New column: Virtual Reality: The revolution is here

In this Internety world, a good idea translated into an active website that attracts lots of users can produce a 10-digit price tag .

By AMIR ORNI
January 30, 2007 15:36
2 minute read.
buffett wertheimer 298.88

buffett wertheimer 298.8. (photo credit: AP)

 
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The Internet. The boundary between the real world and the virtual one is becoming blurry. When we were kids, we used to meet outside to play our favorite games, we went to movies at the cinema and we hung out together listening to music. Nowadays children meet in the "messenger", listen to music together on iTunes and play online baseball against one another… The Internet is taking over our lives and I will be there to let you know about in this new weekly column. The revolution is already here About a year ago, Iscar - an Israeli company established in 1952 specializing in manufacturing cutting devices out of hard metals - was sold to the world's number 1 investment guru Warren Buffet. The price tag: 4 billion dollars (that's a b). The deal represented the biggest transaction in the history of Israeli business. Steff Wertheimer was 26 years old when he founded the company. He devoted his life to the family business until he passed on the torch to his son Eitan, who followed his father's steps, boosting the business and turning it into an empire that employs thousands of workers in Israel and elsewhere. Youtube is a website that was established by Chad Hurley and Steve Chen, who decided two years ago to set up an Internet meeting point for sharing video content. Youtube, a 2-year-old company employing only several dozen employees, was sold to the Internet giant Google for more than 1.5 billion dollars! This is the story of the Internet. Steff Wertheimer devoted his entire life to building his business. Chad Hurley and Steve Chen woke up one morning with a fantastic idea, motivation and some luck, and at the age of 30 joined the growing list of young ambitious entrepreneurs who are worth just a little over a billion dollars. This case and others alike reflect the new business reality created by the Internet, a reality in which many "old school" business people can't help but feel that while they have been devoting their entire life to their business, sweating and bleeding for years on the path to success, a small group of cheeky, inexperienced young entrepreneurs leave them way behind eating dust with nothing more than a good idea, a PowerPoint presentation and a few clicks on the mouse. Let's talk about business models in this new Internety world… Warren Buffet bought Iscar after thoroughly reviewing its financial reports, knowing exactly what would be its expected income, revenue, growth rates, market share etc. Youtube spends more than one million dollars every month only on its video stream infrastructure while its financial reports have yet to produce impressive profits. This, however, did not deter Google from buying Youtube because of its potential and the prospects of intertwining it with its own Internet enterprises. In this Internety world, a good idea translated into an active website that attracts lots of users can produce a 10-digit price tag only because of its potential and before it even made 1 dollar worth of profit. Veteran businessmen, representing the "old school", are beginning to realize that like the industrial revolution that took place more than two hundred years ago, so too does the Internet bring about an economic and social revolution. The rules of the game have changed. What was true in the past no longer applies. Not that we won't need companies like Iscar any more, on the contrary. However, it is much more likely that in the future we will hear more about Youtube type deals than ones resembling the Iscar acquisition. The writer is vice president of business development in JPost.com

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