RealNames keywords terminated as MS pulls out

Johannesburg, 14 May 2002

US company RealNames has started to wind down its business as news broke yesterday that its contract with Microsoft would not be renewed.

RealNames sold keywords, single words that would resolve to a domain name when typed into recent Internet Explorer browsers. At their default settings, Microsoft browsers will search the MSN network when unable to resolve a domain name, a fact the keywords system took advantage of.

America Online (AOL) has used a similar system of keywords for some time.

The keywords system is wholly dependent on Microsoft`s co-operation and RealNames says it gave Microsoft $15 million in guarantees and 20% of the stock in the company to secure a contract with it. It says another $200 million was due to be paid to the software giant over the next five years.

However, this week it emerged that Microsoft would not renew its contact with RealNames and the keyword system will cease to operate when the current contract expires on 30 June.

Microsoft has yet to comment on the reports, but RealNames founder and CEO Keith Teare is less than amused.

"Microsoft seems to be playing the role of the referee who decides whether any innovations succeed," he says on his Web site www.teare.com. "Microsoft dislikes the product because they cannot control it."

RealNames says that with its supplier refusing to do business, it has started to wind down the company and laid-off its 83 employees. The company was not yet profitable and says its assets will be liquidated "to maximise their value for the benefit of its creditors and shareholders".

This leaves the estimated 2 000 local clients with little hope of a refund for their incomplete contracts.

Keywords have had a rocky history locally. In March 2001, RealNames announced that it would be represented in Southern Africa by Dotcom Trading in what was described as a "multimillion-dollar, multi-year partnership".

Keyword registrar Wayne van de Werken, a member of small local company Keyworks Technology, says Dotcom Trading could not afford the around $5 million fee it had to pay for the agency and in November last year RealNames took over as the registry for the region.

This allowed the small number of registrars active at the time to continue business, Keyworks among them.

"Everything was going extremely well and we really believed in the product," says Van de Werken.

He estimates that between 1 500 and 2 000 keywords were sold in the region in total, at a cost approaching R2 million. Most of these would not yet have run the one-year term for which they were sold.

Van de Werken says the liability for executing the contract lies with RealNames, making it unlikely that buyers will see any of their money returned.

However, he has not quite given up hope that the contracts could be completed.

"We are pleading with Microsoft to see if they can`t come to the party and keep the system up after 30 June," he says.

Other companies reselling keywords, such as Internet service provider DataPro and Conexys SA, say they have sold no keywords to date, both having entered the business only in April.

Some companies, such as SABC radio station 5FM, have been using keywords to advertise their Web presence, and conservative estimates put the cost of keyword terminations for SA at R2.5 million when such advertising is included.