No More Plaxo, Please

Monday Sep 13th 2004 by Joshua Greenbaum
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Online contact management service provider Plaxo is building one of the most valuable marketing databases in the world. But Enterprise Advisor columnist Josh Greenbaum wonders if it may come at a cost -- to you.

I have to admit, the threshold on my hype-meter is tuned very low these days (don't even get me started on Google), which means I'm more hard-boiled than most when looking at the business value of so-called free Internet services.

So when it comes to Plaxo and its "free" on-line contact management service, I'm hearing a loud warning signal that's hard to ignore: This appears to be a company with no visible strategy for making real money any time soon.

The reason the hype-meter is ringing is the value of what Plaxo is collecting -- a who's who of contact information that is maintained with the up-to-the-minute precision that only an automated on-line service can provide. In a world where high-precision marketing places an extremely high value on extremely accurate information, Plaxo is building one of the most valuable marketing databases in the world.

And it's not just simple contact information that Plaxo is storing: If you give them permission, Plaxo will also manage your calendar, tasks and notes. Which just about covers everything a marketer could ever dream of knowing about you.

To their credit, Plaxo's privacy and security policy looks like they have it all covered. Everyone who opts in to Plaxo is in charge of how their information is used, not Plaxo. There will be no giving away or selling of any of the information to any third party, and, other than its use by Plaxo for understanding usage patterns and upsell opportunities, the user is in total control.

Importantly, this policy will never change -- until, of course, Plaxo changes it. At which point everyone will be notified and given the opportunity to opt out of the new usage agreement and, by inference, opt of out Plaxo entirely.

No Choice for Non-Members

The problem I have with this scenario is that the people who aren't members of Plaxo and whose contact information is being kept in Plaxo won't have a choice when -- I mean if -- Plaxo radically changes its policy or the company changes hands.

Let's assume that I'm not a Plaxo user, and my contact info is in Plaxo because I answered one of the many requests from Plaxo users -- Plaxo calls them members -- who know me. Then someone buys Plaxo. As promised, Plaxo sends out a change of status notice and offers customers the chance to delete their data from the Plaxo system.

Good for them, but not necessarily good for me. It only takes one of the dozens of people who have my contact information in Plaxo to approve the unlimited use of this information by the new owners and my contact info is now owned by some third-party company. Along with, one can assume, the voluminous information that Plaxo has regarding usage patterns and user demographics that are not necessarily covered by the privacy agreement.

Bear in mind that, as of this writing, the ticker on the Plaxo web site lists more than 3 million members and almost 900 million contacts. Turns out the non-member data may be the really valuable asset after all. Think that scenario sounds unlikely? Actually, I have a problem with it too. Plaxo could never be sold if its only asset, all that contact data, could just fly away before the sale was complete. In fact, the privacy agreement, if Plaxo sticks to what it is promising, makes the company completely unsellable, as its main asset is the data it collects.

And, therein, fellow contacts, lies the real problem. Plaxo really has no other business model that I can discern beside a sale or a sell-out. Sure, it's selling "premium" services at $20 per user per year, but there's no real revenue stream there to speak of. As far as can be seen, the company's business plan consists of a repeat of the dotcom hype model. Unless they sell the company. But to do so they'd have to renege on the privacy agreement. And why not, it's probably not legally enforceable anyway.

What's the moral of the story? If we've learned one thing from the dotcom bust, it's that there's no such thing as a free lunch, or a free online service. At some point or another, someone has to make money, and that means that someone has to pay. And when it comes to Plaxo, the only way to pay is to sell its most valuable asset: You and your contacts. Once again, when it comes to the Internet, "free," like everything else, has its price.

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