SAN FRANCISCO (01/26/2000) - A prime tenet of public relations holds that when a formidable foe moves into a startup's territory, the younger company should declare it's good news for the industry.
That's exactly what online event planners like Mambo.com and Evite did two weeks ago when Yahoo announced it was adding Web-based invitations to its offerings.
"Yahoo's move just validates that this is a serious category and that it's large enough to accommodate lots of players," says Madeline Schroeder, Mambo's CEO. One of a raft of Web sites that help people send invitations and manage RSVP lists for birthday parties and other types of social events, Mambo has also upped the ante by forging a partnership with Lycos and adding a new payment feature.
But Yahoo's largely expected entry into the events category raises a question:
Will the dozen or so players competing in the crowded space dry up the same way that independent free e-mail and calendar services evaporated a few years ago when major portals jumped in? There are powerful reasons for predicting a shakeout.
Yahoo is among the most visible brands of any Internet company. Last month, more than 120 million unique visitors used such Yahoo services as search, address book, calendar and e-mail. By integrating those features with Yahoo invitations, "we can make a complete invitations product," says Thad White, producer for the new service.
And as with free e-mail and calendars, it's hard to make money by offering online invitations. To be competitive, the service has to be free, meaning that revenues come mainly from partnerships with party suppliers, restaurants and other businesses that cater to people throwing splashy events. Yahoo, with its wide network of partners, is in a far better position to strike those types of relationships than is a single upstart that's only beginning to build partnerships.
Another sign that points to consolidation is MP3.com's acquisition last month of SeeUthere.com, an event planner that helps corporations and nonprofits throw large parties and gala fundraisers. MP3.com, a site that promotes and sells music from unknown bands, plans to use the service to help musicians sell tickets to fans.
Other sites will likely follow the moves by Yahoo and MP3.com in their efforts to increase "stickiness," Net parlance for features that bring people to a site often and keep them there longer. It's only a matter of time before Excite, AOL and others make online invitations as common as free e-mail and calendars.
Stand-alone invitation services, however, say they've got a leg up on the bigger players that might move onto their turf. "We think that winning in this space requires understanding the user really well and [offering] a lot of subtleties that [Yahoo] is not going to get," says Josh Silverman, CEO of Evite, which has been operating since October 1998.
Evite, which boasts partnerships with CitySearch, EarthLink and Go.com, might be an attractive takeover candidate, but the future may not be so bright for such players as TimeDance, Event411.com and Invitemetoo.com, which have yet to register on most people's radar. While MP3.com's acquisition of SeeUthere - a leader in the space - was valued at $150 million, most invitation services are likely to fetch a much lower price since they are relatively inexpensive to build.
No company feels the heat more than Mambo. The startup's deal with Lycos, a portal that draws about 30 million unique visitors per month, will offer a cobranded version of Mambo's service that will be tightly integrated into Lycos' calendar and related offerings. In return, Lycos will receive a cut of Mambo's revenues; Lycos declined to say whether it would also collect a flat fee. Mambo also hopes to differentiate itself with a feature that allows an event's hosts to collect payments from other participants. No other player has yet been able to offer a payment service, but look for Evite to add a similar feature in the next quarter.
But adding nifty features this late in the game might not be enough. "You're going to see consolidation occur really quickly," predicts John Chang, president of SeeUthere. "The weaker players will die on the vine."