Riding high-tech wave to success

By Peter Griffin

You know a revolution is under way when Time magazine votes you and me, all of us, its person of the year and puts a computer screen on its cover rather than some charismatic world leader.

That revolution is the second coming of the internet, Web 2.0, a move away from simply taking traditional businesses online to empowering web users to make their own content and share it.

Web 2.0 services exploded in 2006, on a scale of dotcom boom proportions. But there seems to be an unwavering confidence in the internet industry that this is no flash in the pan. The ideas and technology are better than last time and consumers have responded like never before.

Brands such as Flickr, Blogger, Del.icio.us, YouTube and Wikipedia have come to epitomise this new way of thinking.

New Zealand internet companies are scrambling to join the Web 2.0 party. But observers say they'll have to change their thinking to make their mark worldwide.

"There's a mindset holding New Zealand back," says Stefan Korn, of Wellington consultancy Igniter, which advises businesses on their web strategies.

"There's a lot of focus on entrepreneurs here. The one thing missing is for those people to take the leap and sell their products and services overseas.

That's where people fall over."

Korn, who has been in New Zealand for two years, struggles to name any Kiwi technology companies that could make a big impact on the web abroad.

And that $700 million sale of auction website Trade Me to newspaper publisher Fairfax was both a "blessing and a curse" for the local internet industry, he says.

"Great sale, but people have to move past Trade Me and look at what they can do themselves. What people can do in this space is almost endless and the beauty of the internet is that development can take place anywhere. I see it as liberation,a way for people to forget about geography."

Wellington technology entrepreneur Rod Drury explained recently on his weblog why it was unlikely a YouTube-type web service could emerge from New Zealand.

"Because of our lack of broadband we are unlikely to see the innovation that comes when you are used to having big pipes.

"More likely from New Zealand in the consumer space we'll see innovation around trickling and caching video content because our puny bandwidth encourages being clever over small pipes."

The one exception, according to Drury, is Christchurch search engine provider Eurekster, which has a huge addressable market.

But Korn says: "There's no reason YouTube couldn't have started here. There's nothing stopping anyone hosting it in the US, it's much cheaper anyway."

The problem, he says, is a lack of originality because New Zealand companies have not grasped the potential of the new wave of internet services.

If we haven't yet produced any Web 2.0 superstars yet, there are signs that the industry is building the momentum to do so.

Several companies, many of them clustered in Wellington, are starting to build unique services, share ideas and attract venture capital. Broadband services are improving and internet commentators such as Drury, Nathan Torkington, Richard MacManus and Russell Brown are stirring up the type of Web 2.0 discussion that's been raging in Silicon Valley.

Some of our best established and emerging internet companies include:

Eurekster

It qualifies as our one true dotcom with global exposure. Christchurch-based Eurekster gets mentioned alongside Web 2.0 companies that have grown up in Silicon Valley, generally under the title of "Google Wannabe", which is where BusinessWeek recently filed it.

Google dwarfs all others when it comes to simple text-based internet searches, but Eurekster is trying to carve its own lucrative niche - social search. Eurekster allows users to build "swickis", search engines that are customised to the needs of a like-minded group of searchers. As more search queries are plugged into a swicki engine, the quality of results improves, better information is served up. Web publishers can use Eurekster to make searching through their own websites more useful than a regular Google search, and Eurekster has racked up Forbes, Friendster and Popular Science as clients as a result.

There are in excess of 40,000 swickis and 20 million searches a month.

Eurekster "chief scientist" and co-founder Dr Grant Ryan began internet search company GlobalBrain in 1998, so has experience of search engine technology and surviving dotcom bubble bursts. Ryan runs Eurekster with a team of developers in Christchurch, but the company also has a presence in San Francisco. Eurekster has tapped US$1.35 million ($2 million) from the US venture capital pool and seems ripe for acquisition. But the internet giants, Google and Yahoo have made their own plays in customisable searches.

So Eurekster, with its patented technology, could either be subsumed in the Web 2.0 buy-up or hit the mainstream in its own right. The pace of web development means its destiny will probably be decided this year.


Project X Technology

New Zealand companies have a rich tradition of helping people find their way around. Navman has become our biggest technology exporter by developing innovative GPS navigation systems and is now recognised alongside brands like Garmin and Magellan. Rakon makes the oscillators that point a wide range of devices in the right direction, including cruise missiles.

The world-leading hardware design has been matched by some innovative software mapping, which is now being adapted for the web. Project X Technologies, the Wellington-based start-up, merges mapping with user generated content to plot points of interest on maps of New Zealand and Australia.

Founder founder John Clegg has a background in online auctions, which helped him to secure a deal to include ZoomIn maps on Trade Me. ZoomIn version 2 was launched in November and Clegg now plans to bring ZoomIn mapping to mobile phones.


The Hyperfactory

Putting web-enabled applications on the mobile phone is the sole focus of Auckland company Hyperfactory, which has experienced rapid growth riding a wave of interest in mobile applications, particularly in the US and Asia.

Hyperfactory creates marketing campaigns designed for mobile phones and while the company adapts plenty of websites for mobile platforms, it is also creating dedicated mobile-only services as people increasingly use the interactive features of mobile phones.

"Our most successful campaigns have all been based around mobile video," said co-founder Geoffrey Handley, now based in Hong Kong.

Brother Derek has just opened a Los Angeles office and Hyperfactory also has a base in New York.

"People in the more mature markets are used to viewing videos on mobile, so the ability to upload is a logical step forward," said Handley.

With digital video cameras now built into most new mobile phones, being able to record video and immediately send it on to the internet via the mobile is relatively easy. In November, YouTube teamed up with US mobile operator Verizon to allow videos created on mobile phones to be posted straight to YouTube.

Hyperfactory has worked on mobile campaigns for brands as diverse as Absolut and Toyota. A major project saw it adapt for the mobile internet content from the South China Morning Post, Hong Kong's largest English newspaper.

Said Handley: "It wasn't simply putting the paper on to the phone, but doing all the smart stuff like monetising podcasts and mobile ad serving. This is a huge area."

* Other notables: Innaworks, Geekzone.co.nz, Datasquirt, PlanHQ, Sonar6.


How to sell your website for a billion dollars

There are only two types of companies with the spending power and willingness to make you a dotcom billionaire overnight - cashed-up media conglomerates desperate to replicate their publishing empires on the web and other dotcoms that would rather own you than compete against you.

There are good examples in both categories. In 2005, Rupert Murdoch's News Corp shelled out US$580 million ($840 million at today's exchange rate) for social networking website Myspace.com.

Murdoch then paid US$650 million for video gaming website IGN. Last year's big deal was Google's purchase of YouTube for US$1.65 billion in stock.

Yahoo and eBay are the other serial acquirers, the latter paying US$2.6 billion in cash and stock for internet telephony provider Skype in 2005. Yahoo bought its way to the front line of social networking with its purchases of Flickr and Del.icio.us.

The money is there, but your website has to be able to attract vast numbers of visitors and have a genuinely dedicated community of users who can be cross-marketed to or sold premium services. A unique personality and some patent-protected technical traits that are hard to mimic also go a long way. The Trade Me purchase is a good example.

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