Small, Self-Funded, Stubborn _ and So Far Successful

Back to Contents of Issue: January 2002

Technobahn takes on the big boys in the financial information market.

by Richard Meyer

"HANG ON A SEC," the CEO says.
Dressed in wrinkled khakis and an oxford cloth shirt, he sits down at a computer terminal, types a few lines of programming code, and only then pulls over a chair. That's just the sort of greeting you get from the head of a dot-com that may just make it: more interested in work than image, more concerned about the product than publicity.
There are other signs that Yusuke Kon's venture,, may survive and very possibly thrive. Kon, 39, is one of only three employees at the company and works out of his apartment, which is in pleasant but hardly fashionable Tsukishima. From this simple base of operations, Kon and his coworkers produce a financial information site, providing news and 20-minute-delayed stock price charts.
Another indication that Technobahn is here to stay: Kon seems to know his business. Having worked for both Kyodo news service and Morgan Stanley, he speaks with some authority about what he does. He knows about data feeds, where they come from, and what they cost. He knows that you have to own your technology; otherwise, your profits go to one of the big boys of the data industry. He knows his customers, what they want, and what they are likely to pay.
Technobahn offers price charts for Tokyo Stock Exchange-listed companies as well as market-related news. The graphs are static but can be manipulated by the users in a number of different ways. They can be set to show everything from intra-day to five-year prices. Importantly, the graph of one stock can be compared to that of another or to an index (usually called a 2-in-1 chart). The page also offers screens of top gainers, top decliners, and highest volume stocks. The news is available in Japanese only, but the data is available in both English and Japanese.
According to Kon, Technobahn is profitable. It sells its product to companies like Infoseek and Yahoo. The finances of Technobahn are fairly easy to understand. Kon pays the Tokyo Stock Exchange JPY500,000 a month for the data feeds. His apartment/ office costs JPY300,000 a month. Kon says hosting costs are low, and he employs only two other people, both journalists. With expenses like that, profit comes fairly easily. Kon, incidentally, self-financed the operation and is its sole shareholder.
When asked why he has survived and why he is profitable, Kon doesn't miss a beat. "That's easy to answer. We are very small. Nikkei has 2,000 or more people," he says, referring to Japan's leading business daily, the Nihon Keizai Shimbun. "We can work and run smoothly without spending much money."
The phone rings. It's a client. He gets up, punches a few more lines of code, calls the client back, and returns. Kon emphasizes the importance of developing technology in-house. Delayed data itself is relatively cheap and can be freely purchased directly from the exchange by just about anyone. Utilizing that data is a different matter altogether. If a company does not have the software to display the feeds from the stock exchange, it has to pay another company for its graphic technology. Very few providers have those capabilities, so the costs are not low. "Most players get data from others. They have to pay additional money, and that money is not small," Kon says. "We are not dependent on any other data provider. We develop everything by our own hands."
Also, most data providers will restrict redistribution. They will sell a company like Technobahn the data and license the software for it to display that data on the Internet. They will allow that company to resell the information to individual retail customers, but the contract will generally prohibit the sale of the information to portals or other companies that will then resell that information again. For Kon, redistribution has been the source of his profit, and he would have no revenue if he had to sign a restrictive contract with another provider.
While Technobahn receives 40,000 page views a day, Kon has not put advertising on the site. He says he may consider it at some point. But not having banners on the page has had the unintended consequence of making Technobahn look more professional than many other financial Web sites. Kon says office workers can have Technobahn on their screens without being scolded by their bosses for playing on the Internet.
Kon's strategy from here on out is to reinvest the surplus into improving the product and increasing news coverage. Technobahn is one of those sites that always evolves. Every few weeks it is improved incrementally as Kon punches in more code.
The competition is formidable. On one of his screens, Kon has data provided by DLJdirect SFG Securities to its brokerage customers free of charge. It delivers live pricing, a brokers' queue, and dynamic charting. Kon, however, is not particularly worried about products like this. While DLJdirect currently gives data away to those who trade through its site, it charges JPY6,000 every three months for non-traders and will likely be charging all users within a few months. The price is likely to be high. Reuters is the supplier and must itself pay the exchange a fee for each individual customer to offer live pricing. When it comes time to charge for the product, customers could be asked to pay at least JPY3,000 a month (or make a minimum number of trades through DLJdirect). Kon's page admittedly is far less sophisticated, but he thinks he can draw customers once the brokerages stop subsidizing.
Kon believes he can offer a fairly competitive news product as well. While Bloomberg has hundreds of journalists in Japan, he thinks its news is too equity-focused. Reuters, he says, is too concentrated on the currency markets. Kon believes his small staff can provide a broad range of Japanese financial news, covering all the markets in the country -- in Japanese, and at a good price.
Significantly, Kon remains editorially independent. While he himself does everything at Technobahn, from programming to marketing, and has a direct financial incentive to achieve profits, he remains a newsman to the core and refuses to do anything but report without bias toward his sources or subjects. In the past, he has received demands from corporations to change critical stories, but he has politely declined their requests.
Editorial stubbornness has extracted a toll, Kon asserts. He says that no investor in Japan would put money into a company that could potentially anger a major Japanese corporation. This is why, he says, he has not sought outside funding and why Technobahn remains such a humble operation.
But being small, Kon says, is the main reason for his success. @

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