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Sculley backs new Gizmo
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March 28, 2000: 2:04 p.m. ET
Startup backed by ex-Apple CEO aims to transform Web content distribution
By Staff Writer David Kleinbard
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NEW YORK (CNNfn) - Sixteen years ago, Apple Computer's Steve Jobs showed Pepsi CEO John Sculley the prototype for the Macintosh computer. Sculley was so impressed by Jobs and Apple's technology that he gave up the top job at Pepsi to become the CEO at Apple, a post he held for a decade before being ousted by the board in 1993.
Sculley, who makes venture capital investments in Internet companies through his New York-based firm, Sculley Brothers, now is placing his money and reputation behind another technology he believes is as compelling as the Macintosh was in 1984.
Sculley's inspiration this time around is Eyal Gever, a 29-year old native of Israel who founded a company called Zapa Digital Arts. Zapa recently changed its name to Gizmoz and moved its headquarters from Israel to New York. Gever, who appeared on the cover of Red Herring magazine when he was all of 26, aims to change Internet marketing, advertising, and information distribution through an application called a Gizmo.
 "Of all the Internet companies we're involved with, this one is by far the most technologically ambitious," Sculley said in an interview from his Manhattan office.
A digital container
A Gizmo is like a digital "container" that can hold text, audio, streaming video, and graphics. Users can create their own Gizmoz or download them from a Web site. Once a Gizmo has been created or downloaded, it appears on the user's computer desktop as a thumbnail. The content of a Gizmo can be updated automatically by a server. In addition, Gizmoz can be placed on a Web page or e-mailed to others.
As an example, a professional baseball team could create a Gizmo containing text and video about the team. That Gizmo could be updated at the end of each inning to reflect the current score and show video highlights from the inning. The team's fans could download the Gizmo from the team's Web site and e-mail copies of it to their friends. Because Gizmoz spread by being passed from one computer user to another, the company calls their propagation "viral marketing."
 Sculley and Gever are betting that the passing Gizmoz from computer to computer will create networks of people who share a common interest. As an example, thousands of people could have a Madonna Gizmo on their desktops containing text, graphics, and video about the popular singer. When the creator of the Madonna Gizmo updated it, the changes would be reflected in every Madonna Gizmo in the world, regardless of where it is stored. In this way, Gizmoz form what essentially are private broadcasting networks.
"We're enabling content owners to become broadcasters," Gever said.
"People now have to search and find information they want on the Internet. By contrast, the Gizmoz technology brings people the content they like, making the Internet more like television or radio," Sculley said.
It's not push technology
At first glance, the Gizmoz offering sounds like the "push technology" popularized by Pointcast several years ago. The Pointcast network, introduced in February 1996, automatically delivered news and other information from the Internet to users' screens. While Pointcast initially caught on with millions of users, it consumed more than five megabytes of the user's hard drive, clogged corporate networks, and became too obtrusive. For those reasons, Pointcast failed and its service is being canceled this month.
Sculley and Gever emphasize that Gizmoz's technology is different from Pointcast's because the content always resides on Gizmoz's servers, not on the end user's hard drive. Thus, there are no big file downloads.
"The Gizmo makes no footprint on your computer; all the content comes fresh from our servers," Gever said.
And unlike Pointcast's network, Gizmoz are interactive and provide a private pipeline between content providers and individual computer users. Sculley and Gever also see significant differences between their technology and the streaming video software provided by RealNetworks Inc. RealNetworks (RNWK: Research, Estimates), based in Seattle, distributes a viewing application to individual computer users for free and then charges Web site operators for the software they use to broadcast streaming audio and video. The company's viewer, called RealPlayer, has several "channel buttons" on it, including ones run by CNN, Comedy Central, and ABC News.
"If your company is just a button on a RealPlayer, it's not your own virtual private network and it's not targeted," Gever said. "By contrast, a Gizmo is an open pipe leading to a targeted audience."
RealNetworks executives visited Gizmoz's headquarters earlier this month, although neither side would disclose the nature of the discussions.
"Gizmoz has got some neat technology, but I hardly feel they are a competitor to RealPlayer," said Steve Banfield, general manager for RealPlayer products. "They have a tiny Java applet that has limited functionality to play back animation content," Banfield said, questioning whether Gizmoz will be able to handle streaming video. Java is a programming language developed by Sun Microsystems designed to write programs that can be downloaded and run from the Internet.
Gizmoz plans to make money by controlling the computer servers that update the content on millions of Gizmoz thumbnails around the world. The more content Gizmoz serves to end-users, the more money the company makes. In that way, Gizmoz will serve as a broadcaster for major content providers, such as television networks and music labels.
The land grab stage
Sculley and Gever have been making sales calls to major media companies to try to convince them to have their content served to Internet users by Gizmoz. While Sculley and Gever declined to state which companies they are targeting, professional sports teams and music channels, such as MTV and VH1, are obvious candidates because they generate content that millions of people would want to view and pass along to friends through Gizmoz attached to e-mails. By inking deals with as many content providers as possible, Sculley and Gever hope to make it unattractive for a competitor to try to duplicate what Gizmoz is doing.
"We're definitely in a land grab stage," Sculley said.
Before it started to approach corporate customers, Gizmoz encouraged computer users to create their own Gizmoz, such as digital photo albums and greeting cards. Over the last three quarters, more than 500,000 Gizmoz have been created, even though the company did not launch an advertising campaign.
"Our strategy was to test the platform to learn from real users what works and what doesn't work - what make users collect and share Gizmoz and what doesn't," Gever said.
Still, Gizmoz has a long way to go before its user base approaches that of RealNetworks.
"We have an installed base of 95 million users, and that number continues to grow," said RealNetworks' Banfield. "One of the challenges Gizmoz will have is getting distribution of their applet. I can't imagine that users will want 1,000 of these things running all over their desktop."
An invasion of privacy?
If Gizmoz does take off, it has the potential to provide companies with valuable marketing information, since it can track where millions of Gizmoz receivers are located and what content they are viewing. Through Gizmoz, companies can test the effectiveness of their marketing campaigns in real time. However, Sculley and Gever resist having their company compared to the Internet advertising company DoubleClick, which tracks people's Web surfing habits by placing small files called "cookies" on their hard drives. DoubleClick (DCLK: Research, Estimates) has come under extensive fire from privacy advocates.
"We don't see ourselves in DoubleClick's game at all," Gever said. "We are tracking the Gizmoz, not the private information of the user."
In addition to receiving funding from Sculley Brothers, Gizmoz recently raised $14 million from Chase Equity Associates, Polaris Venture Capital, AOL Investments, Giza GE Venture Fund, and 1-800-Flowers.com As for the possibility of an initial public offering, Gever says "it's too soon to figure that out." 
-- Click here to send email to David Kleinbard
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