A Tale of Two E-Companies Seeking Same Audience

By Steve LeSueur, EditorSteve Baldwin and John Whitney, chief executives of different companies, have the same vision.Each wants to create a Web site that will become a daily gathering place for an online community of federal government workers and military personnel, a Web site brimming with information, news and services that target federal employees' needs. And each envisions that these services ? ranging from career assistance to e-learning to travel to e-procurement ? will generate a healthy stream of profits for their new companies.But while Baldwin and Whitney, both 39, share the same vision, they have radically different plans for getting there.Baldwin is chief executive officer of PlanetGov.com, a Fairfax, Va., company that May 24 launched its Web site of the same name amid much fanfare at Washington's Ronald Reagan Building and International Trade Center. Signing autographs at the celebration was Mike Causey, former Washington Post writer of the "Federal Diary" column, whom Baldwin recruited to provide original content to the site.Also on hand were some of the company's advisory board, which includes such heavyweight political talent as former 20-year California Rep. Vic Fazio, former congresswoman and political analyst Susan Molinari, former 18-year South Dakota Sen. Larry Pressler and former Virginia Gov. Douglas Wilder.When asked whether the opening-day hoopla was designed to establish PlanetGov as the "Amazon.com for federal government employees," Baldwin replied that, no, "PlanetGov.com is more of an AOL for government and military professionals."This is no idle boast, because PlanetGov is, in fact, an Internet service provider that offers free lifetime Internet service through a partnership with Freeinternet.com to all government and military employees, retirees and their families. Approximately 800 people signed up for the free Internet service on the first day, said Baldwin, and he expects tens of thousands more during the first year."We view ourselves as an Internet company that really understands the market," he said. Baldwin intends to take Planetgov beyond the 1.8 million federal employees and target what he says is an estimated 18 million state and local government employees nationwide.PlanetGov is not really a new company but a transformation of Intellisys Technology Corp., a privately held government computer reseller that Baldwin has been running since February 1998, when he and several colleagues purchased a controlling interest in the company.The goal from the beginning, said Baldwin, was to make ITC an online reseller of equipment and technology services, and use that as a platform to launch a Web site that provides an infinite number of products and services, not just computers. The company will sell anything that the government and its employees need, from toilet paper and paper clips to travel and library services."PlanetGov was part of the vision two years ago," he said. "ITC validated our e-commerce business model." The official name change from ITC to PlanetGov.com should take place this summer.Since Baldwin and his colleagues came on board, ITC grew from annual revenue of $7 million to $200 million, and he expects $250 million this year as the company's product and service offerings grow. The company also has secured $5 million in investment funding from Blue Water Capital of McLean, Va., and, if needed, will obtain additional capital through more private investment or a public offering, said Baldwin.Contrast the high-profile PlanetGov with fedamerica.com and its chief executive, John Whitney. For more than a year now, Whitney has been quietly laying plans to create a similar online resource of information, products and services for federal and military employees. In April 1999, his company began publishing electronic newsletters and other free content, such as government handbooks, that provides the latest information about a wide range of issues from pay and benefits to buying new computers and keeping up with technology and security concerns. The weekly e-newsletters now have 300,000 subscribers, according to Whitney."Our goal was to spend one year building up a following and generating traffic to the site by providing valuable content and service to federal employees," he said.Consequently, when the fedamer-ica.com Web site debuted May 10, it garnered 1.4 million hits on the first day, and since then has averaged 500,000 hits each day. Whitney, who day. Whitney, who spent 15 years in the newsletter business with such companies as The Economist and Financial Times Business Information, said fedamerica receives 1,500 e-mails from its subscribers each week, who respond to articles and offer suggestions for future stories."It's a very interested and loyal readership," he said. "They give us tons of information" that gets passed on by the newsletters.In contrast to PlanetGov's 180 employees and venture capital funding, fedamerica has only five workers and is essentially self-funded, said Whitney. And while PlanetGov already is generating $200 million in sales, fedamerica has not yet begun selling products and services online.But fedamerica will unveil its e-procurement services to government buyers by the end of June, said Whitney, who added that the company has lined up as partners several large companies that sell computers and IT equipment, office supplies and training to the government. The company's board of advisers includes Dendy Young, chairman and CEO of Chantilly, Va.-based GTSI Corp., the largest reseller of computer products and services to the federal government."Where others throw money at big parties and putting faces on buses to get eyeballs, we've already got a huge base of subscribers," Whitney said.But even if both these Web sites successfully attract millions of daily viewers, can the companies actually turn a profit?"This is not exactly an uncrowded field," said Thomas Meagher, an analyst with BB&T Capital Markets, a division of Scott and Stringfellow Inc., a banking investment firm in Richmond, Va.Meagher, who recently completed a report on business-to-government Internet companies, said there are at least a dozen similar types of government e-procurement sites, and new ones continually on the rise. Each wants to get a piece of the hundreds of billions of dollars that federal agencies and military services spend each year on procurement.One of those companies, for ex-ample, is Digital Commerce Corp. of Reston, Va. Founded in 1995, the company already has two online purchasing sites for government employees, FedCenter.com and StateGovCenter.com. A third site, MyGovClub.com, is designed to provide personal help to military and government personnel and their families, such as real estate and relocation services.Because Digital Commerce filed May 2 with the Securities and Exchange Commission for an initial public offering of stock, company officials could not comment for this article. But last August, company officials told Washington Technology that its federal e-procurement site at that time was getting nearly 1 million hits a month, had more than 7,000 registered users from 1,100 different agencies and offered nearly 2 million items.The company, however, still has a ways to go, according to Hoover's Online of Austin, Texas. Hoover's reported that Digital Commerce, which has 285 employees, had sales of $1.4 million and losses of $16 million in 1999.Companies that plan to make money by facilitating online government procurement also face competition from the government itself. Since 1995, government buyers have been able to purchase selected goods and services online through GSA Advantage, which is run by the General Services Administration's Federal Supply Service. "We're certainly not hostile to Web sites [such as PlanetGov] that serve federal employees, nor are we hostile to them making a buck," said Don Heffernan, deputy chief information officer at the Federal Supply Service.At the same time, however, Heffernan's agency is working to improve GSA Advantage and expand the online selection of products and services for its 100,000 registered customers. Last year, $86 million in purchases were made through GSA Advantage, and the online service is on a pace for about $130 million this year, he said.And for every purchase, the site had about 20 browsers who were using GSA Advantage to gather information, possibly for purchases that were then made directly with vendors."As long as we see a demand for what we do, we'll continue doing it," Heffernan said.Meagher believes the government e-procurement market appears to be moving toward two basic models. One is represented by National Information Consortium Inc., whose e-government offerings includes e-procurement solutions.The other is the "alliance model" in which large IT systems integrators such as American Management Systems Inc., Andersen Consulting, KPMG LLP and Science Applications International Corp. form alliances with specific e-procurement solutions providers. AMS, for example, is teaming with e-commerce specialist Ariba Inc. to create Buysense.com, a Web-based marketplace for governments and their suppliers. Numerous state and local governments are putting out requests for proposals for e-procurement solutions similar to Buysense.com, said Bill Kilmartin, AMS vice president for state and local government."We bet on the right horse," said Kilmartin, who added that AMS this month will announce its first two Buysense.com state customers. But as Baldwin and Whitney would point out, their Web sites provide more than just e-procurement. They also will generate revenue through advertising and wide-ranging services aimed at government employees, using free content and selected free services to draw those employees to their sites. And both are looking for additional business partners to expand their list of service offerings."We've proved our business model," Baldwin said, referring to the online success of PlanetGov's forerunner, ITC."I think the market's big enough for four or five companies," Whitney said.While Baldwin puts that number at two, possibly three companies, he, like Whitney, thinks there is money to be made selling online to the government and its employees. Such is their shared vision.