A lot of Web products come out every month, but few get as much lift from their launch as West Hollywood-based Yammer Inc. did.

Days after its debut earlier this month, the startup netted thousands of users, a coveted award and the kind of prestige that catches the eye of venture capitalists.

But despite the buzz, Yammer has its skeptics. Some industry analysts are underwhelmed by the concept: a blog tool for businesses that allows employees to chat via short blog posts instead of endless streams of e-mail. They also question whether Yammer will make money.

In the coming months, the company and its chief executive, serial entrepreneur David Sacks and the founder of online genealogy site Geni.com, face the test of translating a remarkable debut into a viable business.

"It's an attractive idea that Yammer is offering, but it's not a unique one," said Oliver Young, an analyst with Forrester Research Inc. who specializes in Web 2.0 applications. "I don't see anything yet that says to me this one will succeed where others have failed."

Yammer's premise is simple: The usual ways that employees use electronic communications are outdated. E-mails have devolved into mind-numbing chains that often get lost amid screenfuls of spam, while instant messenger tools are difficult to use in a conversation with more than two people.

Few dispute that there is a need for a better communications hub for businesses. That's the niche Yammer wants to fill.

"I think a microblogging tool for business hits the sweet spot for what we need," said Mark Suster of GRP Partners, a Los Angeles venture capital firm.

But there are challenges. Employees and companies could be resistant to change; as frustrating as e-mail can be, people have grown accustomed to it. Plus, there is already competition. Another microblogging tool for businesses, called Presently, launched in mid-September; Esme, which claims to offer a similar service to Yammer, is scheduled to debut soon.

Then there's the question of how Yammer will generate revenue. All it takes to join Yammer is a company e-mail address, and employees can use it for free. A company can also "claim" a Yammer network of its employees. In doing that, it gets additional security features and control over what employees post and who uses it. At that point, the company would pay Yammer just $1 per user per month.

Yammer is now letting companies test the "claim" feature for free, so it doesn't expect revenue until the late fourth quarter this year, said David Schwartz, Yammer's vice president of legal and corporate development.

The company said some of the biggest corporations in the United States were testing the product, but wouldn't name them.



Direct to employees

Instead of going to companies with its product, Yammer is appealing directly to employees to adopt the service.

That's how Universal Mind, a tech consulting group that has 90 employees scattered across the country, found out about it. When executives sent an e-mail a couple weeks ago asking if anyone knew of a better way to communicate than e-mail and chat rooms, an employee replied: How about Yammer?

Now, it takes employees minutes to update colleagues about a meeting or find volunteers for a project tasks that used to take hours via e-mail, said Matthew Stevanus, the company's vice president of services.

Stevanus said Universal Mind planned to subscribe to Yammer once the free trial period is done.

"At $90 a month, you can't beat it," he said. "It's cheaper than a single cell phone or anything else we could have built internally."

Were it not for communication problems in Geni, Yammer might never have been born.

In January, as Geni's headcount neared 30 employees, Sacks and others grew frustrated with e-mail chains. When they couldn't find a better communications tool, a handful of Geni engineers started building one from scratch.

Geni employees have been using Yammer since then. "We've had to eat our own dog food, so to speak," Sacks said.

The internal testing paid off. Within two days of Yammer's Sept. 8 launch, more than 10,000 users had signed up. Shortly after, Yammer won the top prize at the TechCrunch50 conference, one of the most sought-after awards in tech circles.

Sacks decided to spin off Yammer as its own company, but it has shared Geni's fifth-floor offices off Sunset Boulevard since its inception.

The startup ethos there is pervasive; on a recent Friday, Transformer toys littered desks; a remote-control helicopter was perched in the reception area; and the break room was stocked with sodas, hot dogs and onion rings.

The oversized check for $50,000 from TechCrunch50 was pinned to an otherwise bare blue wall.

But the benefits Yammer could reap from TechCrunch50 go beyond money. Aaron Patzer, chief executive and founder of Mint.com, a personal finance Web site, took top honors at last year's TechCrunch50 and saw an immediate surge in registered users. Soon after, Patzer netted $12 million in venture funding.

"It was probably the most important seven minutes of my professional life," Patzer said. "It put us in a completely different league."

Yammer is in the midst of its first round of public financing. And in any case, the $50,000 check is on hand.

"We're debating whether we can cash it or not," Sacks said.

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