Internet gains, false prophets

A flirtatious young digital television reporter tosses her perfectly manicured, glossy mane, giggles, and says: "... but honestly, like, my mom knows you." The reporter is interviewing the chief executive of the US online news publication The Business Insider he is a thin, intense but hardly old fellow named Henry Blodget.

The reporter's "mom", of course, remembers Blodget from his time on Wall Street as a stockbroking analyst and key member of Merrill Lynch's technology investment team in that period known as the dotcom boom - all that way back in the late 1990s.

No mention, however, from the young journalist in her interview last week about what makes Henry McKelvey Blodget - as he was recorded in court documents - infamous. She just recalls for her audience that Blodget was there for the first tech boom and lived to tell the tale.

For those with a corporate memory dating back a mere decade, Blodget was banned forevermore from working in the US securities industry.

The then New York state attorney-general, Eliot Spitzer (who later met his own public demise for other scandalous reasons before becoming a television host), took offence at Blodget's talking-up of technology stocks to Merrill Lynch clients while internally trashing them, and pursued him successfully through the courts.

In failing to mention Blodget's vital court statistics, the young reporter unwittingly confirms the interview's theme. A second technology boom is nigh. Few seem interested in lessons learnt from the last boom. For isn't that when a boom becomes a bubble, when those involved can't see the similarities between the then and now?

Thursday's extraordinary debut of LinkedIn on the US bourse demonstrated tech stocks are hot, hot, hot. The $US45 ($42) shares traded as high as $US122.69 before closing at $US94.25.

This week's cover of the illustrious global magazine The Economist confirms the thesis. It reads "The New Tech Bubble". So, little more than a decade on from the first time it took its first near-fatal purler, there is again a stench, but of a different variety, around the internet.

Back when the dotcom boom began, there was a celebration of individuality and equality. The internet at that time was defined as equal access to information to anyone with a computer within reach. It meant equal access for consumers and to those wanting to flog something to them.

The boom time dictum of the net-heads was that the internet was one of the great levellers. Australian companies and technological innovations had as much right to claim their place in the annals of global corporate history.

The great leveller, though, turned out to be the stockmarket crash that ensued which saw only the best - make that the best-funded - companies survive.

In short, the egalitarian dictum was drivel. The internet is now powered by a select few, and surreptitiously so.

The overlord had its foundation in a 1996 Stanford University PhD research project belonging to a pair of fellows named Larry Page and Sergey Brin. Google, their research project, grew into an omnipotent search engine that ultimately controls where we travel on the internet and what we see along the way.

These days we "google" when

we need to find something online. Its very ubiquitousness means few question the Google search process.

"Don't be evil" had been Google's conduct code. "We believe strongly that in the long term, we will be better served - as shareholders and in all other ways - by a company that does good things for the world even if we forgo some short-term gains," the Google prospectus said.

Commercial imperative, however, came to the fore when Brin and Page decided to include advertisements in their business model - even though they had written a paper in 1998 at Stanford arguing against the advertising-based search engine model.

And Google is not the only dominant player. Last week Apple pushed Google out of the world's number one brand position. If there is a dominant technology concern, Apple is it - at least for now.

Apple introduced a second seismic shift in the development of the internet with the prevalence of applications, or "apps" as they're colloquially known.

The universality and wideness of the world wide web had become diminished - Apple retains the

right to approve all third-party applications. In plain English, it controls what we see (if we are Apple app users).

Apps have changed the very way we use the internet. So much for the world wide web - these days we simply go directly where we want on the internet, through an app.

Joining Apple as a dominant player in the app-sphere is Google, with its Android smartphone operating system.

And Australians have jumped at the opportunity to use the internet on their mobile phones.

In the year ended June 2009, 26 per cent of Australians were using the internet on their phones. One year later it was 41 per cent, according to the annual e-business report from Sensis.

Apple - and Google - are the prisms through which many of us view the online world.

The internet, back in the days that "mom" can remember, was meant to level the economic playing field. Instead it has created a handful of superpowers.

And like the wide-eyed young reporter interviewing Blodget,

few people are questioning the credentials of these companies and their motives.

An appendix to Google's dominance was the news this week from researchers at Germany's Ulm University that Google's Android phone system could be accessed by hackers. They warned not to use the system on public wi-fi networks. There were also warnings that its gmail system can be hacked into relatively easily.

Google said on Wednesday that it would fix the system glitch.

Where does that leave Australia's internet entrepreneurs?

Back in the days of the dotcom crash, Australian internet players were a dime a dozen. Anyone who could register a website name or a uniform resource locator (URL in common English) could play along.

There were some big successes. David Spence was one of those who hand-reared the internet service provider OzEmail, along with Malcolm Turnbull, Trevor Kennedy and Sean Howard, before selling

it off.

A decade later he did the same thing with the mobile broadband provider Unwired. He couldn't stay out of the sector - last June he agreed to become the non-executive chairman of another technology concern, Vocus.

Fellows such as Jason Ashton, who made his first millions selling an ISP called MagnaData to the one-time dotcom darling Davnet, fought on. Ashton's Big Air is also an ISP and last year it reported a profit.

Still successful in the technology arena is Adrian Ballintine,

whose dotcom company Multiemedia morphed into the satellite business NewSat.

In August last year, in a nod to the American satellite mogul Rene Anselmo and his infamous ads in The Wall Street Journal which featured Spot the Dog urinating on politicians' legs, Ballintine took out a half-page advertisement in The Australian Financial Review. This took the form of an open letter to the federal government in which he drew a parallel between his independent media company and the independent members of Parliament. It was titled Exploding the Broadband Myth.

Ballintine wanted NewSat to be a wholesale supplier to the national broadband network. At its last half-year results it was making something of a profit, albeit a slight one. NewSat shares last traded at 0.8? .

David Tonkin, who was behind Travel.com.au and before that was one of the founders of Flight Centre, moved into 3D digital page-turning travel brochures with Express Travel Brochures. He then became involved with DigitalDM, a digital publisher.

Then there were those big dotcom players who followed their entrepreneurial roots, instead of their technology leanings.

Graham Bristow had been the founder of LibertyOne, a hotchpotch of companies centred around all things internet. Bristow had furthered his love of good property (he very briefly owned Paradis Sur Mer when LibertyOne shares were hot) and multilayered company arrangements when he founded a venture capital business, Meridian Pacific Capital, while he was in Australia running LibertyOne. From there he established an Indonesian property company, PT Island Concepts Indonesia, based in Bali.

He then incorporated a company in Delaware - known for its flexible company arrangements and favoured by other great internet entrepreneurs such as Rupert Murdoch - called the Island Residences Club. Bristow ran the business from the upmarket Queensland beachside village of Noosa Heads.

John Kennerley, otherwise known as Mr Kerri-Anne Kennerley, chaired both of Bristow's companies. He had also been a fixture at LibertyOne.

Anthony Bertini was another forward-looking creature. He was as inspired by the promise of "clean tech" after his efforts with his online advertising agency BMC. He has his own corporate advisory practice named Thumper One which specialises in incubating new technologies. He's still chasing financial mega-bucks, but through downstream services. Bertini is focused on a clean-tech stock exchange, which housed only companies involved in sustainable energy.

It's a somewhat different existence to drinking tea at London's Claridge's in the company of Charles Saatchi, as Bertini did with Malcolm Turnbull when the British advertising guru was providing public relations advice to the partnership, which was then co-chaired by Turnbull and Elisabeth Murdoch.

Mark Mezrani, the former Macquarie banker turned wine retailer turned internet mogul, transformed himself into a children's chain store mogul. He bought the two Kidstuff Sydney stores in 2003 there are now more than a dozen locations.

Also demonstrating something of a green bent was David Higgins, the former boss of Lend Lease, under whose reign Lend Lease threw money at an internet-based coupons business called Coolsavings.

Having come off badly from his efforts to turn Lend Lease into a global real estate concern, Higgins departed public companies and worked for the British government.

He ran the regeneration agency English Partnerships between 2003 and 2005 before leaving to become head of the Olympic Delivering Authority. He kept preparations for the 2012 London Olympics under budget and on time in the five years he was there, before beginning in February as the head of Network Rail.

In spite of working for the government, he hasn't stayed out of the press. He received much publicity for being the highest paid public official in Britain, with his salary of #390,000 ($596,000).

The brothel madam turned successful internet entrepreneur Sharon Austen, of the eponymous online marital aids retailer, moved largely out of high corporate life but has retained connections to the internet. From her Amsterdam base she remains interested in affairs of the heart and other throbbing organs - she has been writing a screenplay about Charles II's long-term mistress, Nell Gwyn, and the life of an Australian callgirl living in Gwyn's former house.

At the same time she has been stirring up interest in another completed screenplay, Killer Cranky Diamonds. A start-up movie studio has expressed interest and planned to launch it - where else? - on the internet.

Austen's arch-rival, Malcolm Day of the online sex toys retailer Adultshop.com, has branched out. Last year the online business merged with a real-life Sydney brothel, Stiletto, in a deal worth about $20 million. The merged company changed its name to Delecta Ltd last November.

The co-founder of the cult web designer Spike, Ruby Blessing - another dotcom player who, like Sharon Austen, felt chewed up and spat out by the boom - stayed in the business, but she has also turned her hand to writing books.

Chris "Creed" O'Hanlon, Blessing's co-founder at Spike, has turned against the internet in his own life.

"There is an increasingly dense and impenetrable cloud of data acquisition that hangs over our lives like a shroud, and yet very few, relatively, recognise its threat. I still engage with technology. I just refuse to fetishise it or to rely on it. I discourage others from relying on it too. At sea, I almost avoid it completely," he wrote in the online publication HoboEye.com.

After leaving the "celebrity angel" investing outfit TinShed behind, Janusz Hooker left for New York in 2003 to work for the real estate concern W.P. Carey. Within six years he had bought back the Australian real estate business founded by his grandfather, L.J. Hooker, paying $67 million.

It was about 18 months ago the Secretary to the Treasury, Ken Henry, delivered a speech at a Queensland technology university which he titled The Shape of Things to Come.

"I sometimes get the impression that some people believe that the information and communication technology revolution ended with the collapse of the dotcom bubble earlier this decade. Instead there are very good reasons to believe that we have only just begun to see what the information and communication technology revolution promises," he opined.

Whether Henry imagined the second coming of the internet with such force and in such a short time is unclear. One thing is for sure: Blodget - the fellow who picked Amazon's share price rise like a nose - doesn't agree it's overheated to the point of bubbling over. "I think the bubble talk is ludicrous," he says.

Then again, the old, fence-sitting, habits of a stockbroking analyst die hard. Blodget says in the same breath: "It doesn't mean that investors aren't going to lose their shirts - tech shares are risky."

Kate Askew is a former Herald journalist. Her book Dot.Bomb Australia: How We Wrangled, Conned and Argie-bargied Our Way into the New Digital Universe is published by Allen & Unwin.