Aiming at Profits, PeopleLink Shifts Business Model.

SANTA Monica-based PeopleLink Inc., a provider of what it calls "e-community infrastructure" -- online chats, message boards and instant messaging -- inked a deal last week with two of Viacom Inc.'s Internet properties. For 5-year-old PeopleLink, the deal with one of the world's largest entertainment companies is a sign of the Internet company's keen fight for survival and an indication that its new business model could be paying off.

The battle started five years ago, when Bill Gross called his friend Steve Glenn and asked him to help start a business in Los Angeles that would nurture Internet companies. Glenn was at the time co-director of Walt Disney Co.'s Virtual Reality Studio, where he was developing various high-tech products for Disney theme parks. Glenn said he would join Gross and form what would become Idealab Inc. under one condition: that Gross fund Glenn's dream company. That condition was fulfilled a few months later and, today, Glenn is still at the helm of PeopleLink, his company-come-true. But it has been a tough road for a company that has depended on dot-com startups for business.

As its name suggests, PeopleLink was formed to exploit what Glenn, who holds a bachelor's degree in organizational behavior from Brown University, calls the "human side of the Internet."

"The Internet introduced a new kind of capability for people to be able to communicate via e-mail and real-time mediums," he said. "We have a great need to communicate with other people, especially in the context of completing commerce."

PeopleLink was launched in 1996 to provide the software and servers to keep these virtual communities running at sites. Glenn initially planned to market the service to a wide range of community-oriented Web sites.

PeopleLink charged clients, as it still does, a fee to set up the service and collected fees based on the number of page-views that its community-oriented links got.

It wasn't an idea that met with immediate success. Dot-com customers didn't exactly jump all over the services, and PeopleLink had a tough time getting by on funding from Idealab and other investors, Glenn said.

Then AT&T Corp. offered to invest $2 million in the company on the condition that it focus exclusively on instant messaging, which meant competition from America Online Inc. and its hugely popular instant messaging service. PeopleLink took the money and the challenge.

It has been an uphill battle, made all the more difficult in a market that had turned hostile to consumer-oriented Internet companies like PeopleLink.

"We lost 30 clients in the last two months alone, clients who went bankrupt or are no longer paying," Glenn said. The fallout from the decline of dot-com businesses caused Glenn to back off from his plan, announced early last year, to go public by the end of 2000.

Losing millions of dollars, Glenn was forced to lay off nearly 20 percent of PeopleLink's 140-person workforce in December.

"We then decided to shift our client focus from dot-coms to large enterprises," he said. "We're not serving dot-com clients anymore. It's mostly about large enterprises."

In addition to Viacom, PeopleLink inked deals late last year with Oracle Corp. and General Electric Co.

"In the last year, PeopleLink finally figured out the right business model," said Howard Morgan, vice chairman of Idealab and a PeopleLink board member.

"At the beginning of the Web phenomena in about 1996, we were very focused on users -- how many are coming -- as opposed to customers -- people paying us money," Morgan said.

For Oracle, PeopleLink is setting up chat and message board services that help users share information about Oracle products.

GE's Medical Systems division gets similar virtual community infrastructure that enables physicians and other medical technicians to exchange information about GE's high-tech medical devices.

Will it pay off for PeopleLink? Despite recently adding deep-pocketed clients, the company is still not profitable. Glenn is projecting that profits will start materializing by 2002, and said the company has enough cash to continue its effort to reel in large companies.

PeopleLink closed its third round of financing last March when it raised $25 million from Goldman Sachs Group, HarbourVest Partners LLC, Idealab and others.

"We're not taking for granted how bad things are right now," Glenn said. "We're assuming the market will stay ugly for the next year. We're hunkered down to weather the storm."

Quebec Comes Fishing

Tech companies could be the next runaway sector in L.A if a new program launched by the government of Quebec is successful.

If Quebec has its way, multimedia companies will take flight from L.A. and other points south of the Canadian province and head north for new digs, where a generous subsidy awaits.

Quebec's "Citie du Multimedia" is a former industrial area on the edge of Montreal that has been converted into a glittering tech hub with an array of hip restaurants and shops.

While Quebec may staunchly guard its culture from American intrusion, the province is beckoning American tech companies to its new "city" with brochures and other promotional materials.

Why would a tech company in balmy SoCal migrate to Montreal, where it has not been warmer than 8 degrees in the past week?

A hot subsidy. A tech business willing to relocate and that meets a few easy criteria can receive a refund of 40 percent of salaries paid to eligible employees. The assistance is renewable annually until 2010. Another incentive is a five-year holiday from corporate income tax and a tax credit of 40 percent of the cost of specialized equipment.

To be eligible, tech companies must simply carry out job-creating activities in the multimedia and information technology sectors.

"Companies will save money and benefit from ideal infrastructure," said Robert Davidson, a financial advisor to the government of Quebec. "There is also a great opportunity for companies to provide synergies with other technology companies."

The government's motivation, Davidson said, is to create 25,000 high-paying jobs over the next decade and to eventually make its money back on revenue from income taxes.

So far, nearly 100 companies from Europe, Canada and the United States have rented space in the 1.5 million-square-foot multimedia city.

"The place is full of whiz kids with green hair riding scooters," Davidson said.