Internet Censorship Yields Software Profit

Several companies are making money from Congress' demand that Internet smut be curbed

P> The government-backed business of on-line decency and Internet censorship is beginning to generate big profits.

Consider the recent $12.6 million buyout of Surfwatch Software Inc. by Spyglass Inc. Surfwatch was founded 16 months ago by three partners, and its smut-filtering software rose to prominence as Congress enacted a controversial bill to suppress pornography on the Internet.

"The access-control market is just starting to take off," said Brian Ek, a spokesman for Prodigy Services Co., White Plains, N.Y.

Even as a court reviews the constitutionality of Congress' on-line porn curbs, Surfwatch and rival companies are hoping to win more revenue from "family-friendly" on-line services such as CompuServe Inc.'s Wow! and from corporate clients seeking to bar information from employees.

Future markets could include countries such as China and Singapore that are trying to keep information from their citizens. "It is potentially another market opportunity," said Bob Smith, executive director of the Interactive Services Association in Silver Spring, Md.

Industry executives are predicting a rosy future for the data-filtering business -- despite charges by some Internet proponents that the data-filtering technology is censoring the Internet. Solid Oak Software Inc., based in Santa Barbara, Calif., earns less than $1 million a year from its Cybersitter data filter, but revenues are growing at 20 percent per year, said Marketing Director Marc Kanter.

Most of the sector's revenue is now generated by subscribers to on-line services, said Surfwatch co-founder Jay Friedland. On April 29, Netcom Online Communication Service Inc., San Jose, Calif., offered Surfwatch's smut filters to its 400,000 subscribers.

But in five years, corporations will provide roughly one third of Surfwatch's revenues. "That's where the real money is in this market," he said.

Some companies use filter software "to increase work productivity.... [Employees] surfing the Internet during business hours is a concern for companies," said Ek.

Friedland is alert for other opportunities. Businesses with a companywide Internet-based network may want to prevent employees from viewing sex-related data that might contribute to a sexual harassment lawsuit, he said. Also, companies will use filtering software such as Surfwatch to track Internet piracy of their software, pictures or brands, he said.

Surfwatch will also gain from the growing international market for data-filtering software. Countries in Europe and Asia want to erect Internet firewalls to keep out unwelcome information such as political debates or pornography, said Friedland.

Surfwatch and other data-filtering companies will be aided in their search for pornography by the industrywide acceptance of the Platform for Internet Content Selection standard, which labels on-line data. The standard allows any company or social group -- such as the Christian Coalition of the American Civil Liberties Union -- to create a suitable data filter for its particular customers. The PICS standard was developed by the industry-backed WorldWide Web Consortium at the Massachusetts Institute of Technology in response to the effort by Sen. James Exon, D-Neb., to legally bar Internet porn.

But some observers doubt the rosy revenue predictions put out by the data-filtering industry. Brian O'Connell, an analyst at New York-based Technologic Partners, said the data-filtering companies will have to work hard to avoid being swallowed up by the Web-browser firms, such as Redmond, Wash.-based Microsoft Corp. and Netscape Communications Corp., Mountain View, Calif. PICS-compatible filtering software will be included in Netscape and Microsoft browsers, AT&T's Internet network, and is being adapted by the Recreational Software Advisory Council, Cambridge, Mass., to let parents filter violent video games.

But the data-filtering companies may survive if they work fast enough, O'Connell said. Netscape recently allowed Webster Network Strategies, Naples, Fla., to install its Webtrack data-filtering software on Netscape's servers. Since it was founded last July, "our [revenue] growth has been 10 percent each month.... Now we are just under $1 million," said Webster spokeswoman Julia Novak.

Also, the data-filtering companies expect a steady stream of revenue when companies update their data filters as the Internet changes.

Even if data filtering doesn't generate a fortune, it will likely benefit the on-line industry. Data filtering will "have a calming effect on the hysteria that is out there on the market about [pornography on] the Internet," Ek said. Data filtering "will probably help convince a large segment of the [consumer] market... that it is safe to jump back in the water."

Data Filters for the Internet

CyberpatrolMicrosystems Software Inc., Framingham, Mass.

Cybersitter Solid Oak Software Inc., Santa Barbara, Calif.

Net Nanny Net Nanny Ltd., Vancouver, Canada.

SurfwatchSpyglass Inc., Naperville, Ill.

WebtrackWebster Network Strategies, Naples, Fla.

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