Postini Revisited

For casual observers, Postini is a nice tonic for the otherwise fairly general dot-com doom and gloom. For ISPs, the company should definitely be on the must-investigate list of value-added services.

by Gerry Blackwell [November 20, 2001]

Successful dot-coms like e-mail services wholesaler Postini Inc. of Redwood City, Calif. are a rare breed these days.

That Postini also has a no-brainer value proposition for ISPs should make the company doubly interesting. Success, after all, is a nice attribute in a potential partner.

Not that Postini is a blue chip stock or anything. It's still at an early stage in its development, but at least it didn't self-destruct like so many other hopeful e-ventures—in fact, far from it.

Founder and vice president of products Scott Petry told us recently that the company has seen three straight quarters of growth—including close to 100 percent growth quarter over quarter for the last period.

Petry also says Postini expects to be profitable by next year. Not bad for a post-holocaust dot-com.

Last month, in a move signaling the company's growing confidence, Postini announced it had acquired a like-minded e-mail services company, San Francisco-based Neomeo Corp.

Air mass
We first took a look at Postini exactly one year ago when it was just getting off the ground. At the time it was offering fairly unique virus and spam filtering services for ISPs to resell—or give away as a churn-reducing premium.

Postini has added to its offerings since then.

Last September, it introduced Air Postini, an e-mail-to-wireless forwarding service. Users specify in a profile which messages received in their regular mailbox they want to be forwarded to their wireless devices—by name, message content, and the like—and how much of each message should be forwarded.

Then earlier this year, the company launched an e-mail-to-fax service. When a Postini subscriber wants to send a message to a fax machine, the user simply e-mails it, complete with attachments, to an address that includes the fax's seven-digit phone number at Postini's postinifax.com domain.

Postini turns the message into a real fax and sends it through a gateway out over the public switched telephone network to the intended recipient. Or rather Postini's supplier, Miami Beach, Florida-based VisionLab Inc. does this.

Subscribers also get a fax telephone number so they can receive faxes in their e-mailbox. Postini/VisionLab receives the fax and adds it as an attachment to an e-mail which it forwards to the subscriber.

The beauty of Postini's offerings for ISPs is two-fold. First, they require zero technical integration. You simply redirect customers' e-mail through Postini's servers, where the application programs do their thing—scan for viruses, filter for spam and so on.

It's part of the normal Simple Mail Transfer Protocol (SMTP) flow. The process delays each message for all of 30 miliseconds. Most users can live with that. And Postini makes it easy for network operators to manage which services each subscriber gets.

Second, Postini's services require zero capital investment by the ISP. That's nada, zip or zero dollars.

Something for nearly nothing
ISPs pay for what their subscribers use. The more services used and the more subscribers using the services—the lower the monthly subscription fees. They're typically in the "dollars-per-month range," Petry says.

"Think about a guy doing a make-buy decision," he suggests. "Either he buys six versions of a piece of software for each of his e-mail servers—or he signs up for one service—ours—that provides a centralized point of control for metering and auditing."

Apparently Postini's proposition appeals to ISPs. The company claims to have over 250 ISP customers with a total of more than one million users. And according to Petry, Postini has a 100-percent customer retention rate.

Although the company started off selling only to ISPs, it now also sells to government institutions and enterprises. "We're selling to anybody who's running an e-mail service," Petry says.

Earlier this year, the company completed a second round of venture capital financing—$6 million. The principal investor first time around in 1999 was August Capital of Menlo Park, Calif. August was in on the second round as well, along with Boston-based lead investor Summit Accelerator Fund and Sun Microsystems.

So how has Postini managed to thrive while others were dropping like flies?

Petry offers no deep insights. What it comes down to, he says, is that Postini offers products customers already want or need—they don't have to be sold on a new concept.

The company offers its products in exactly the way capital-strapped ISP customers want them—and in a way that makes it easy for ISPs to make a decision.

And the products are good—as witness the company's 100-percent customer retention rate.

While Postini initially thought ISPs would be able to justify the ongoing cost of providing the services to their customers with reduced churn and reduced time spent dealing with subscriber virus hassles, ISPs surprised the company.

"They said, 'Don't tell me about cost containment, tell me how I can generate more revenue from my customer base,'" Petry says.

Many ISP customers resell the services or use their introduction as justification for raising base rates.

Thrill seeking
Postini is of course not content with the nice little franchise it has already developed. The company is busy now developing new products, many based on technology Neomeo brought into the house.

Neomeo's strength was in SMTP network management and mailbox mining. One of the first applications Postini hopes to bring to market is an "intelligent attachments" intercepter service.

Say a company or individual e-mails a message that includes a rich-content attachment—an MP3, JPEG, movie—to a large mailing list. The Postini service will strip the attachment out of the messages destined for its subscribers, post the attachment to a Web site and insert a pointer to the Web site in the original message.

Instead of umpteen instances of the same attachment moving around the Net—and lodging on the ISP's server—now there's only one.

"ISPs are going to like it because it saves them space, and money," Petry says. "End users are going to like it because now the message won't take so long to download, and he may not want to view the attachment anyway—many don't like to look at high-res images, for example."

Another product, more for enterprises, he concedes, will exploit Neomeo's mailbox mining technology. It can analyze mailbox contents according to parameters established by the user and extract messages to and from the same person or with related content and organize them into separate folders.

Petry could give no time frame for introduction of either service.

For Net observers, Postini is a nice tonic for the otherwise fairly general doom and gloom. For ISPs, the company should definitely be on the must-investigate list of value-added services.

— End