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Following the departure of several top executives, ambitious gay Web site PlanetOut this week is expected to announce the loss of a major investor and a reorganization.

San Francisco-based PlanetOut will lose the backing of Sequoia Capital, said executives close to the service. How much Sequoia put into the company is unknown, but PlanetOut once boasted $3 million in backing from various investors.


A departure of Sequoia would follow months of disagreements between the investor and PlanetOut founder and President Tom Rielly, insiders say.

Sequoia and PlanetOut declined comment; Mr. Rielly would only say he would make an investment-related announcement this week.

America Online, which carries PlanetOut, is expected to remain a backer. The service had also been carried on the Microsoft Network, but posted a letter to MSN subscribers in November saying it was "migrating" off the service. PlanetOut said it will instead manage a new lesbian and gay forum on MSN; Microsoft Corp. is not a financial backer of PlanetOut.

Some said PlanetOut had an overly ambitious business plan. The plan projected $1 million in annual ad revenue, Advertising Age has learned, though the budget called for just two sales staffers; ad support since PlanetOut's mid-1995 launch has fallen far short of the $1 million mark.

Also, the site had hoped to quickly attract 250,000 users a month, surpassing the circulation of the largest gay magazine, Out. But last fall, PlanetOut claimed 150,000 unique users.


Toward the end of 1996, Mr. Rielly left the company for several weeks, said one executive close to the situation, though he currently is at the helm of PlanetOut.

Other top executives have been leaving the service. PlanetOut CEO Jon Huggett is stepping down, while VP-Advertising Sales Harry Taylor resigned after just four months to join Digital City LA. Executive Producer Karen Wickre also left, though Mr. Rielly said she is returning but declined to provide other details.

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