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"There are circumstances when SPS clients joined just so that they got mentioned in the reports," the former analyst says. "It's prestige around your peers, but it can lead to venture capital interest -- it can lead to financing. And when a company is in a quiet period, popping up in a Jupiter report that comes out before an IPO [is] gold. A lot of companies become SPS clients in order to see their name appear in reports, and become panelists during Jupiter conferences. It's never said that one is dependent on the other, but there are definitely cases in which they are."

The music industry executive agrees. "To get Jupiter's attention you must spend thousands of dollars buying their research reports," he says, complaining that the recent Plug.In conference favored the major record labels over smaller labels or Internet businesses. For example, he says, the industry-backed SDMI "secure format" system was touted at the conference at the expense of MP3. "Their ideas come from the result of schmoozing for lunch with major record companies," he says.

Kurnit, of About.com, had a different experience. Though About.com (then called the Mining Co.), was an SPS client, Jupiter repeatedly dismissed it and its business model. "When we started our business three years ago, they were really into 'cool,' and we weren't cool," says Kurnit -- the only person contacted for this story who would criticize Jupiter on the record. Today, he says, Jupiter does "get" his market: "I educated them to the point where they changed their tune."

Although Jupiter does sometimes heavily criticize certain Internet markets and strategies, others wonder whether the company has a vested interest in producing bogglingly large predictions -- since bigger numbers get more attention, encourage industry growth and therefore could bring in more customers looking for help figuring out these predicted new markets. DeRose and Schoenfeld admit that the company has overestimated markets, and scaled back later. For instance, Jupiter this year revised an earlier forecast that the online grocery business would be worth more than $7 billion by the new millennium, downgrading the prediction to a mere $3.5 billion.

"I reject the assertion that we have a vested interest in Internet activity booming," says Schoenfeld, who says that Jupiter's most popular reports are those that predict markets that will fail. "It's booming; that's done. I couldn't make a dollar telling people that these markets are going to be big, that you've got to act now. You can get that from any dime-store pundit. Our clients want to know, what's going to fail? What's going to cost us? What's the competition like? Should I do branding or direct selling?"

Still, some people wonder if Jupiter's predictions are actually shaping markets. As Calacanis puts it, "There's an irony about this -- the self-fulfilling prophecy of Jupiter. Jupiter says something is going to happen, a bunch of CEOs put it in their business plans and S-1s, get a lot of money and make it come true. Is it that Jupiter is getting these things right or are they influencing others to do it?"

It's also indicative of Jupiter's influence in the industry that no one is eager to say anything negative about Jupiter on the record. Although more than half a dozen industry executives happily gabbed to me about their experiences with Jupiter, both positive and negative, none, with the exception of Kurnit, were willing to go on the record with criticism. As one executive puts it, "If you speak on the record critically about Jupiter, they can kill you, because they have the power of the pen."

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In many ways, the criticisms that are leveled at Jupiter can be leveled at just about any market research company -- and often are. "Do I think the Internet analyst market is a scam? Yes," says one Internet executive. "The studies are on a continual basis deemed inaccurate; all they are doing is validating subjective beliefs. In the Internet industry we all have pretty firm beliefs, and we look up numbers to justify them, but rarely the opposite."

But if it's a scam, it's a fairly lucrative one, and one that a lot of people find valuable enough to pay for. Jupiter brought in revenues of $14.8 million last year, although the company came up $2 million short of profitability. If the specifics of its initial public offering (underwritten by Donaldson Lufkin & Jenrette) remain unchanged, Jupiter will go public with a valuation of more than $200 million, and will raise $57 million in capital.

With the growth of the Net, Jupiter's market has clearly become enticing to other firms: Besides competition from Forrester Research, IDG, the Yankee Group and others, Jupiter will soon have to face off against its biggest investor. Gartner Group is introducing a new research group that will focus exclusively on the consumer space -- the market that Jupiter once called its own. It's an odd situation, as Jupiter admits in its S-1, considering that Gartner executives sit on Jupiter's board of directors and know the company secrets.

Still, the best measure of Jupiter's success may be in its own IPO; if the company goes out with a bang, it will give credibility to Jupiter's long-standing predictions about just how huge the Net is going to be. After all, the rise of the Internet IPO is due at least in a very small way to Jupiter's own optimistic and widely read predictions about the meteoric usage of this new medium. The Net is making millionaires out of the executives that Jupiter has been plugging for years, even before anyone else did. Why shouldn't Jupiter's executives be millionaires too?
salon.com | Sept. 2, 1999

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