November 25, 1996 10 AM ET

Banyan signs pact with AOL
Struggling company attempts to boost SwitchBoard directory

By Lisa Wirthman

  Behind Banyan Systems Inc.'s plans to expand its Internet directory is a company searching to find itself.

Banyan announced last week that it would form a partnership with America Online Inc. to expand the amount of users, traffic and advertising for Banyan's SwitchBoard Internet white pages directory. Separately, Banyan plans to reveal next month a yellow pages enhancement for SwitchBoard.

Banyan's new partnership with AOL will deliver to about 7 million AOL users this year a co-branded version of SwitchBoard. AOL officials said it will exclusively sell banner advertising for SwitchBoard for the next two years.

But the real money for Banyan is in the yellow pages enhancement, which will enable businesses to target markets without sacrificing users' privacy.

The company's yellow pages model has been planned since SwitchBoard was released in February but not revealed until now, despite criticism over how the free service would survive without a way to generate income.

Banyan's private work to expand SwitchBoard is a strong illustration of the company's resistance to explain product strategies, despite pleas from users and criticism from analysts that it needs to increase its marketing savvy instead of relying solely on the technical strength of its products and its strong customer loyalties.

Inside the company, changes have been handled in the same closed-mouthed way. Banyan Chairman, President and CEO David Mahoney actually went to the board of directors last spring to discuss his plans to step down, although the move was not revealed until earlier this month, said Eugene Lee, vice president of marketing for Banyan and its Internet division, in Waltham, Mass.

But changes are slowly unfurling. Following Mahoney's resignation last month, the company is promising a renewed commitment to marketing and a narrowing of the gap between its Internet and networking divisions.

Lee, who took over all marketing for the company with the reorganization, has several marketing changes in the works for 1997: more emphasis on product families, increasing the percentage of the overall budget spent on marketing and sustaining marketing efforts after products launch.

But even clever marketing may not be enough to save products such as SwitchBoard, said Carl Howe, an analyst with Forrester Research Inc., in Cambridge, Mass. "Fundamentally, we only see a few of the Internet hubs surviving," he said, "and SwitchBoard's focus on finding people makes it a niche service."

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