Sunday, March 12, 2006

Peter Griffin: Trade Me mega-sale a one-off

The news of Trade Me's staggering $700 million sale to newspaper group Fairfax lingered like a mist as I made by way from bank to barber to post office in central Wellington last week.

Everyone seemed to be talking in bemused tones about the big sell-out. There was lots of talk of new Ferraris and round-the-world trips. But the words were shot through with surprised awe.

Internet companies in New Zealand don't go for that sort of money, people seemed to be thinking. Especially not internet companies run out of scruffy little buildings in Wellington.

From the few conversations I've had with mid-sized internet business owners in the past week, the Trade Me deal has generated a lot of giddy excitement. They've been doing the math, poring over the new figures disclosed in the Fairfax deal, comparing Trade Me's measurables to their own. They're trying to figure out how much their own virtual empire might be worth in light of the deal of the decade.

The reality is that the Trade Me deal is a one-off. No other websites, bar XtraMSN, Stuff and the Herald Online, have nearly the same audience share or revenue-generating potential as Trade Me. It will now take a major strategic blunder by the online auction king to change that.

The Trade Me sale is the epitome of the old saying: "If you can't beat 'em, join 'em."

The media companies would love to have squashed Trade Me on their own terms.

It was Trade Me founder Sam Morgan's certainty that online classified adverts were the future, his demolition of the insipid local arm of eBay and the desire to keep the Trade Me user experience simple, that led Fairfax to his door.

He could always roll off some formidable figures, culled from the Nielsen Netrating figures, to show what a powerful hold Trade Me had on the internet. He viewed would-be competitors with disdain. He's had buy-out offers before, but the numbers were never realistic.

Hopefully Fairfax won't start charging for listings or mess with something that's all but perfect. And while it's always a bit disheartening to see New Zealand companies pass into foreign ownership, I'm less sorry to see Trade Me go than some of the other tech companies put on the block in recent years. The Trade Me sale is sort of like if Stephen Tindall had flicked off his chain of Red Sheds to the Aussies instead of taking The Warehouse public. Trade Me is a national institution, but it's not making the world's smallest GPS chip like Rakon is. It's not putting Kiwi-made software into hospitals around the world like Orion is.

Trade Me took a proven internet concept and made it work in New Zealand - no mean feat. In Morgan's case the whole process took a mere seven years.

It's not with great sadness that I see Trade Me flung into the arms of the media barons. Instead, it's with admiration for the Trade Me shareholders who stuck to their guns and believed in the worth of their venture. They could easily have flicked it off at $100 million or $300 million and our jaws would still have dropped. I think history will show their timing to have been impeccable.


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