Technology: Mega trouble, Mega opportunity

Not satisfied with much of the superficial media coverage to date – some of it admittedly courted by the colourful and gregarious Dotcom – NZ Management magazine wanted to find out what really makes Kim Dotcom and his colleagues tick. And if the creators of business that turned over more than the GDP of several of the world’s smaller economies, could have something truly transformational to offer the New Zealand economy.
Behind Dotcom’s showman public persona – flamboyant style that undoubtedly grates with Kiwi conservativism – there’s very smart, very tight business unit with the ability to go from world-class concept development to startup, and massive scale-up very fast.
Before being shut down in January 2012, MegaUpload was multi-billion dollar hugely successful online file-sharing business, that counted 80 percent of the US Fortune 500 companies and the governments of number of sovereign states amongst its users. It had 66 million registered users and an installation base of over 120 million Mega applications and 50 million unique visitors every day. By Dotcom’s reckoning MegaUpload the accounted for around four percent of internet traffic.
The Dotcom team vigorously reject the US government’s claim that MegaUpload was an illegal business and face an extradition trial in August. They say they did not encourage piracy or other illegal practices. And certainly in their new business they have acted promptly to shut down users if any illegal activity is reported.
Dotcom’s cloud storage start-up Mega, launched year to the date from his Miami Vice-type arrest, is one of the fastest-growing internet businesses in history. All that from just four guys here in New Zealand, on bail pending their day in court, unable to leave the country and with most of their financial resources seized by the authorities and unavailable to them. In just eight weeks Mega had three million users. Dropbox – one of the established competitors – took two years to achieve that growth. That’s not surprising, given they say Mega offers speeds 10 times faster than Dropbox, and the 50GB of free storage is many times competitors’ offerings.
So just who are these guys, the smarts behind Mega? NZ Management met recently with chief marketing officer Finn Batato, and interim CEO at the time of the launch, Kiwi Tony Lentino. On purely personal level there’s nothing of the ‘corporate cowboy’ about Batato. In recalling the day of the arrests he seemed genuinely traumatised and still somewhat fearful of what lies ahead, regardless of the team’s confidence in the outcome of future legal proceedings. “I’m just marketing guy and suddenly I had Bushmaster rifle to my face.”
Lentino has been embraced as family by the Mega team. He and his wife were the only Kiwis to come to the aid of Dotcom, his family and colleagues after the arrest and seizure of their property and freezing of their funds. Lentino is the founder and owner of Instra Corporation, leading, worldwide internet domain registrar. Following his initial stint as launch CEO of Mega, Lentino remains shareholder and director, working with the Mega executives to grow the business.
In common with many business people I took little notice of the more sensational aspects of the Dotcom case and hadn’t read the NZ Herald account of the raid until researching for this article. But we should be aware and, regardless of your view of Dotcom’s business activities, we should all be concerned that such over-the-top actions can be carried out by the authorities, on New Zealand soil, against New Zealand residents. If you haven’t read the piece already you can go to www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10783521 and see the accompanying photographic evidence also. Judge for yourself whether this is how we should treat private persons lawfully residing in New Zealand, and under the presumption of innocence – let alone young children and mother heavily pregnant with twins.
It’s somewhat ironic that Dotcom appears to have more support from the man and woman in the street – who are way more removed from his vast wealth – than New Zealand’s business and wealthy elite who should at least admire and support his ability to generate massive returns from his business models. Although Batato and Lentino did say that now Mega is up and running – and successful, with exponential early growth – there has been interest from potential investors in New Zealand, now that they can see the opportunities for substantial returns.
It obviously rankles that, in country that prides itself on ‘a fair go’ and historically has David-like, stood up to global Goliaths when principle like sovereignty (the sinking by the French government of the Rainbow Warrior in the Auckland harbour), or our nuclear-free status (refusing US nuclear-powered and/or armed ships in our waters) was at stake, we will allow what now appears to most reasonable people to be massive over-reaching by our authorities.
That realisation, together with admiration for the Mega team’s abilities, their business model and believing upon personal acquaintance that they are genuine and honest, was what convinced Vikram Kumar to take on the role of Mega CEO following its start-up. Initially reluctant, like many from the business establishment, to engage with the controversial team, the former chief executive of InternetNZ, was perturbed by their treatment at the hands of the authorities, and sympathetic to their personal stories. But above all he was impressed by their business and entrepreneurial acumen, and the smart model they had developed for Mega.
His previous role supported the vision of an ‘open and uncapturable internet’ so he was philosophically aligned with the Mega team. Securing Kumar was coup for Mega. His earlier positions working for central government in the State Services Commission, and for Telecom in variety of management, strategy, innovation and policy roles should lend credibility to the Mega team. But Kumar has copped some flak from business acquaintances who feel he’s bought himself whole lot of trouble. (See also Kumar’s Thought Leader column on page 26.)
So why did Dotcom and his team choose New Zealand? And what drives them? Are they, as many of our institutions and establishment figures would have us believe, bunch of bright cowboys – bright but cowboys nevertheless, prepared to flirt with the law for their own gain? And are they, as commentator Rod Oram stated, “the absolute antithesis of what the internet and this country need”?
Or, could they just possibly be very clever internet entrepreneurs and pioneers with something of game-changing potential to offer New Zealand. We don’t have too many individuals here capable of building businesses based on smart new technology as quickly as the Mega team can – or with the scalability to become global powerhouses. And isn’t that what we’ve been exhorted to do, since the Knowledge Wave conference of 12 years ago and even before? That is, generate new businesses based on smarts rather than relying solely on our primary sector and limited natural resources to fund the economic growth New Zealand requires to regain and build the standard of living we all aspire to?
This begs the question; when the best we can come up with is to grow more cows in an environment already under pressure from the intensification of dairying – strategy that has already put New Zealand’s international reputation at risk – why are we not taking Dotcom and Mega more seriously?
New Zealand was, Dotcom thought, benign environment to establish his family base, raise his kids, and run his business from. He bought property; was prevented from buying another – but that was minor hiccup compared with what was to follow. Surprisingly he’s still prepared to give New Zealand and New Zealanders another shot.
His plans, prior to January 2012, include