PR Time Warp: The Palace

How did social networking get to be known as “Web 2.0”? Somehow it makes the first generation of the Internet seem so unconnected and solitary. Coming from that generation, I can tell you that the Internet was not so solitary but we didn’t necessarily use the Web for our interactions with each other. America Online was its own stand alone service but was so successful because it was all about the chat rooms and interaction, there was IRC (Internet Relay Chat) and there was even a virtual world: The Palace.

November 15, 1995, was the launch of The Palace, an online virtual world (think Second Life) that was downloadable from the Internet. The Palace was big enough to get the backing of Time Warner, Softbank, and Intel.

I sat down with Mark Jeffrey, the founder of The Palace, and discussed how social networking has changed since the beginnings of the Internet. After selling The Palace, Jeffrey went on to found and sell Zero Degrees (an early social networking site) and is now the CTO of, a human-powered search engine.

“Back in the early days of the Internet, there wasn’t enough bandwidth to support programs like The Palace,” said Jeffrey. Back then, we were working at the lightning fast speed of a 14.4 modem!  [Editor’s Note: To put this in perspective — on a 14.4 modem it would take around 10 minutes to download a 1MB file (a reasonable PowerPoint file with nearly no bells and whistles).  A hi-res headshot that we now send around without a second thought could have taken 30 minutes or more on each end.] The Palace software needed to be downloaded and acted like its own type of browser to the Internet. As participants in a visual chat environment, users could customize everything from their avatar to their environment. While in The Palace, friends could trade props they made and talk online. And it was uncensored as well, without the ubiquitous porn chicks of today.

However, similar to today’s social networking woes, no one knew how to monetize it. There were attempts at using it for branding purposes, creating specialized environments such as the House of Blues room (think fan page) and distributing branded props (think flair and Facebook gifts). In this way, early social networking was not that much different than Facebook today.

Jeffrey’s take on virtual worlds now: “The only way to make money is to sell virtual items, create a monetary system. That is working well. Though branding may have some value, advertising (virtual billboards) doesn’t work in virtual worlds.”

When Intel took over The Palace, they came up with a monetization plan that was drastically different than any social network now. Their idea was to make it into a virtual chat browser separate from the Web and sell it as software. Netscape was the World Wide Web browser of choice and The Palace would be the chat browser of choice.

Adds Jeffrey, “If you bought a PC in 1996, chances are it came with The Palace already loaded. The Palace was bundled with Intel machines as a way to get more demand for Intel chips.” Ultimately, this strategy failed and in 1998 The Palace was sold to and Jeffrey moved on.

In January 2003, even before LinkedIn was launched, Jeffrey formed ZeroDegrees, Inc., with Jas Dhillon and by August the site launched.

“We envisioned ZeroDegrees as a professional networking site but it took us 6 months to build and by that time, LinkedIn had launched.”

According to USA Today, “Thanks to its roots in Southern California, ZeroDegrees first caught on with entertainment executives and their counterparts in the defense and aerospace industry.” Also, ZeroDegrees had the competitive advantage of being one of the first to sync to popular e-mail and contact programs such as Outlook and ACT! and there were even privacy controls in place.

By the time of its sale to Barry Diller’s InterActive Corp. (owners of, TicketMaster, and Expedia), the site had 218,000 people signed up, which was considered a good number at the time.

“We believe that investing now in the next generation of these services, such as Zero Degrees – is a smart bet to place,” said Dan Marriott, senior vice president of the IAC Interactive Development Group in a press release when they bought it.

These words from the USA Today article about its purchase in 2004 sound as if they could be spoken today:

“The excitement over so-called social software sites has created a mini-replay of the dot-com boom as Silicon Valley venture capitalists have poured tens of millions of dollars into funding the most high-profile of these sites. There’s even talk of IPOs, despite the absence of proven business models for generating sales, and the fact that most sites caution they are still in preliminary testing mode.”

So really, has social networking evolved much from its roots?

Now Jeffrey is involved with yet another social media start-up,, which is backed by Sequoia, Elon Musk (Paypal), Newscorp, CBS, Burda Media, Mark Cuban, Ted Leonsis, and others. Mahalo (the word for thank you in Hawaiian) is a human powered search engine that employs human editors to review websites and write search engine results pages that include text listings, photos, and video. Its goal is to improve search results by eliminating search spam.

According to Wikipedia, “[the site’s founder Jason] Calacanis has said that algorithmic search engines, like Google and Yahoo, suffer from manipulation by search engine optimization practitioners. Mahalo’s reliance on human editors is intended to avoid this problem, producing search results that are more relevant to the user.”

From its initial launch, Mahalo has evolved. The editors of the search engine are considered members of the “Mahalo Community,” effectively creating a social media experience. And with the addition of MahaloAnswers in December 2008, it developed a sort of social media network. But Mahalo distinguishes itself from other social media networks by offering monetary compensation for contributions to the Mahalo Community and even has its own form of currency, “Mahalo Dollars,” that can be traded or even cashed in for real money at 75% of the value.

With all his experience behind him, I asked Jeffrey, what do you think of the Web 2.0?

“I love Twitter. You can’t market without it.”

Jeffrey can be found several social networks including LinkedIn, Facebook, and Twitter, though he feels that Twitter and Facebook are the two main players. His advice to them is, “You need to make some money in the next few years.” And he would know.

Tracy Bagatelle-Black
Tracy Bagatelle-Black

Tracy Bagatelle Black is principal at Bagatelle Black Public Relations. A seasoned PR executive based in Los Angeles, she has been working in Internet public relations for as long as the Internet has been commercially viable. As a freelance writer she has been published in The Net, Websight, America Online, California Computer News, and most recently, the Gannett News Service. Her lame attempt at a social media blog is just getting up and running. You can find her on twitter or LinkedIn.