Artificial intelligence, long considered obscure and unmonetizable, is starting to find its groove.
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For the longest time, artificial intelligence has remained in the domain of academics, considered untouchable by investor types. Increasingly, though, this somewhat esoteric science is finding its way into crisp business applications that translate into hard dollars.
I have always considered the concept of a personal assistant--a digital servant of sorts who takes care of all my repetitive activities--extremely attractive. Recently, I met another crazy entrepreneur who has a surprisingly similar view of AI.
Patrick Grady, chief executive of Rearden Commerce, has been enchanted by the idea of a personal digital assistant ever since the early 1990s when he invested in General Magic, a company incubated inside Apple( AAPL - news - people ) and later spun off. General Magic pioneered the concept of a "personal intelligent communicator" with roughly the same notion of an AI-based intelligent device. That work was a precursor to what later became the PDA, and has today evolved into the smart phone.
Through the years, though, the path of entrepreneurship has been littered with failed experiments in commercializing AI. But it seems that a change is in the air.
Grady's Rearden Commerce is certainly one of the most prominent flag-bearers of AI applications that are making good on the long-time promise. Simply put, Rearden Commerce offers a platform for managing business travel and services procurement for "prosumers" (professionals who are also consumers at work) in an automated mode, the same way a personal secretary would. Book air tickets. Reserve hotel rooms. Make dinner reservations. Get event tickets. File expense reports. So on and so forth.
The company has raised $200 million in venture capital, and has partnerships with American Express ( AXP - news -people ) and Chase. "If you go back nine quarters, we had 12 customers and tens of thousands of users. Today we have well over 4,000 corporations; more than half of that is from American Express. We now have 2.5 million prosumer knowledge workers on the network, and that is before we go live with Chase," boasts Grady. But it's a boast with substance: Rearden has clearly managed to monetize his AI vision at a significant scale by bringing under one umbrella a vast network of merchants and providers and then negotiating discounts as well as enforcing policies on behalf of its client corporations.
What's the revenue model? Grady explains: "In the enterprise and higher end mid-market B2B, we charge a subscription amount based upon the amount of spend a company puts through our system and how much they save. We try to deliver roughly a 10x cash-on-cash annual return. If we are going to save you $20 million, we would like to get a couple of million dollars a year from you.
"On the back end, we receive transaction revenue from the merchants and suppliers where there is not an existing relationship," Grady continues. "If a new customer has an existing relationship with FedEx ( FDX - news - people ), we do not get involved."
Rearden also aims to cater to the SME market. "When you get to the small-business market, things change. Small businesses do not have the same buying power as larger businesses. We negotiate significant discounts that you will never get on your own, pass most of that on to you and also take a piece for ourselves."
Next stop: taking the platform to consumers. "We are going live in the consumer space in a couple of months with Chase and their consumer card members. It will be the Chase brand powered by Rearden Commerce, just like we power American Express and other brands. That will be a combination of contextual advertising revenue and transaction revenue share. Partners such as American Express and Chase pay us for the right to distribute our product." (Read my interview with Patrick Grady here.)
In my January 2008 column, "Connecting You With Your Intimate Bot," I wrote:
"In a Web 3.0 world, then, a personalized travel agent will help you find and book a highly customized itinerary, leveraging all the power of previous generations of Web technology--searching (both generic and vertical), community building, content and commerce. That's how I get Web 3.0=(4C+P+VS)--the sum of content, commerce, community and context, with personalization and vertical search.
"This is complex technology, requiring sophisticated artificial-intelligence algorithms. After all, your Web 3.0 travel agent will not be a "person" but a "bot," or intelligent agent.
"But I suspect you will like your travel bot. And your career bot. And your shopping bot."
For the moment, Rearden's bot seems to be the closest to this idea, although Patrick Grady has aspirations of delivering a great deal more in terms of personalization as part of the Rearden Personal Assistant platform--a dream that is at the same time far-fetched and oddly within reach.
Sramana Mitra is a technology entrepreneur and strategy consultant in Silicon Valley. She has founded three companies and writes a business blog, Sramana Mitra on Strategy. She has a master's degree in electrical engineering and computer science from the Massachusetts Institute of Technology. Her first book, Entrepreneur Journeys (Volume One), is available from Amazon.com, as is her second book, Bootstrapping, Weapon Of Mass Reconstruction.