Here's why the next Facebook could be British...
US companies have dominated the web, but Nick Clark says a search for the next big thing could return some .co.uk hits
Tuesday 31 May 2011
The social networking group LinkedIn enjoyed soaraway success as it debuted on the public markets this month; the scramble for shares doubled their value on the first day of trading.
Excitement is crackling around the US technology sector again, with investors desperate to pick up shares in the next big thing when it lists. Many hope they will be able to buy into companies including Zynga and Facebook.
Yet there has been little talk about the digital companies on this side of the Atlantic, prompting Sir Richard Branson to bemoan Britain's inability to launch a global internet leader.
He expressed his hope that in the next decade "a new generation of Brits will put that right and we can get some world dominating sites", adding that "we've got to encourage entrepreneurs to be coming up with the next big breakthrough".
But there are digital companies based in the UK that are growing in stature and could well become significant global players. The Independent has canvassed a number of digital experts, investors, analysts and start-ups to find some of those that are set to arrive and others that are already making a splash.
The social multi-player games developer has not had a smooth path to becoming one of the UK's big technology success stories. The company, which is expecting to gross $100m in 2011, was on the edge of bankruptcy just three years ago; its fortunes have completely turned around thanks to a group of multi-coloured monsters. Mind Candy was launched in 2004 by Michael Acton Smith – who co-founded the online gadget retailer Firebox in 1998 – with $10m of backing.
Its first game was the alternative reality title Perplex City which, Mr Acton Smith said, was "creatively extraordinary but a commercial disaster". It burnt through most of the company's resources and in 2007 he launched Moshi Monsters with the remaining $1m as a "final roll of the dice". The gamble to launch Moshi, described as a mix of tamagotchi and Facebook with some educational elements thrown in and aimed at kids from six to 12, paid off handsomely.
The site now has 40 million registered users – one in two UK children in the target age group has a monster – and has spun off merchandise including toys and trading cards. Mr Acton Smith put his interest in monsters down to Dr Seuss and Maurice Sendak's Where the Wild Things Are. He is happy with the company's position but is purely focused on growth. "An IPO would be interesting but not yet. We're in a steep growth phase and it would be too early," he said.
Richard Moross founded Moo in 2004 with a plan to use technology and design to disrupt the global printing market from his base in the UK. The initial idea pitched to seed investors was a "Facebook with cards" – although this was in the days before Facebook had emerged. The idea was to take business cards to the consumer in a market that was 99.9 per cent business focused, teaming up with social networks to do it.
Moo launched in 2006 and saw huge demand, expanding into other products along the way. It now has 30 times the manufacturing capacity it had when it launched. "We have taken a 550-year-old business model of printing and enabled it for the digital age," Mr Moross said. "The clever stuff, of making it work online, is the key. We are trying to disrupt a $100bn industry." The company has a global audience and has received orders from places as far flung as the North Pole. "The internet knows no bounds," Mr Moross said.
The group, which has been profitable since 2009, has partnerships with Flickr, LinkedIn and the photo sharing site SmugMug. Moo, which has offices in London and the US, has 70 staff and is looking to expand to 100 by the end of the year.
Errol Damelin spotted a gap in the banking market for short-term loans and, backed by Balderton Capital, started work on building Wonga in 2006. It took two years to draw up its strategy and create the ground-breaking algorithms that would make the company work, and it officially launched in July 2008. Users can choose the size and length of the loan and, if approved, the cash is transferred to their account without needing to interact with a human. Mr Damelin said as soon as Wonga started advertising on Google it knew it would prosper, given the number of searches for short-term loans. The service took off almost immediately, and was helped by clever marketing including the sponsorship of Blackpool Football Club. So far the company has made 1.5 million loans. "This is a mass-market service," he said.
There has been some controversy around the company, especially the huge APR. However, the average loan is taken out for 13 days, with the maximum 37, and the highest amount offered is £400, so the company argues that an annual measure is simply not appropriate. Wonga was profitable six months after launch and while Mr Damelin said the company could easily carry out an IPO, it was not currently on the agenda. "There's a lot of excitement around Wonga," he said. "We have the opportunity to build a once-in-a-generation business."
Thanks to Shazam people have been using their mobiles to identify catchy tunes and settle pub arguments for almost a decade. The idea was thought up by a group of entrepreneurs in London in 1999, launching three years later. The popularity of the service has soared to levels where the company has 125 million users and is adding more than a million a week. It has technology that matches the music played to a database of over 10 million tracks dating back to the 1950s, and then allows phone users to buy the track.
The chief executive, Andrew Fisher, said the service hit its inflection point in the past three years, helped by the adoption of smartphones and consumers becoming more comfortable with buying music over the internet. Shazam makes money from those who want to tag more than five tracks a month and are willing to pay for it, and takes a cut from the songs it identifies that turn into sales. Currently that conversion rate was about 10 per cent, Mr Fisher said.
Revenues are also boosted by mobile advertising on the site. Mr Fisher said: "The mission is to be one of the largest mobile music platforms, and we're doing well." It has launched Shazam for TV in the US and is looking to bring that to Europe in the near future. "We want to be the leading discovery service for mobile," he said, and has targeted 250 million users.
The group was set up in 2006 by Joe Cohen, who previously established and ran the European operations of Match.com, before it officially launched in February the following year. Seatwave is an online ticket exchange, offering a way to buy and sell concert, theatre and sports tickets, with the site acting as middleman between the two sides. The group raised $25m in 2008 from Fidelity Ventures and existing investors including Atlas Venture, and took its fund raising to $53m the following year. The secondary ticket market in the UK is estimated at £1bn and the opportunities for Seatwave look good.
Despite coming late to the party, as founder Alex Chesterman admits, Zoopla has grown to become the second largest property search site in the UK. "There were lots of players, but they had effectively taken what was in print and put it online," he said. "We saw a chance to innovate." Zoopla aims to give its users more information to help their house purchases by combining property details with market data such as from Royal Mail and the UK Land Registry. It also has an algorithm designed to provide an instant valuation of any property in the country.
It was set up in 2007 by Mr Chesterman, a co-founder of Lovefilm, and Simon Kain, who had worked at the online DVD rental company as its chief technology officer. The site went live in 2008, backed by Atlas Venture and Octopus Ventures. It expanded with a series of acquisitions including Thinkproperty.com and PropertyFinder, and now has 8 million unique visits a month. It makes money from estate agents advertising properties on the site. "We have 70 per cent of all estate and letting agents listing with us," Mr Chesterman said.
Songkick co-founder Ian Hogarth points to statistics that 50 per cent of concert tickets go unsold and on average people in the UK go to less than two gigs a year. "That's mainly because they don't know when their favourite bands are playing," he said. His site changes all that.
Songkick was set up in 2007. It raised $6.5m and was officially presented at South by Southwest in 2008. It tracks users' favourite bands and emails them when concert dates are announced. The number of users continues to grow and it is now, according to Mr Hogarth, the second largest concert site on the web, at about a quarter of the size of Ticketmaster.
Songkick makes money from generating ticket sales at the venues and has been responsible for as much as 20 per cent of sales at some gigs.
This year it poached a senior technology manager from Google in London and the focus is on growth.
Ones to watch
Academic web programme for managing research papers, released in 2008
Twickenham-based group that creates niche retail sites
File storage and project management software set up in 2006
Site that offers furniture at affordable prices by cutting out the middleman
Same-day delivery service to online and in-store customers in as little as 90 minutes
Online poker group making use of 3D imaging and an innovative revenue model, set up in 2006
Software to help companies manage their online operations, founded in 2007
Social betting exchange set up in 2008, expected to pass £20m in bets in June
Group set up to allow publishers to make money from affiliate links
One Fine Stay
Site that lets travellers stay at people's houses when they are out of town
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