ChaCha and Tech Companies and Scott Jones and Manufacturing & Technology

Jones' ChaCha IT firm to have human touch

August 14, 2006

For the last eight months, Indiana's resident high-tech guru has been quietly developing a new IT firm. Few details have been leaked to the public.

But when the name Scott Jones is involved, nothing stays hush-hush for long.

In September, a national media blitz will announce the launch of ChaCha Search Inc., Jones' new human-assisted Internet search engine.

By e-mail from California, Jones declined IBJ's request for information about it, referring questions to his team at Indianapolis-based Dittoe Public Relations Inc. Dittoe declined to make information public before next month's campaign.

But IBJ pieced together details of ChaCha through interviews with a dozen business insiders who have either been approached to invest or who have personally seen the startup's software demonstrated.

So what's the twist that gives ChaCha its unique rhythm? Jones, 45, helped invent voice mail in the mid-1980s and his official biography is thick with self-comparisons to Thomas Edison. Still, it would take fancy footwork for anyone to compete against major search engines like Google or Yahoo!

"It's essentially a macro search engine that utilizes existing search engines, along with a human component that leads to a better user interface," said Techpoint CEO Cameron Carter. "It introduces human judgment into the computer algorithms."

Papers filed with the Indiana Secretary of State show ChaCha was organized in December. The company will employ a network of people who can respond quickly to user inquiries. The idea is that they'll pinpoint more precise answers than the wildly variable responses offered by other search engines.

To keep costs low, ChaCha is aiming to hire college students it can pay $5 to $20 per hour. And to ensure its services are available 24 hours a day, Carter said, the network likely will include teams in India. The company is expected to draw the bulk of its revenue from advertising sales.

Jones serves as ChaCha's chairman and CEO. One tech insider who asked not to be named said the software is being developed in a yellow house a stone's throw from Jones' "digital palace" residence in Carmel.

ChaCha has hired Brad Bostic, founder of Indianapolis-based e-commerce firm Bostech Corp., to serve as president. The company is publicly advertising to fill open positions.

"ChaCha, a revolutionary new search engine, is headed by some of Indiana University's best and brightest alums. This includes the illustrious Scott A. Jones, inventor of voice mail and specific technology components behind iTunes and the iPod," read one ad posted at the IU School of Informatics. "This is a great opportunity to exercise your knowledge in subjects you're already knowledgeable about--anything from sports to genomics and bioinformatics!"

The iPod allusion refers to a company Jones acquired in 1998 that's now known as Gracenote. The Emeryville, Calif.-based firm uses several audio-contentrecognition systems that Jones bought or built. iTunes and other media players use Gracenote's online database to automatically identify artist, song title and other information when users are copying CDs onto their computers.

Tim Durham, one of the wealthy individuals Jones approached for investment in his new search engine, said ChaCha's business model is similar to one he attempted himself half a decade ago with a company called iNetNow. Now defunct, it also employed teams of college students to surf the Net on behalf of others.

"The difference is, we had a call center and you had to man that call center day and night. That was the bulk of your cost," said Durham, CEO of Indianapolis-based Obsidian Enterprises Inc. "Scott's unique approach is to have college students be his call center all around the country."

Durham said he considered investing up to $500,000 in Jones' company, but ultimately passed because his money was tied up elsewhere. He said ChaCha would likely be most useful to cell phone users, who could connect with it when they wanted rapid answers to questions like where to find the nearest Italian restaurant or men's clothing store.

"I think the concept is a great one. Now, whether or not it becomes economically profitable is another issue," he said. "There's a lot of things that are neat ideas that don't make money. I couldn't get it to make money, but his model is different."

Local angel investors agree that Jones has already raised several million dollars for ChaCha, mostly in low-six-figure lumps. There are clearly plenty of people eager to take a chance on a Jones startup, even though his last major venture, the consumer electronics firm Escient Inc., fizzled.

But there are others for whom the Jones name has lost its luster. They note that last year, Jones was brimming with excitement about the business prospects of automated vehicles when he sponsored a team for the Defense Advanced Research Projects Agency's robotics Grand Challenge. Because of a technical glitch, the Indy Robot Racing team's car didn't even get past the starting line.

"Scott makes a great presentation," said one local angel investor who asked not to be named and who passed on the ChaCha deal. "As far as raising money in the community, if he intends to do that, it's going to be very challenging given the number of people he's burned. He's certainly lost a lot of money for investors in his prior endeavors."

"Scott is one to get distracted easily when other opportunities come along," the angel added. "Perhaps that's a strong sign of entrepreneurship--or an inability to focus."

Others see the occasional failure as a necessary part of the business cycle. Sometimes, promising businesses flop, Durham said. That's a chance one must take to earn spectacular returns.

"Anytime you're investing in new technology, the odds are always against you. Scott's had some major successes, some hits and some failures. But that goes with the territory," Durham said. "You either hit big or lose it all. It's really risky, and hopefully investors understand that."

ChaCha is still working the kinks out of its system. One local IT expert who declined to be named voiced frustration with ChaCha's demo version, which the expert said took precious minutes to produce results.

It'll have to move faster than that to gain traction in the marketplace, said James Oakley, assistant professor of marketing for Purdue University's Krannert Graduate School of Management.

Consumers these days are used to instant gratification, whether it comes from on-board navigation systems in their cars or text messages to their cell phones. Impatient users won't wait long for results, no matter how precise they might be.

"If the length of time they have to wait has any meat to it, more than a few seconds, I think it's a huge drain on the value," Oakley said.

Competition against the established search engines will be an uphill battle, Oakley said. Cambridge, Mass.-based Forrester Research Inc. reports that four companies now share a whopping 83 percent of the search engine market: Google, Yahoo!, MSN and AOL. If a niche application shows it has legs, Oakley said, it's a good bet one or more of the big players will attempt to copy it.

But Jones is almost certainly well aware of the competition. Few others in Indiana could claim anything like his experience with the risks and rewards of new technology.

"Scott's just not a personality that's intimidated by challenge. He thrives in that environment," Carter said. "He's a serial entrepreneur. He thinks outside the box. He has upset the status quo in a very large telecommunications field in the past. There's no reason to think he's not capable of doing so again."

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