Sam Morgan’s e-Business strategy - an i-Start exclusive
He’s now New Zealand’s 700 million dollar man, but six years ago when iStart’s David McNickel interviewed TradeMe founder Sam Morgan, his auction site wasn’t making a cent, and local tech-media portrayed him as a lightweight contender to the crown everyone assumed e-Bay would soon arrive to inherit. At the time he gave McNickel his thoughts on how to use technology in business – thoughts that are just as relevant today as they were in August 1999…
The Sam Morgan story that has been bandied around on Campbell Live and Close Up is a rather romantic one – a young guy in Wellington who, frustrated in his search for a second hand heater for his student flat, decides to build New Zealand’s most successful internet business ever – and quickly becomes a multi-multi-multi millionaire. It’s a great ‘feel good’ story, and of course will inspire hundreds (if not thousands) of other local dreamers to found their own online business.
The trouble is, however, that most of them will fall flat on their faces. For while the Sam Morgan story that hit the TV screens this week was essentially factual, it missed out a few important details. For one, the very bright Sam Morgan wasn’t some struggling uni student when he started Trade Me, he was actually gainfully employed as a technology consultant for none other than esteemed consulting firm Deloittes.
His specialty? Internet projects and supply chain issues. He had maintained a keen interest in US online success stories e-Bay, Yahoo and Amazon – and he had been a very astute observer of the bursting of the dotcom bubble. In short, Sam knew exactly where he was going. Right from the word go he surrounded himself with the right technology and the right people to get him there – and he’d actually learnt something from the mistakes of those who came before him. David McNickel asked him all about it;
David McNickel (Interview conducted in August 1999):
Tell me about your website Trade Me, how did you build it and what technology was involved?
DM: And how many users does it have now?
DM: So is it actually making any money?
Today there is basically no money coming in and we are concentrating on growing the user base and we’re investing significant more than we’re making – we’re not making anything really.
This is because we haven’t launched any of the value added services we are looking to add in next. The first value add service is the escrow service which we are releasing on Monday.
It’s percentages based. If we are going to hold $500 in the trust account we will take a 5% commission, so buying and selling is free and doing it securely will cost 5%.
The best thing about it for the seller is that it actually provides them with an auditable process and it shows them as trust worthy – we want this to become the defacto way of doing things. 80% of all fraud reported on the internet now is related to auctions. It’s a big issue and it’s important for us to get it out there in order for us togrow and for us to find a revenue model is to ramp up the merchant services. The area we want to grow is keeping ourselves as a trusted service provider, rather than someone who actually puts books in boxes and sends them to people. We see auctions as examples of the business models we are trying to pursue – basically high scalability low margins, low individually but high gross margins – and basically all automated businesses. That’s what we’re trying to do.
DM: What’s the smartest thing you’ve done so far?
DM: What's the No.1 issue putting the brakes on e-business in NZ?
DM: What are some common misconceptions about e-business and e-business innovation?
DM: What's unique about the NZ e-business experience compared to say, the US?
DM: In e-business terms, does NZ have any strategic advantages over our international competitors?
DM: What's the easiest first step to e-business that any business could take right now?
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