A few kids with a laptop

Trade Me’s story is that of a paradigm shift from the old economy to the new

Tuesday, July 27 2010 || Technology || BY Caitlin Sykes

Each night of his summer holiday, when his wife and young daughters were tucked up asleep in the family Kombi, Mike O’Donnell would retreat to the old schoolhouse at the remote Anaura Bay campground north of Gisborne, pull out his laptop, and write the history of New Zealand’s most famous technology company.

It was the second crack O’Donnell, popularly known as ‘MOD’, had at writing an insider’s account of Trade Me, where he spent five years as the company’s head of commercial, and is now head of operations. The first attempt — a chronological account of the company’s progress — was “diabolically unreadable”, he says.
But his second effort, arranged more thematically around Trade Me’s forays into areas such as motors, property and jobs, flowed as naturally as the tide.

The result is Trade Me: The Inside Story. The idea for the book had been rattling around in O’Donnell’s head for a couple of years. Ironically, stepping away from the company for a few months to work for Gareth Morgan Investments (the company of Trade Me founder Sam Morgan’s father) gave O’Donnell the perspective he needed to get started.

As part of the process O’Donnell interviewed Trade Me’s key players — people who were not only colleagues but good friends. “It felt really weird,” he admits, “like asking your wife out on a date.”

In 2003, O’Donnell worked nights for Sam Morgan helping with the launch of Trade Me Motors. He quit a job at Fonterra to officially start with the company in early 2004, sitting next to a guy who wore nail polish and mascara. Anecdotes from Trade Me’s early days give an insight into how incredibly underestimated the company was. In the book, Morgan recalls talking to the powers that be in 2000 at Telecom’s Xtra, then the country’s biggest website, to see if they could work together: “‘So what do you think you are worth?’ was the question from the head of Xtra. Although we had no real revenue and seemingly little prospect of it, I was undeterred. ‘$10 million,’ I said. I was laughed out of the room. A few years later, Marko Bogievski, Telecom’s chief financial officer, offered me $50 million for the company and I laughed them out of the room. That felt good. Damn good.”

That Trade Me was often blessed with poor-quality competition — who also refused to take “a few kids with a laptop” seriously — is a theme that pervades the story of the company’s meteoric rise. Another is the way consumers embraced Trade Me with open arms and took the company into its trust.

Each time the company launched into a new ‘vertical’ — motoring, property, jobs — most established industry players dug in their toes, rebuffing and obstructing the upstart website’s advances to work together, only to be left choking in the dust created by consumers rushing to Trade Me’s offerings.

It leaves the impression of a startling paradigm shift; of the old economy doing battle with the new. “In those early days,” says O’Donnell, “what we had recognised that our competitors hadn’t was that power was transferring from the traditional hierarchies to the audience ... You need to listen and you need to innovate deeply.”

When Morgan et al sold Trade Me to Fairfax Media for a jaw dropping $750 million in early 2006, the irony of being bought by one of the country’s established media players was not lost on the tech company. O’Donnell recalls it as an “absolutely insane” time, but tempered by staff concerned their unique and prized culture would be subsumed. Culture is another strong theme of the book, both among staff and Trade Me’s wider community of buyers and sellers, and O’Donnell says the most common question he’s asked about Trade Me is ‘has it changed?’ No, he says — surprisingly it’s been business as usual.

In the book, O’Donnell puts the overwhelmingly positive public response to the sale down to the high esteem in which then-Fairfax boss, and former All Blacks captain, David Kirk and Morgan are both held.

Retaining the trust of the Kiwi public is among the challenges ahead for Trade Me, which O’Donnell ponders in the one of the book’s last chapters. There’s a huge amount of goodwill among New Zealanders for the company, which Morgan describes in the book’s foreword as finding itself “in the right place at the right time”.

O’Donnell echoes the sentiment: “One of the reasons for our success is New Zealand was a late adopter of the internet ... For a lot of New Zealanders, Trade Me was kind of how they learned how the internet worked and that worked very, very well for us.”

Trade Me: The inside story is on shelves in August