Praful Shaw, vice president of strategic communications at San Jose-based Web conferencing firm WebEx, seems very confident for a man whose company recently entered into mortal combat with Microsoft, the largest software maker in the world. "The truth is, we are very focused on one thing, and that is building a global network and delivering multimedia communication" for online meetings, he says. "That's all we do and we do it better than anyone in the market."
Bravado in the face of danger is nothing unusual, of course, but the noteworthy thing about this competition is that WebEx is actually holding its own against the company that wrote the book on cutthroat competition, and could even come out ahead in the end.
Old-Time Tech Boom
If you viewed research on the current state of the Web conferencing market, you might think you're back in 1999 as you ponder the industry's growth figures. Currently valued at about $500 million in annual revenue, the Web conferencing market should be worth $3 billion by 2010, according to New York City-based analysts Frost & Sullivan. The market is growing at an estimated 30 percent each year, a step down from the years leading up to 2000, when it posted annual growth rates of nearly 200 percent, but still a heck of a lot better than most niche markets out there, especially those in the tech sector.
Many experts, including Bellingham, WA-based author and tech consultant Corbin Ball, believe the Web conferencing market has good short- and long-term growth potential, and those sentiments are echoed by analysts in the financial community. The good feelings transformed into dollars when WebEx went public in July 2000, offering 3,500,000 shares of common stock at $14.00 apiece. Then just four years old, WebEx had a bright future, as it continued to put itself in a position of dominance in the market, thanks to superior funding, splashy ad campaigns, and a very solid line of products.
But WebEx's rising success took a hit in January 2003 when Microsoft announced that it was buying Mountain View, CA-based PlaceWare, a well-established player in Web conferencing, at the time second only to WebEx in market share. In a single day WebEx stock lost over 20 percent of its value, as investors reacted to the news that the biggest, baddest computer company in the land had entered the relatively small market that WebEx seemed poised to rule. "Perhaps the greatest risk to the WebEx story is the impending entry of Microsoft into the Web conferencing industry," wrote Steve Ashley of Baird Equity Research, in a report released that March.
Moving quickly, Microsoft rebranded PlaceWare as Microsoft Live Meeting and moved most of the PlaceWare staff up to Bellevue, where many of them still work on the product line. But now, with well over a year in the Web conferencing business, Microsoft has yet to bare its teeth and devour the competition as some thought it would. It has maintained PlaceWare's spot as the second largest provider of Web conferencing services, but its market share has stayed under 20 percent, a poor showing compared with WebEx's share of over 60 percent. Part of the reason for the disparity, experts say, is that WebEx has a strong foothold in the area of one-to-one conferencing. "WebEx has been very effective in the one-to-one, help-desk, sales-meeting market," says consultant Ball. "Live Meeting is focused more on groups."
So far, Microsoft has not launched a high-profile ad campaign to compete with WebEx's Lily Tomlin television spots, although it could certainly afford to do so. And insiders say it has also yet to employ against WebEx the kind of strong-arm tactics that have provoked legal battles with regulatory authorities around the world. Which raises the question: Does Microsoft even seek to dominate the Web conferencing market as it has so many others? Microsoft Live Meeting product manager Feliz Montpellier won't exactly say. "Our goal is to develop products our customers need," she explains. "We see it converging with other forms of collaboration technology, and integrating with e-mail and instant messaging. It's not a single-point solution."
Battle For Survival
Perhaps Microsoft has yet to take off the kid gloves with WebEx, but the company is beginning to leverage its relationships with existing clients to push Live Meeting's Web conferencing platform. And since Microsoft already counts nearly every business in the world among its clients, this strategy should worry WebEx and the other providers. "A typical Microsoft sales rep is selling volume licensing, and they actually have Live Meeting in their arsenal of tricks they pull out of the bag," Montpellier says; the arsenal also includes ubiquitous business software such as PowerPoint, Outlook, Excel, and Word.
WebEx's Shaw admits that the Web conferencing industry's growth so far has been positive for WebEx, and he professes not to worry much about the Microsoft threat. Instead, he points to conventional wisdom within the industry that at a certain point in the not-too-distant future, demand for online collaboration will dramatically escalate, in much the same way that demand for instant messaging has recently caught on in some markets. "The growth has been good, but the question is when will it really accelerate," he says. "It is very difficult to predict that inflection point, but we believe it is coming."
In the meantime, WebEx, Microsoft, and dozens of smaller companies will continue to duke it out over their slices of the Web conferencing market, according to meetings techie Ball. "I think there's room for many players," he says, "but Web conferencing has been one of the most volatile industries, and it has seen more road kill than just about any other meetings-related technology. But there is a lot of space there."
If Microsoft Live Meeting's ace in the hole is its ability to sell itself with other wildly successful Microsoft software, Shaw says that WebEx's greatest strength is its proprietary MediaTone network, which it uses to send data between users. "It's a very reliable global multimedia network and it uses our core technology to automatically make attendees' computers compatible at the time of connection," says Shaw. "It doesn't matter if you have a PC, Mac, or Linux operating system. All you need is a browser and an Internet connection." Users and pundits praise the WebEx product line, saying it is easy to use and offers rich functionality, but only time will tell if that's enough to beat Microsoft.