Will it be deja vu at Deja News?

Under the guidance of CEO Tom Phillips, former president of ESPN Internet Ventures, Deja News hopes to tap into the hot community niche and, more importantly, position itself for an initial public offering.

Although no timeframe has been set for an IPO, sources close to the company say Deja News wants to raise enough capital to build the site into a leading Web brand, reworking it into a kind of chatty "Consumer Reports" of the Web. The search engine's redesign includes possibly shortening its name to deja.com.

No doubt Deja News-which puts a Web interface on top of Usenet newsgroups and hosts its own discussion forums - sees what it's missing as the valuations of so-called community sites like Xoom.com and theglobe.com skyrocket.

Yet so far, it has failed to ignite widespread attention beyond a core group of technology enthusiasts sharing information about topics like computer programming, industry observers note.

But taking a page from Amazon.com's user-generated reviews, soon-to-launch programs like "Deja Ratings," where users offer their opinions on everything from Anne Rice books to MiniDisc Players, could bring in a more mainstream audience for Deja News.

"The concept is for Deja News to be a place for consumers to get information to empower their decision making on their e-commerce purchases," says Joe Aragona, a general partner at Austin Ventures, a Texas investment firm and initial backer of the four-year-old, privately held Deja News. "The best way to do that is through shared knowledge and experience."

In fact, Deja News got a ringing endorsement a few months ago from no less than Amazon.com CEO Jeff Bezos. Bezos, according to BlueStone Capital analyst Catherine Skelly, was quizzed during a company conference call to analysts how his company could fare against the aggressive pricing policies of discount Web sites like buy.com Bezos suggested that [the analyst] should go to Deja News, type in buy.com and view the feedback from customers.

After Bezos' comments, Skelly made her first visit to Deja News. "There was horrible feedback (about buy.com) from people. I'm sure Deja News got a lot of traffic that day."

Challenges ahead
Of the Internet's more than 60 million users, an estimated 17 million to 25 million people regularly participate in the public discussion groups, better known as Usenet. Anywhere from 600,000 to 1 million articles or postings are made on any given day to the more than 30,000 message boards, research shows.

However, Usenet posters, while loyal and dedicated, tend to be the more tech-savvy, "early-adopter" crowd.

"Average Web users don't even know what Usenet is," writes Tom Stanley, a Netizen reached at an Excite message board. "Since WWW message boards like Excite and Yahoo! are simply easier to use and more accessible, people are just going to go to them."

If it's to compete against message boards at Web portals like Yahoo and Excite, Deja News will have to win over the "Joe Sixpack" Web surfer, industry experts say.

"Deja News' biggest challenge is to get it beyond the technology freaks and early adopters and into the mass market," says Patrick Keane, content analyst with Jupiter Communications. "They are going to have to do a coherent and aggressive marketing campaign to build a brand if they ever hope to succeed."

To that end, Deja News is looking for investment from media and commerce partners to accelerate its growth.

"We've got an opportunity to not only participate in the value proposition for e-commerce, through part of the purchase price or referral dollars, but by being the place where consumers come to share knowledge. Then we have sponsorship and advertising opportunities that are unique," says Austin Capital's Aragona.

Deja News CEO Phillips declined to comment. But interactive ad executives warn that people who hang out in so-called community sites aren't that responsive to marketing messages.

"Not too many sites in the community space have come up with compelling offers for advertisers," says Rishad Tobaccowala, a senior interactive executive at Starcom, the media buying unit of Leo Burnett. "Deja News needs to find a way to reach the community in more meaningful ways than straight banner ads." Tobaccowala says he used to visit Deja News, but "it's slipped off the radar."

Deja News also faces charges from privacy watchdogs that it may have compromised the privacy of its registered users with internal data logs that have been recording e-mail addresses for over a year. The complaint that Deja News was collecting a database of who is e-mailing whom through its service prompted the search engine to issue a statement saying, "To avoid any doubt about our practices, we do not intercept nor do we have any interest in intercepting any e-mail that a Deja News user may send by clicking on a link in a discussion forum posting."

A spokeswoman for Deja News, a member of the Internet privacy group TrustE, said the company would make sure it remains in compliance with the Web's self-regulatory privacy mandates, even "if it requires making changes" in its data collection.

Message medium
Web message boards have never been more popular, especially those devoted to finance and investment such as Raging Bull. Based on word-of-mouth buzz, late last year Raging Bull received investment from @Ventures, the affiliated venture capital arm of CMGI, and chairman and CEO David Wetherell sits on its board. In April, the financial community site announced that it had signed up more than 100,000 free memberships and that site traffic had hit an all-time high of nearly 3 million page views per trading day.

Meanwhile, Deja News, which boasted that 3.5 million people accessed the site in December 1997, has seen its traffic virtually stagnant over the last year.

According to online measurement service Media Metrix 1.7 million unique users visited Deja News in March, compared to 1.3 million unique visitors in April 1998.

Last July, Deja News scored $11.5 million in a second round of financing, with Ziff-Davis contributing $5 million. After a redesigned interface and expansion of its content channels last fall didn't stimulate broader interest in the site, Phillips was brought in in December to replace CEO Guy Hoffman, and headquarters were moved from Austin to New York. Earlier this month, Eric Etheridge, the head of Microsoft's Sidewalk New York, signed on to lead Deja News' editorial shift.

While analysts talk about the challenges stacked up against it - building traffic and attracting a more mainstream audience - and doubt that Deja News would see a meteoric stock rise like community sites Xoom.com, they express support for the site's new management team.

"[Phillips] has shepherded strong brands in the space and knows a lot about interface design and marketing," says Jupiter's Keane.