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AUGUST 19, 2002 ONLINE ASIA By Bruce Einhorn How Outblaze Outlasted the Bubble The Hong Kong's Net-services company avoided becoming just another dot-com casualty, but entrepreneur Yat Siu admits it hasn't been easy
Well before Outblaze had any serious revenues, the local and regional press fell in love with the soft-spoken Siu, with just about every newspaper and magazine -- including BusinessWeek (see BW, 2/1/99, "Asia Logs On") -- featuring a picture of the daring young entrepreneur who worked out of cramped offices overlooking a tenement in Wanchai, Hong Kong's old red-light district. The city's business class swooned over Outblaze, too. Siu attracted investment from the likes of PCCW, the local Internet giant run by Richard Li, the thirtysomething son of billionaire Li Ka-shing. Investment bankers wooed him, trying to get Siu to commit to having an initial public offering on Hong Kong's Nasdaq-like experimental bourse, the Growth Enterprise Market. STILL STANDING. A classically trained musician who studied at a Vienna conservatory before switching to computer software, Siu even became a poster boy for Citibank, which plastered giant pictures of him around town as part of an ad campaign designed to capitalize on his membership in Hong Kong's hip cyber elite. So, you're probably thinking, with the collapse of the Net bubble, Siu no doubt got his comeuppance. Surely Outblaze fizzled, with Siu & Co. following in the footsteps of so many of their Silicon Valley counterparts by pawning their pricey sports cars, packing up their possessions, and struggling to land jobs with "real" companies. Outblaze isn't dead, though. According to Chief Executive Siu, it's actually expanding its offices in Hong Kong and Beijing. The privately held company won't reveal its sales figures, let alone its profits or losses, so of course it's hard to know just how secure it really is. Yet Siu insists that, after going through some tough times, Hong Kong's marquee Internet startup is healthy, at least when compared to so many others that have fallen by the wayside. "We have been self-sufficient for some time now," he says. "We don't require any new funding. We have been running on operational cash flow for some time." CHANGE OF PLANS. Not that the going has been easy for Siu's company, which started as a bet on what seemed to be a lucrative market for Internet advertising. The original idea was to create portals for companies on an outsourcing basis, similar to the way Taiwanese companies build hardware for foreign customers and Indian outfits write their software. Outblaze would then split the advertising revenue generated by the co-branded sites 50-50 with its customers. But two years ago, when the Nasdaq started its meltdown, it was clear that Outblaze's business model didn't make sense. That's why Siu decided to ditch revenue-sharing. Instead of offering free services up front with the hopes of tapping advertising riches later, Outblaze now charges its customers, which include e-mail giant Mail.com. And Outblaze is now focused on helping its customers manage their e-mail, at a fraction of what it would cost them to operate the services themselves. Siu reasons that Outblaze appeals to companies that don't want the hassle of maintaining e-mail services. "In the U.S., e-mail is considered a headache," Siu explains. "It's like electricity: If it works, you don't care, but if it doesn't work, you hate [the operator]." SPAM SOLUTION? By far the biggest challenge of the new business model, he says, is finding a way to take care of all the spam messages that clutter up customers' inboxes. Of the 65 million or so messages that Outblaze manages a day, Siu says, a staggering 50 million are junk. Only a year ago, the ratio of spam to legit e-mail was closer to 50-50. The problem, warns Siu, "is increasing exponentially." Since Outblaze is privately held, it's hard to verify Siu's assertions that business is improving. But one indication that things are looking up: It's soon moving to bigger and fancier offices. Having left the cramped Wan Chai location in 1999 for more spacious digs in Sheung Wan, a short subway ride away from Hong Kong's financial district, Outblaze will soon be moving to the Cyber-Port, the ambitious high-tech center that Hong Kong's government is developing on the island's south side. There are many reasons for the move, says Siu. With the economy in the dumps, the government is desperate to attract tenants to its controversial project. So rents in Cyber-Port are cheap. Moreover, since the project is designed with IT companies in mind, it has much better facilities. And with Outblaze working with customers from all over the world, Siu says it would be nice to be able to invite them to Hong Kong. Right now, the offices are in a building next to the Sheung Wan wet market, which scents the air with, well, a distinctive odor. Cyber-Port, which boasts Microsoft among the other tenants, presents an opportunity for a more upscale image. NO MORE POSTERS. It doesn't hurt that the government's Cyber-Port partner is Outblaze's biggest shareholder, PCCW, which controls 26% of the company. However, Siu denies that PCCW put any pressure on Outblaze to move to the park. "There was no coercion," he says. One thing is for sure: There won't be any more Citibank ad campaigns in the works. "It was a one-time adventure," says Siu, who quickly adds he didn't realize at the time how big the signs would be. The ads were supposed to be "discreet," he says. "Next thing I know, the billboards are making me look like Godzilla." Siu vows to keep a lower profile in the future, one of many lessons he's learned as he tries to avoid becoming just another dot-com cliche.  Einhorn covers technology from Hong Kong for BusinessWeek. Follow his weekly Online Asia column, only on BusinessWeek Online Edited by Beth Belton Get BusinessWeek directly on your desktop with our RSS feeds.  Add BusinessWeek news to your Web site with our headline feed. Click to buy an e-print or reprint of a BusinessWeek or BusinessWeek Online story or video. To subscribe online to BusinessWeek magazine, please click here. Learn more, go to the BusinessWeekOnline home page  | | AUGUST [an error occurred while processing this directive] |
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