Plaxo, the free contact application that automatically updates address books via e-mail, has gained notoriety since it was launched just over a year ago. Now its creators are pinning the application’s future on a paid, business-oriented version to create the company’s first significant revenue stream. However, given the privacy concerns Plaxo raises and the widely held belief that the e-mails it generates are at best annoying and at worst spam, the application might hit a wall as it tries to penetrate corporate North America.
Plaxo has garnered more than 2.5 million users who copy the address books in their Microsoft Outlook e-mail clients to the Plaxo server, which generates e-mails requesting contacts update their phone numbers or addresses, and keeps the server and local copy up to date. Plaxo doesn’t charge users for the software, instead collecting US$20 per year from customers interested in “VIP” support. The company also says there are plenty of small businesses using the tool, especially since it added group calendaring and expanded note-taking capabilities in Version 2.0 that was released in May.
Before year-end, the company plans to release a “premium” version — Plaxo officials won’t yet say how much it will cost. With both individual and per-seat pricing, this version is aimed at the business market and adds the ability to automatically clean up address books (deleting duplicate entries) and a back-up and recovery capability.
Although the company thinks the premium version will appeal most to small businesses, the company also is setting its sights on larger outfits. “Our approach is going to be to enter organizations from the bottom,” says Rikk Carey, Plaxo’s vice-president of engineering. “One day you may see us selling enterprise versions.”
Yet the concerns that the Plaxo model raises — critics say collecting and storing contact information and relationships on a central server (see graphic) is risky for users — it might keep Plaxo out of many small businesses, nevermind large companies that tend to be more sensitive to letting information out of their networks. “It poses a huge risk to any company,” says Will Hayden, senior network administrator at All Phase Communications Inc., a telecom dealer in Seattle with 30 users on its internal network. “You’re sending your database contacts over to a third party.”
Plaxo isn’t alone in this category; products from Corex Technologies, GoodContacts and others use a similar model to keep address books up to date. Corex is attempting to leverage the success it has found with its business-card scanner to sell its AccuCard service, which automatically sends update requests to contacts to corporations via e-mail once a quarter.
However, one analyst notes that competing against a free product like Plaxo is an uphill climb. “The number of adopters of Corex’s service is not nearly as impressive as Plaxo’s,” says Avi Greengart, senior analyst with Jupiter Research. Corex charges US$49.95 per year for AccuCard.
Widespread adoption of these types of applications in the corporate environment is questionable, Greengart adds, because it’s difficult to convince users to pay for a service that’s been available for free. “I’m still somewhat skeptical that anyone can make it work, but…I would give Plaxo the nod. Scale does help; if you need a whole bunch of people to convert to a paid (model), it helps to have a whole bunch of people to begin with,” he says.
Among the products in this category, Plaxo seems to have made the most noise. This is astonishing, considering the company spends no money on marketing or advertising, relying instead on its members to pull in new users. (Each Plaxo message sent out includes a sentence encouraging the recipient to join the network.) A quick review of opinion columns and Web blogs shows that Plaxo also has received the most criticism, particularly from people who feel the information it stores is invaluable and easily could fall into the wrong hands.
“The notion that a central place is collecting relationships makes me nervous. I’m in your contact book and you can find a whole bunch of people who are related (to me)…that’s great for target marketing” says David Jameson, founder of DigiPortal, which makes an e-mail challenge-response tool for verifying message senders by forcing them to validate their identity before a message is received.
The oft-repeated response from Plaxo, as outlined in the privacy agreement posted on the company’s Web site, is it does not share its users’ information with any third parties. And, if Plaxo is bought or goes into bankruptcy, users will be alerted and given the opportunity to delete their information from Plaxo’s servers before ownership changes hands, Carey says.
However, Carey acknowledges that many of the privacy concerns directed at Plaxo are valid. “We live in a time where the world is pretty disruptive; there’s crazy stuff going on. By Plaxo’s nature, we tickle that (privacy) concern, you get an e-mail from someone that shows your personal information, it’s a little scary,” he says. “People assume the worst.”
To help calm these concerns, Plaxo recently added a feature that lets the recipient of a Plaxo e-mail challenge the sender to prove how they know each other. Plaxo tracks when its users are challenged, and if a particular user gets an abundance of challenges (Carey says 10 would be considered a lot) then the user is kicked off.
From a privacy standpoint, there’s no reason for businesses to avoid using Plaxo, says John Pironti, a security consultant at Unisys who advises the computer maker’s large enterprise customers. “The privacy agreement is solid, and Plaxo seems to be abiding by it. Everything in security is about balance, and here the benefits outweigh the risks,” Pironti says. However, he questions whether large companies will need it. “A lot of corporations have been driving this concept internally — there’s a lot of push to put in directory systems with active notification — so I wonder about the market viability for an enterprise version.”
Another complaint against Plaxo is that the e-mails it generates are spam. Proponents deflect that criticism, saying Plaxo e-mails simply request that someone the sender knows updates their contact information and are not commercial messages.
Businesses will have to give this issue a hard look before sanctifying the application for corporate use, lest they be accused of sending irritating messages or, worse yet, junk e-mail. In addition, many companies might not want to be viewed as Plaxo advertisers.
Whether Plaxo gains a foothold in the small-business and eventually enterprise markets likely won’t affect the product’s popularity among individual users. What it might well affect is the company’s viability; Plaxo has attracted US$20 million in funding and is banking on the paid version of the application to increase the small amount of revenue it collects for VIP support, according to vice-president of marketing Scott Epstein. That leaves the paid version of Plaxo to carry the weight of the company and to ensure the free version stays that way.