within the next five years. However I think that how these are implemented and used are likely to be very different to how RSS is used in a consumer environment. It's still not clear quite where the vendor-side value will be unlocked in this space, as RSS becomes integrated into all aspects of enterprise activity. Newsgator is absolutely well positioned in this space, though anything in this space remains a tough sell because if the potential of enterprise RSS is to be truly tapped, it requires shifts in workflow patterns, which are deeply embedded and highly recalcitrant.

    • http://intensedebate.com/people/bfeld Brad Feld

      I agree that the enterprise adoption (and usage) will look different than consumer usage. We've learned that in spades at NewsGator based on our experience with our consumer products (FeedDemon, NetNewWire, Online, Blackberry, iPhone) in contrast to our enterprise products (web-based, tight SharePoint integration.)

      While the IT people know about RSS, the end users typically don't (and don't care) – they just care about the social / sharing / collaboration / discovery features of the products – many of which are based on top of a very robust RSS capability.

      In 2007 we found this an evangelical sale as we were trying to explain "RSS". We shifted to social computing in 2008 (on top of the same technology, but with a much clearer use case) and – as a result – had a fabulous year. Social computing in the enterprise is here, it's real, and major companies are buying and adopting it now.

      • http://karyng.typepad.com Karyn German

        Thanks, Brad. As someone on the front lines who is coaching companies on what it means to deploy social computing in the enterprise, I know first-hand that there is tremendous energy and enthusiasm for this transformation. And that is the way companies must think of it – transforming the culture and the business. RSS just happens to be an enabling engine/plumbing/technology – in my consulting, I don't focus on reading news via RSS. That misses the bigger picture.

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  • http://www.clickbrain.com Brad Nickel

    Ross: Excellent points. RSS has the potential to replace email and other flows of information, but the companies leading the way don't see how as yet and adoption will be particularly difficult. In addition, I believe that one of the fundamental conceptual problems we have in tech is that of the separation of me and my personal communications and my work communications. Until we allow for MY communications to securely include my company as well, then usability issues, separation of information,etc. will be incredibly difficult. RSS can give us as technology users the ability to secure corporate data, while allowing the identity and information flow, and communications I have at my disposal as an individual be seamless whether I am at work or not. RSS can allows us to have channels in our life and give companies the ability to still control it while we as human beings can gain usability, completely eliminate SPAM, and much more. They key is how to seed it. How do you overcome the issue of changing how people work. One method is to use a trojan horse model of providing functionality for work or home using RSS feeds (way beyond info feeds) that allows for secure sharing of large files or collaborative information and overcomes a current limitation in computing. You then expose more functionality for the user as they grow accustomed to using the tool. In the end, the power of RSS has not even come close to being tapped. It has the potential to change the very model of our interaction with technology, but until the "owners" of the technology or someone else comes along to show them how to get people to use it, we may never get there.

    • http://intensedebate.com/people/bfeld Brad Feld

      Brad, I'm not a believer that "RSS will replace email." While there are definitely things done by email that can and should be done in a social computing environment, it's more complex than "RSS replaces email."

      That said, I agree with a lot of what you said as it underlies the theme in social computing in the enterprise. There are massively inefficient and ineffective work patterns resulting from email Reply-All and Forward that should be replaced with tagging, sharing, collaborating, etc. Information discovery services that are "separate applications" where the content then gets emailed around are also ripe for complete and total replacement by social computing applications.

      So – in that way "RSS will replace <some> email." Just not "email" as we'll still all use email very extensively for a long long time.

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  • http://intensedebate.com/people/greg_reinac2315 Greg Reinacker

    I posted a response to this whole conversation here:

    http://www.rassoc.com/gregr/weblog/2009/01/15/ent

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  • chrisdymond

    Who needs better business intelligence when the market's good and they're making money anyway? Go Newsgator – I think that's a pretty shrewd investment, Brad.

  • http://intensedebate.com/people/bfeld Brad Feld

    Thanks Chris.

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  • http://syabac.student.ipb.ac.id syabac

    oke..
    RSS with Newsgator really good..

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