How Will Gomez Rate in Its New Role?

To survive the dot-com lean times, it's helping some of the e-businesses it has been ranking to analyze and enhance their performance

By Faith Keenan

When Gomez Inc. launched in 1997 with just $1.5 million, it boasted that it would become the Consumer Reports of the Web. By analyzing e-business sites and ranking them in tidy lists, or scorecards, it would help consumers decide which bank, brokerage, or travel site best met their needs.

Nearly four years later, the most important list today is not one found at It's Gomez' own internal to-do list, and it runs something like this: Find more corporate customers for consulting and new site-monitoring services, do it on a shoestring, and continue to search for new funding sources.

Gomez, like plenty of the other dot-com walking wounded, is morphing for survival. Its original game plan was to make money by helping fledgling e-businesses attract customers by analyzing and rating their sites. Say you visit to find an online broker. After clicking on that category, the scorecard pops up showing Charles Schwab ranked first. Click on Gomez' review of Schwab, and there's a link at the top that lets you jump to the Schwab site to start doing business if you like the Gomez review. But these customer leads, which have contributed nearly half the company's revenue, aren't expected to grow at the rate they did in the early dot-com years. "There has been a clear slowdown in the adoption of online financial services by consumers," says Julio Gomez, the company's 41-year-old chairman and CEO.

That's especially troubling for a company that has relied on a handful of clients for large portions of its revenue. E*Trade, for instance, made up 19% of sales in the nine months to Dec. 31, 1999. Gomez would not say whether that proportion remains the same.


  So Gomez is turning to more of the very companies it has been ranking to pick up the slack. A service called GomezPro offers e-businesses more detailed data and analytical tools that allow them to compare themselves directly to competitors. That service has chipped in the other half of revenue since its launch in March, 1999. Gomez says it charges between $40,000 and $100,000 for the service, which includes data from quick online polls Gomez conducts, asking questions such as: Which tools (such as a sizing guide or zoom feature) would you most likely use when buying clothes online? On top of that, Gomez has added e-consulting services to help clients evaluate what works and what doesn't on their sites, and in September launched GomezNetwork, which simulates user activity to measure the speed and reliability of a site. Gomez expects Network to contribute as much revenue this year as its original consumer service,

First, though, Gomez has to distance itself from some prickly questions. Analysts wonder whether the company's scorecards can be objective when the 6,500 companies that it ranks pay a commission for business coming from links at the Gomez site. And if consumer interest is waning -- site traffic was down 19%, to 669,000, in December compared with the previous month -- how can Gomez provide quality instant feedback from its on-site polls that help its corporate clients decide which features are must-haves for a site? "Gomez is walking a thin line between being an unbiased retailer rating service and a shopping portal. The result is a perception of bias, even if none exists," says Brian Smith, an analyst with tech-consulting firm Gartner. "Because of its dual position, Gomez hasn't achieved critical mass in either category."

And now it's trying to do the same in the new categories -- consulting and site monitoring -- that are already crowded with strong players and wannabes. Gomez, based in Waltham, Mass., is up against established names like Gartner and Julio Gomez' own alma mater, Forrester Research Inc., on the consulting side. It competes with companies like Keynote Systems Inc. and Mercury Interactive Corp. on the monitoring side. Both companies offer tools that test the performance of Web sites.

How will Gomez make inroads against these front-runners? "Keynote systems built the market for performance services," acknowledges Gomez. Then he adds: "But ours is faster, better, and cheaper."


  Gomez the man, not the company, addresses challenges and competitors as though they were items on a new list, subject to quick checkoff. On the question of objectivity, he says the company maintains a strict separation between church and state the way writers and salespeople on a newspaper or magazine do. "The analysts that develop and provide the ranking criteria aren't the ones who are selling it," he says. And the quick polls intended to take the temperature of consumers continue, though with more difficulty. It was always tough to get site visitors to answer, and it becomes even tougher when fewer visit, says a source close to the company.

As for the competition, Gomez isn't backing off his aggressive targets. "Our goal in 2001 is to unseat Keynote Systems as a benchmark for performance" with the GomezNetwork service, says Gomez. Even rivals at Forrester say that GomezNetwork could prove a serious challenge to Keynote. Not so fast, says Keynote. "That's highly unlikely given that Gomez has no real-time global infrastructure for Web-site performance measurement of the kind that Keynote has," says a Keynote spokesman. "We believe we have over 90% market share for e-commerce benchmarking and intend to hold on to that share and grow it."

If Gomez succeeds, it may well be on a shoestring. "The real question for Gomez will be staying power," says Gartner's Smith. "They've clearly invested heavily in advertising trying to build their brand. The question is whether they have the cash to sustain brand-building long term." The company had hoped to raise $60 million last year by going public, but the market tanked even before it registered with the Securities & Exchange Commission. Gomez canceled the plan in October.


  The timing couldn't have been worse. The company said in its prospectus that as it expanded, "we expect our operating expenses to increase significantly, especially in the areas of product development, sales and marketing, and brand promotion." In the nine months to Dec. 31, 1999, it was already spending nearly $700,000 a month on average and had $16 million left at the end of 1999. Gomez raised an additional $10 million a year ago, but then spent $3.5 million to buy back shares from company founders and early investors. Gomez himself pocketed $500,000, saying it would free up shares for the upcoming initial public offering, which he says was oversubscribed two months before the company even registered with the SEC.

Still, Gomez has had to tap original investors for more cash. In October it raised $9.3 million, some of that from Ashton Technology Group Inc., a Philadelphia company that makes online transactions systems for the financial industry. "We're adequately financed to execute on our business plan forever," says Gomez. "We're experiencing significant growth in our revenues and smaller growth in our expenses." The company, he adds, will be cash-flow-positive this year. In its prospectus, the company said it would probably post losses for two more years, adding to its accumulated losses of $31.7 million on sales of about $5 million through Dec. 31, 1999.

Gomez may have enough to carry the company to the next IPO window -- if sales keep picking up. Though Gomez wouldn't comment, a source close to the company says revenue for 2000 hit $16 million -- four times more than the previous year. Among the new clients: J.P. Morgan Chase & Co., which turned to Gomez in September for advice on its online private-banking site. Trying to transform what has been a very personal and complex business into simple and solitary clicks has been a huge challenge, says David Levi, a vice-president at J.P. Morgan Chase. He thinks he got his money's worth. "They told us where they hit roadblocks, where to put more information, where to contact service desks, when to call a banker," says Levi. "They act like a customer. We try, but we can't do that."

That's exactly what Gomez is banking on -- that its understanding of finicky consumers will be something corporations still fiddling with their e-businesses can't afford not to have.

Faith Keenan covers e-business for BusinessWeek in New York

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