Wall Street Journal
( Monday September 20 1999 )

Two Small Internet Companies to Offer Desktop Services to Help Web Customers

By KARA SWISHER and DON CLARK
Staff Reporters of THE WALL STREET JOURNAL

The race is on to create a desktop on the Web.

Desktop.com, a secretive San Francisco start-up with big-name backers, Monday launched an ambitious Internet service that offers consumers a complete graphical software environment, a Web equivalent to the desktop scheme presented by Microsoft Corp.'s Windows operating system.

The free service (http://www.desktop.com/) will let users customize their desktops with a range of Web-based programs, including word processing and games, and link up with other Web services, news feeds and e-mail services. The programs and consumer data are stored on Desktop.com's computers; all consumers need is an Internet connection and a current Web browser.

Others are moving in similar directions. Another new entry, MyWebOS.com Inc. says it has developed a kind of operating system for making programs that run on Web sites and operate much like conventional personal-computer programs.

The new ventures are part of a broader movement that is turning software from a product to a service, forcing changes on Microsoft and other computer-industry kingpins. Where some companies have already begun renting software, the latest entries are going a big step further: They have developed technical ground rules to let other companies write Web-based software, creating a development platform along the lines of Microsoft's Windows.

"This could redefine the browser experience, extending its capacity by making it easier and more powerful at the same time," says Mitch Kapor, a Desktop.com investor known for founding Lotus Development Corp. "That's a very significant idea."

Desktop.com's founders, part of an early wave of young Internet millionaires, previously created a free Web-based e-mail service called RocketMail and sold their company to Yahoo! Inc. in 1997 for $89 million. Their new venture received a hefty $29 million in initial venture-capital funding from Kohlberg Kravis Roberts & Co., Sequoia Capital and Accel Partners, where Mr. Kapor is now a partner. Desktop.com has grown to 38 employees without giving much detail about what it was doing.

"We didn't want to reveal very much because we wanted to have first-mover advantage," said Katie Burke, Desktop.com's 29-year-old chief executive.

Desktop.com hopes to make money by selling advertising and placing icons from other Web sites on its desktop and in application programs. It will start with a small number of simple applications that it developed, such as utilities that let users chart stocks and sift through news articles.

But the company hopes to inspire thousands of additional programs by later releasing a development methodology, known in the industry as APIs, for applications programming interface. Ms. Burke says the company will spend more than $10 million to advertise the service and to strike a series of distribution deals in building its audience.

MyWebOS.com, a 10-person company based in Baltimore, has a different business model. It plans to make money by licensing its tools to other Internet sites and software companies that want to develop Web-based programs and rent them out. But the closely held company also will offer free software through its own site, including a word processor and later a spreadsheet and database, with no advertising support.

Where many Web-based programs are slower than conventional PC programs, MyWebOS.com says its technology allows developers to create programs that are actually faster -- even over slow Internet connections.

The company has been funded by individual investors so far. But big venture capitalists are knocking on the door, says Chief Executive Shervin Pishevar, 25, an entrepreneur who teamed up with an 18-year-old Swedish programmer named Fredrik Malmer. He expects to announce major partnerships with Web companies next month.

"This will change the distribution of software," he said.