Finger on the e-pulse
Wednesday, March 7, 2007/
Hitwise made successful forays into internet ratings long before anyone else had a clue. Founder Adrian Giles talks to AMANDA GOME
Adrian Giles, founder of Hitwise, talks to Amanda Gome. Hitwise is one of Australia’s few global technology success stories. It will soon list on the Nasdaq, reportedly with a market valuation of more than $400 million.
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Amanda Gome: Today for Lunch with an Entrepreneur we’re talking to Adrian Giles, who is 32 years old.
Adrian Giles: 33.
You’ve had a birthday. Adrian is the founder of Hitwise, which monitors how internet users interact and then sells that information to clients keen to know how their competitors are faring. You started the business in 1997. While everybody was focused on the Yahoos of the world, no one was looking at smaller websites.
Yeah, that’s right. We looked at the way that typical television ratings had been conducted and that same methodology had been applied to measure the internet when the internet became popular. Those methodologies worked quite well for TV. But you couldn’t get enough people on your panel to accurately reflect the websites that people were visiting and so we looked for a different way of measuring the internet.
We identified that there was a way you could measure the internet backbone by partnering with ISPs and by sitting on the backbone you end up seeing a lot more data and measuring many more people. That allowed us to provide popularity statistics for hundreds of thousands of websites rather than just the Yahoos of the world and it allowed us to sell that service to many companies.
How much did it cost you to start the business and how did you raise the money?
We put about $5000 of our savings each into the original business and that’s what really got it off the ground. The first thing that we actually sold was a search marketing product that we developed.
Because of that it was almost immediately cash flow positive and able to grow without significant amounts of money in the first few years and the cash flow was able to help fuel the R&D into what eventually became Hitwise.
So you’ve never had sleepless nights over cash flow?
Yes. We did want to grow a little quicker than our cash flow would support and so we did a few family and friends rounds. Just small seed rounds and then eventually at the point at which we had, we’d built the technology for Hitwise in Australia and it successfully launched here and we are about to start up in New Zealand.
We recognise that what we’d built with this competitive intelligence service was quite unique. The method that we’d used to extract information from ISP networks was very unique.
We started to develop patents around that and we knew that we needed to raise money in order to get international quicker and the only way we could do that was by raising money through venture capitalists and high net worth individuals around Melbourne.
You were very young then. Did people take you seriously?
We were young enough to be a little bit naïve and that was a bonus because we just kind of didn’t care that we were talking to VCs and talking to some very high net worth individuals around Melbourne and asking them for lots of money in return for shares in the business. We had a lot of faith in what we were doing.
We just convinced ourselves that what we were doing was the right thing and that it was going to grow effectively and that we were going to provide a fantastic return for those that had invested in us.
A lot of entrepreneurs say the worst thing they ever did was go into business with someone and yet your relationship with Andrew has lasted the distance.
Yeah, well we complemented each other quite well so the areas that I was lacking he filled and vice versa. That was I think what made the partnership fantastic, that it was yin and yang.
What happened when you disagreed?
To be honest, I cannot remember a significant disagreement that we weren’t able to work out amicably. We had a lot of off-sites. We’d go away a lot on little kind of mini-retreats where we’d talk about strategy of [where] we wanted to put the business and it all just kind of worked out quite nicely.
In the early days, what mistakes did you make and how did you overcome them?
I think one of the mistakes that we made was that we tried to expand too quickly overseas. At one point we launched in New Zealand. We were just about to launch in Hong Kong, London and Singapore. We started an office in Tokyo.
We were in South Korea with some ISPs there. We even had South Africa and a couple of other countries in the radar and we were just spreading ourselves far too thin.
We thought that we could franchise Hitwise by creating processes around how we’d expand the business.
But it’s never really as easy as that and we just had our fingers in too many new markets and worked out that it would put the long term growth and prospects of the business at risk. We pulled out of Japan and Korea and it’s one of those hard decisions that you make for the best.
Was it cash flow or were you killing yourselves running the business?
It was a mix of everything. The Japanese company that we were talking to, the length of time that we needed to invest in those relationships was a lot longer than we were used to in Australian, New Zealand and UK markets. And you were spending lots and lots of money, and it was partly the management distraction of trying to do all these different markets at once.
We pulled back to the Australia, New Zealand, Hong Kong, Singapore, London, UK and it allowed us to refocus and we were able to get those markets running profitably and successfully to the point where in 2003 we decided to grow the company into the US. We launched in January of 2003 the US market and that’s now really become the largest market for us globally.
Why didn’t you go to the US first?
It was lucky we didn’t. The US is a much more robust global business that we could take all the lessons we’d learnt from those other markets. We knew how to expand into a new market, we knew the product worked certain ways, we knew how to deal with ISPs. We eventually moved the entire structure of the organisation to the US.
And now what are your plans? You’re going to float in a year?
We could do that at any time this year. From now until the end of the year really.
OK, and you’ve employed Deutsche Bank to look at it, and we’re talking about a $400 million plus…
We haven’t really formalised who we’ve appointed and really haven’t formalised any pricing or anything. We’re really just getting all of our internal processes in the right place so that when it comes time to hit the Go button we can very quickly get through all of the various internal processes that are necessary for a Nasdaq listing.
Is it tougher listing on the Nasdaq?
It does appear to be. We’ve been a little lucky in that over the years, over the past five years, we’ve had PricewaterhouseCoopers regularly audit the company from a privacy and a data integrity point of view. So we’ve continually refined and improved all the operational processes of the business with the help of PwC to the point where nowadays I think we’re running like a company much more mature than our years.
So how is that going to change your life? What have you given up to run a company like this for the last 10 years? Are you married?
Married. You don’t feel like you give anything up because my attitude has always been that I love what I do. It is your life and you enjoy it so much that it doesn’t feel like work.
What’s your regular hours though, especially with the US. How do you handle that?
Well you do spend a lot of time on the phone and on conference calls. Communication’s obviously pretty important and you just really work hard on your communication processes and make sure that you’re on the phone regularly and on email regularly and I do a lot of travel to the US and UK. We have board meetings over in the US every quarter and I’m usually doing around the world each quarter at least for two or three weeks.
And so when you sell… you and Andrew have 15% of the company?
Well we don’t really disclose the shareholding of the business.
When you sold down, would you sell your whole stake or half of it?
It’s really something that’s dictated at that point in time based on performance of the business, what the market will take and the attitudes of the bank that’s actually leading it.
You’ve been very successful in building a really good profile for Hitwise. How have you gone about that?
We don’t have a huge marketing spend and really the way that the PR of Hitwise has grown over the years has been based on our data. So we do put a lot of press releases out about the changes that we see in the Hitwise data.
A lot of companies that subscribe to the service will use their popularity within the Hitwise rankings to promote their success in the media as well and so we tend to find that there’s just a lot of media mentions that refer to the Hitwise data all over the world and that’s helped drive the publicity for Hitwise.
There’s not many Australian tech companies that have expanded from a unique technology here and taken it into other markets like the UK and US and up into Asia with a view to ultimately putting the company on Nasdaq and I think that is an attractive thing within the Australian media.
Where are you going to be at 40 years old?
So how long is that? Seven years away. So that would have put me 17 years in Hitwise. Wow, that’s a long time away. I have some goals. One-year, three-year, 10-year goals, and I would imagine that without going into too much detail I think that I will still be playing a role within Hitwise. I would imagine that there would be a few other businesses that I may have an interest in or be growing at the same rate.
Have you got interests in other businesses now?
Well not really. I’ve tried to focus 100% of my energies and attention to Hitwise and the plan is really to continue to do that for the foreseeable future. I love it every day and really don’t want to distract myself.
This is an edited transcript of the interview which is available by podcast.