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 Internet World '97 Israeli Internet Companies: More Risks Than Opportunities According to a survey conducted by IDC, the market for Internet products and services is estimated to have generated $19 billion in 1996, and is expected to grow by 50% per year till the year 2000. That rate of growth is five times the rate of growth of yearly expenditures for information systems. Israeli Internet companies can be divided into several main categories: infrastructure, development tools, information security, and services. Infrastructure needs are met by companies developing basic software for communications and various search engines such as Vocaltec (Internet telephone) of Netmanage (Winsock and Chameleon protocols). Another application has joined this group recently: software that can charge Internet users very small amounts, such as cents or fractions of cents. Xacct, for instance, which specializes in developing and marketing software for Internet supervision and control, is now offering software adapted to TCPIP protocol, charging Internet traffic. It facilitates allocation of Internet usage costs among various departments; guarantees secure charging via various means of payment; and supervises visiting surfers. The array of multimedia products can also be categorized as infrastructure. They facilitate transmission of graphic, video and audio files on the Internet. Vocaltec, which is fighting to justify its attractive share offering executed with the early launch of its audio-transmission products, is fighting hard to survive among the multitude of similar products brought to market immediately afterwards and embedded in every browser. Vocaltec’s engineers are now working on a new technological breakthrough. In contrast, VDOnet is enjoying Microsoft’s courtship and that company’s investment in compression products and Internet video transmission. While Geo chose to market its technology at affordable prices. It is still too early to know the market reaction. Geo’s multimedia technology "Emblaze Video" and "Emblaze Audio" for transmitting quality video and audio on the Internet, does not require needless plug-ins or expensive designated servers. Geo excels in especially high compression rates, facilitating the conversion of video movies and audio files, from every known editing tool, into files of negligible size. Multimedia viewing is based on operating small Java applets which present the video and audio sections on any standard Internet browser. In the field of information security, there are several companies developing firewalls, mail and fax encryption systems etc. Check-point developed the firewall most used on the Internet. The company went public with a very high market value. Other companies are concentrating on second level firewalls, designed to give remote protection to computers against hostile Java applets and Active-X components which can damage computers. Israeli company Finjan announced its Surfin Shield software to protect the surfer from Java applets loaded into the computer when entering many Internet sites. Security Corp. also works on this. Algorithmic Research specializes in developing encryption products. It will present new products for individuals and for organizations interested in supplying secure information over the Internet. EliaShim has worked several years in offering solutions against viruses. Memco, RAD Guard and other companies also work in this field. No one doubts that this is one area where Israel is in the forefront. Besides developing Internet infrastructure, companies are also developing tools to manage the Web such as site applications to search designated data-base etc. Outstanding are Magic and Sapiens, which have widened their original development tools to operate on the Internet. They target the organizational market, in contrast to Ventura, which concentrates on the end user. Among its new releases this week, it announced the Personal Crawler, a personal search engine to investigate and filter information from every site on the Internet. Cloudy Future The bad news is that technology is less important than marketing. Despite the success of a number of private share offerings, and despite the dreams of local software developers, analysts do not foresee a rosy future for companies working on Internet development. On one hand, many believe that stock exchanges around the world feel saturated with bloated share offerings of Internet companies. Also, initial enthusiasm has dried up for new marketing methods whereby products were given away free in order to build a profitable customer base. Shelly Tshuva is the general manager of Foresight, a company dealing with financial advice and raising capital. According to Tshuva, Israelis lack an understanding of the market and what the audience really needs. Computers and the Internet have split into two: Microsoft and all the rest. Therefore every start-up is faced with two options: either concentrate on a market segment so small that Microsoft doesn’t pay attention to you; or be active in a hot part of the market, and if you’re good enough, Microsoft will buy you up and take control. In other words, picking the market segment is critical. Tshuva attributes Checkpoint’s success to the situation in the company’s niche, besides its quality and superb timing. Checkpoint’s firewall was the first out on the market, but the market had become aware of the problem of security. Two years later, with Microsoft and Sisco entering the field, Checkpoint will have to develop new products to preserve its standing. Another Internet trend is to offer services or information for very small sums of money. It turns out, however, that this does not help Israeli vendors, since a critical audience mass has to be generated in order to make the product profitable. This isn’t an Israeli strength. Comsat, which represents the Gartner Group in Israel, believes that after the first wave of Israeli Internet start-ups, we can expect mergers, buy-outs, and wash-outs of a large number of Israeli Internet companies. |