IQ News: Q&A - From Apple to Applets

John Sculley and Eyal Gever hope that advertisers and consumers take a shine
to their Gizmoz.
It’s become a cliche to cite declining clickthrough rates as the primary impetus for online advertisers to seek better “beyond the banner” marketing schemes. If Internet startup Gizmoz has a say in the burgeoning viral marketing category, the company’s eponymous multimedia product will help both content creators and advertisers more effectively deliver their wares and messages to users.
Gizmoz, which is based in Tel Aviv, Israel and New York, creates small, 13 kilobyte Java applets that function as “containers” for content, video, advertising and hyperlinks. The free-standing, collectible containers, called Gizmoz, can be “played” on a user’s desktop using the Java virtual machine application tied to most Web browsers. Gizmoz have the additional benefit of one-click e-mail capabilities, realizing its viral marketing potential.
After launching a Gizmoz, which can be e-mailed to friends and associates as an attachment, users can choose the links and content they want to see. Gizmoz are free to users, but advertisers and content creators pay a licensing fee for use of the Gizmoz creator. The best part for Gizmoz clients? All user traffic goes through one server, namely Gizmoz’, letting advertisers know exactly how many people viewed the available content and what they looked at. And, since e-commerce hooks can be built into the Gizmoz, advertisers can see an instant payoff on their investment. Of course, advertisers pay for the traffic that comes through the Gizmoz server.
Eyal Gever, Gizmoz’ chief executive officer and founder, and former Apple Computers chief John Sculley, the company’s chairman, were recently in New York for the Streaming Media East 2000 trade show. The two sat down to discuss how Gizmoz fits into the viral marketing landscape.

IQ: When did you become aware of viral marketing and what do you think of it?
John Scully: Well, I first became aware of it when [investment firm] Draper Fisher invented the term. And then I saw it first hand with ICQ [the free, real-time chat application]. What I liked about [ICQ] was that in a world where the power shift has gone from producers who control everything to customers or users who control the viral marketing, it seemed like a perfect example of that. I think it’s still a very powerful idea that the most important content is created by the users themselves. The users are in control. They can pass things on to their friends. They can build affinity groups and special relationships with content that they like and want to be around on a virtual basis.
How do you think Gizmoz will be able to compete with the other viral marketing companies that are out there right now, considering that they had a head start?
JS: I don’t think that Gizmoz competes with any of them. Gizmoz is a different model, which is essentially a broadcast model. It says that anyone who has content can be their own broadcaster. So it’s focused at owners of valuable content who want to have their own virtual private networks (VPN). That’s a different model than some of the other examples that are out there, where they are essentially saying, let the users do everything. We say, let the content owners create private networks and let users decide when they want to opt in. It’s basically an interbroadcast VPN. In effect, pre-tuned stations or channels allow users to hear or see or view what they want. It’s like turning on a radio. If they like it, they can pass it on to their friends because there’s a copy-and-send technology. Gizmoz doesn’t require plug-ins.

Is this technology going to be exclusively used by content providers and advertisers or will you open it up to end-users as well?
Eyal Gever: We started in reverse. We started almost a year ago when we finished the development. We came out and said, you know what, we’ll allow any user out there to create Gizmoz and propagate them to their friends, families and business colleagues. So far more than 800,000 Gizmoz have been developed. Not all of them are very powerful because of the content inside, but some are. And in doing this, we learned a lot about what people were doing, where they distributed them, and how we could improve the scalability [of the product]. We are keeping this personal service because we think there is a loyalty issue here. Let’s say that you are collecting branded Gizmoz, which is great for you, right? You can trade Gizmoz, but the ones that you will probably keep forever are those that you have created, whether they are photo album Gizmoz or personal interest Gizmoz. Our core business is providing VPN for businesses and building VPNs for businesses. But the ecosystem has to have great interfaces that let the users express themselves.

Can you embed an ad in the personal Gizmoz?
EG: No, only the companies that create private networks can do this.
JC: The big difference between this and what other people are doing with viral marketing is that this is really designed for people who own valuable content to be able to build their own virtual private networks. Because it is controlled by the owners of the content, they are the ones who can put ads in or put transactions inside of a Gizmoz. The viewer is in control of which ones that they want to have available to them. They can keep them on their desktop and bypass the browser and bypass the portal and have a direct connection to the Gizmoz. You can think of it in terms of the way a television dial would let you connect to your favorite video station. We think that’s important because Gizmoz has made some careful policy and technical decisions about privacy. There’s no invasion in terms of trying to put cookies on anyone’s [PCs], so it avoids a lot of the controversial issues about getting personal information. [Our server] only tracks where the Gizmoz are so the Gizmoz are viral in the sense that someone can pass a Gizmoz on to somebody else who can then pass it on to somebody else who can pass it on to somebody else. They are always connected back to the Gizmoz network. So if it’s a favorite piece of music, they can pass it on. But the person controlling the content, the person who owns the music label–unlike Gnutella or Napster, which have essentially no control over what happens–knows exactly where all the Gizmoz transceivers are. From a marketing standpoint, that’s a much better model because it’s increasing the incentive for content owners to find models to generate revenue and go beyond banner ads. They can actually sell merchandise. Music would be a good example of that. You know music labels currently make all their money selling CDs, and the only way the artists make any significant amount of money beyond the very small royalties they get from selling the CDs is by having their own concert tours and selling merchandise at the concerts. A Gizmoz VPN lets an artist or band run specialty events, have fan clubs, be able to show photos, sample music, sell merchandise like hats and T-shirts and bags and things like that. And it gives them a chance to have a much bigger participation in the commercialization of their actual properties. And we’re starting with pop culture. n

Karen J. Bannan covers technology, e-commerce and the Internet for The New York Times, Business Week Online and Internet World.