SYDNEY (03/30/2000) - The Asian market is fast getting to grips with its internet endeavors. Our special report looks at who's doing what, and the implications for local online business.
Part 1 - Platform to the Pacific
If the Asian tigers' economic miracles of the 1960s and 1970s are anything to go by, we ain't seen nothing yet when it comes to their internet endeavors.
Astute Australian companies are fast realizing that not only can they be part of a dynamic and growing internet environment, but if they don't they could well be left in the cold when Asian online growth starts to overtake the current leaders.
Indeed, already web usage and internet commerce are no longer the domain of the US and a handful of developed countries. There is a proliferation of ecommerce throughout the Asia-Pacific region, with market researcher International Data Corp predicting that Asia-Pacific internet users will spend more than $2.2 billion online this year, more than three times the $723 million they spent last year. The number of internet users in Asia-Pacific (excluding Japan) in 1999 increased by 69 per cent, going from 12.9 million at the end of 1998 to 21.8 million now. By 2004, there will be 95.2 million users generating $87.5 billion in online revenue, resulting in an annual growth rate of 56 per cent.
Amazon.com's recent minority investment in Basis Technology, a US firm that helps internet companies localize their products for Asian markets, signifies the importance of rapidly growing overseas markets to the future of ecommerce.
According to Basis Technology CEO Carl Hoffman, in less than two years it is likely that more than half of the users on the internet will speak a language other than English.
"Traditionally, US companies have dominated the growth of the online economy due to the historical roots of the internet originating in the US market. But now those same companies are looking to quickly expand globally in an effort to justify their massive market valuations," says Rob Appel, founder and CEO of Australian online music retailer ChaosMusic. "Their first point of call is Europe, but the Asia-Pacific market will not be far behind. With about two-thirds of the world's population, Asia-Pacific has the potential to become the powerhouse of online commerce."
Appel says that in the online music space US players distracted by European rollouts are looking to Australian companies to establish joint venture launches into the Asia-Pacific. "Australia's stable economy, political situation and language skills make it an attractive prospect as a platform into Asia," says Appel, "but there are still few internet companies with the maturity and experience to assist."
Sienna Technologies, a leading Australian developer of business-to-business ecommerce solutions, is one of the exceptions. Sienna has long been building a market presence in Asia, and now plans to expand further, having secured some $2.5 million in first-round venture capital from Sydney-based Technology Venture Partners.
"While homegrown dotcom business-to-consumer models have not translated well in Asia and there are really only a few big players that tend to dominate the market, we believe there is tremendous opportunity for Australian business-to-business models," says Robert Byrne, Sienna's CEO. "Australia is seen as the technology leader and there is strong acceptance of local technology in the region. The key to success is building up credibility. We've been working in the market for some three to four years, having set up ebusiness systems for seven major banks in Singapore, and clients in Malaysia.
We already have a running start in the market and will now be moving quickly to further consolidate our position."
Media and marketing players are also mindful of the potential. According to a Goldman Sachs Investment Research report, the emerging online advertising market in Asia will be worth as much as $US1.5 billion by 2001. Further to this, Forrester estimates that the region will generate $US3.3 billion in online advertising spend by 2004.
"This will come to represent 10 per cent of the global online advertising market, which is expected to be worth $US33 billion by 2004," says Anthony Bertini, CEO of Australian online marketing and media network BMCMedia.com, whose Asian network is now nearly 300 sites strong. After raising $15 million through the sale of 30 million shares last December, much of the company's expenditure has gone on opening offices in Hong Kong, Singapore, Taiwan and Tokyo.
"The company is now also a major player in China, through an exclusive joint representation agreement with Media 999, the largest online Chinese advertising network with 161 websites and the only one licensed to carry advertising in China," says Bertini. "Just recently, we also signed an exclusive joint representation agreement with Korea's largest advertising network, KTInternet's AdClick, which reaches more than 45 per cent of Korea's 10 million internet users. The agreement enables us to leverage advertising revenue from the 67 websites AdClick represents, and its network of 15 communities of interest and editorial categories."
For its part, DoubleClick AdServer has also been represented in the region for some years now. "Because of our early start, we have managed to build a strong TechSolutions client base that includes the major telecommunications companies in Australia, New Zealand, Hong Kong, Singapore, Taiwan, Korea and Japan," says Jason Martin, DoubleClick's director of sales Asia-Pacific advertiser solutions. "Other clients through the region include the top-tier publishers and organizations in each market, such as Singapore Press Holdings, China Times, China Bytes, Peoples Daily, Softbank Ventures, Asaki, Fujitsu, and Hitachi."
Most recently, the company strengthened its position with the opening of DoubleClick Korea, a joint venture with Asiacontent.com, a leading pan-Asian consumer internet company offering premium branded content, advertising and ecommerce to online audiences in Korea as well as the rest of Asia. In the past nine months, it has quadrupled its staff, launching businesses in Taiwan, Hong Kong, Singapore, Malaysia and Korea as well as expanding its presence in Japan."
Internet services company Spike Networks is another of the fast-growing internet businesses in Asia. "Spike's commitment to expansion in the Asia-Pacific is crucial for the company's continued, rapid growth," says founder and CEO Chris O'Hanlon. Recent initiatives have included the announcement of a joint venture with Hong Kong-listed Century Cyberworks to provide a comprehensive range of internet services in Japan and the rest of the Asia-Pacific region.
According to O'Hanlon, the company's recently reported 243 per cent increase in revenue for the six months to December 1999 of $7.309 million (up from 1998's $2.129 million) resulted in no small part from major new service projects in Japan.
Spike has now also moved to take advantage of expectations that the Asia-Pacific region will see exponential growth in the ebusiness consulting market, estimated to represent revenues in excess of $US8 billion by 2002.
Spike and global professional services firm Arthur Andersen recently formed an exclusive alliance to deliver comprehensive and integrated ebusiness consulting services throughout the Asia-Pacific region, including Australia, New Zealand, Japan, Singapore, Hong Kong, China, Korea, India and Taiwan - believed to be a first for any Australian-based web services provider.
Meanwhile, Asian countries are also increasingly seeking Australian expertise.
Just recently, Canberra-based eDIME Internet Agency was featured on Chinese TV and Australia was lauded for the leading role it is taking in internet security. As a leading developer of federal government websites, eDIME is now in consultation with several major Chinese and other Asian-based firms to roll out some of its expert products for website development. China, where government-run websites have been the target of many attacks, says it is looking closely at the approach the Australian government is taking to protect its sites.
Indeed, while it may be hard to justify running Asian-based operations out of Sydney or Melbourne, what does make sense is for local companies to locate back-office or regional support centers in Asia, not least due to Australia's technical expertise.
Only a handful of companies in the internet industry may have been operating in Asia for any real length of time, but it won't be too long before many more make their mark.