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Yammer's premise is simple: The usual ways that employees use electronic communications are outdated.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.


For reprint and licensing requests for this article, CLICK HERE.