Case No: EBIZ– 002

Date: 27 August 2008

Barney C C Tan and Shan-Ling Pan

Web Assimilation at Hardwarezone.com

Organizational Background

Hardwarezone.com (HWZ) is the most popular IT media website in Singapore (refer to Figure 1). Its
business centers on providing localized news and information on the latest IT products, as well as
numerous services; which includes consolidated price lists of the major IT vendors in Singapore, a
classified ads directory and an online discussion forum. HWZ attracts 330,000 unique browsers and
more than 32 million page visits every month, a considerable achievement given that Singapore; with
its small domestic market, is a country that has seen little success in the e-commerce arena. The
unprecedented nature of HWZ’s success even prompted the most widely circulated business
newspaper in Singapore to compare its two founders to Larry Page and Sergey Brin of Google,
enthusiastically proclaiming HWZ’s founders as “Singapore’s very own Google Guys”. By 2004, it
was estimated that HWZ controlled 29.7% of the Singapore IT publications industry. In comparison,
CNET Asia, in second place, only had a 9.9% market share.

The phenomenal success of HWZ belies its humble origins. HWZ began as a special interest group
known as the Singapore’s Overclockers Group (SOG) hosted by SingaporeOne, an e-commerce
initiative spearheaded by the Singapore government. The SOG was targeted at a niche community of
CPU overclockers, allowing members to post their hardware configurations and overclocking results
on an electronic message board. Although the size of the community was relatively small, the SOG
generated such heavy web traffic that it throttled its parent website, taking up 90% of SingaporeOne’s
bandwidth allocation within a month of its launch, leaving the management of SingaporeOne with no
choice but to dissolve the SOG. Aided by the management of SingaporeOne, the founders of HWZ
applied for and were eventually awarded a US$13,000 grant from the Singapore government. With
this grant and US$650 of capital contributed by its founders, HWZ was founded on August 9, 1998 in
a small factory space, running on home equipment contributed by friends and family members. The
initial capital at the time was only enough for one server and six months of bandwidth charges.

Entering the IT Publications Industry (Late 1998 – Late 1999)

At the time of HWZ’s entry, Singapore’s IT publications industry was stagnated and saturated, with a
wide variety of foreign and local IT publications, both on the bookshelves and on the Internet. An
industry insider described the state of the industry at before the entry of HWZ:

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Web Assimilation at Hardwarezone.com EBIZ – 002

Figure 1: Hardwarezone.com

“We had printed foreign magazines like PC World, Chip and PC Magazine. And we had the
local ones like Gravity and Tech… Even though the Internet was a relatively new thing back
then, websites like CNET and Tom’s Hardware were already popular… We also had local
websites like Hardware-one.com… On the whole, the industry was pretty stable… some
would even call it boring because we saw clusters of similar offerings everywhere”

Yet, despite the wide variety of product offerings available, feedback from the SOG made the
founders of HWZ realize that there was an unmet need among local IT enthusiasts. One of HWZ’s
founders described this critical insight:

“The foreign publications are not geared towards the local audience… the products
reviewed may not be available locally because in terms of IT products, we (in Singapore)
are probably some months behind… Even if they are available, the prices may be, for
example, listed in US dollars… The local publications were more like hobbyist sites. Their
coverage was not comprehensive and people generally feel that they are not credible…”

Based on this insight, HWZ acted swiftly to differentiate its value proposition from the existing
offerings in the industry. Four key strategies, with the aim of positioning HWZ as a comprehensive
and credible provider of free, localized IT content, were employed by HWZ in the local market. First,
HWZ established a hardware testing laboratory to generate its own product reviews. Consequently,
the content generated by HWZ was generally perceived to be more credible than local IT publications
because the product reviews were done by genuine content experts with reproducible, extensively
described experiments and benchmarking tests carried out in a controlled environment. In addition,
HWZ’s content was more relevant to the local audience than foreign IT publications since testing was
done only on products available in the local mainstream market.

Second, HWZ negotiated agreements with major IT vendors in Singapore for priority access to their
latest products, which allowed HWZ to provide the most up-to-date product reviews, prices and

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Web Assimilation at Hardwarezone.com EBIZ – 002

availability information through its website. The timeliness of HWZ’s content created an important
advantage over foreign IT publications, whose content were often not synchronized with the local
market. In addition, the strategic alliance with the IT vendors provided HWZ with a continuous
stream of products to review. This formed a critical advantage over the local publications as HWZ
was able to provide a more comprehensive coverage of the IT products available in the local market.
Third, the management of HWZ made a conscious decision that HWZ’s revenue would stem solely
from online advertising, as opposed to charging its members a subscription fee for the content they
provided. Online advertising was a viable and dependable source of revenue then as HWZ’s entry into
the IT publications industry coincided with the height of the dotcom bubble. And by offering their
content free-of-charge, a significant advantage is gained over the printed IT magazines that local IT
enthusiasts typically had to pay US$5.00 to US$11.00 for.

Finally, HWZ invested extensive resources and effort to nurture a strong sense of community among
its members as the management of HWZ anticipated that a vibrant and highly interactive virtual
community will increase the stickiness of their website, and make it difficult for current and potential
competitors to imitate its business model in the IT publications industry. The Managing Director of
HWZ described the measures undertaken by the management of HWZ to foster a sense of community
among its members:

“When HWZ first started, we were there almost every other minute. We were there
answering questions, getting the community going, discussing things. It was a very
hands-on approach… We organized lunches, barbecues and other outings for our forum
members… We invited the opinion leaders to come over to our office for tea, where we give
them freebies like t-shirts… If we identify someone who is knowledgeable or helpful, we will
consider giving the person moderator privileges…”

Table 1 provides an overview of the existing market conditions, the strategic objectives of HWZ at the
point of market entry, the strategies employed to achieve the objectives, and the ways in which web
technologies were used to support these strategies during this period. By using web technologies to
facilitate its business strategies, HWZ was able to deliver a unique combination of value that stems
from: (1) its unique positioning as a comprehensive provider of free, localized IT content, (2) a
vibrant, close-knit community that served both as a knowledge base and a platform for local IT
enthusiasts to interact, and (3) high responsiveness to evolving customer demands due to its close ties
with its customers and its ability to deliver updated content quickly.

Market Stable, stagnated market. Saturated with numerous foreign and local IT publications, both online and
Conditions offline.
Strategic Positioning as a comprehensive and credible provider of free, localized IT content to differentiate itself
Objectives of from existing competitors which include:
HWZ Foreign Publications that produced comprehensive content but is not targeted at the local audience
Local Publications that provided localized IT content but with limited coverage
Printed Publications that charged up to US $11.00 for a printed magazine

Key Strategies 1. Establish a hardware testing laboratory to generate credible local IT content.
Employed 2. Form strategic alliances with major IT vendors in Singapore to ensure that their coverage of
local IT products is both comprehensive and up to date.
3. Provide content for free and depend solely on online advertising to achieve cost advantage over
printed magazines
4. Nurture a strong virtual community through (1) responsive, knowledge-rich interactions, (2)
physical outings, (3) freebies and (4) forum privileges
How web Provided the means of delivering HWZ’s proprietary content to their customers free-of-charge
technologies Enabled real-time updates to product information and prices
facilitated the Provided a platform for interaction and feedback between members of HWZ’s virtual
strategy of HWZ community and HWZ’s top management
Table 1: Strategies Employed by HWZ upon Market Entry

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With its unique value proposition, HWZ was able to establish itself as an immensely popular online
portal for IT price guides and reviews in Singapore. By 1999, official membership for their
community had soared to 40,000 with a webpage impression count of over 16 million per month.
Advertisers were attracted by HWZ’s reach and the size of its vibrant community and online
advertising revenue quickly reached levels of around US$200,000 per annum. Up to this point in time,
HWZ had been a resounding success. But new challenges were to emerge as the IT publications
industry was about to undergo a dramatic transformation.

The Dotcom Crisis (Early 2000 – Late 2004)

The onset of the dotcom crisis, which coincided with the peak of the Asian Financial Crisis at the
beginning of the year 2000, plunged the Singapore IT publications industry into great turmoil and
uncertainty. The severe economic conditions, coupled with the revolution that HWZ was effecting in
the industry forced the closure of numerous competitors, both online and offline, foreign and local
alike. Due to its dependency on online advertising, HWZ was also badly affected as the confidence in
viability of online advertising was shattered. The abundance of venture capital in the days of the
dotcom bubble had all but vanished, and several venture capitalists who have pledged funding for
HWZ had to withdraw even as HWZ’s fundamentals remained sound.

The new challenges caused by the adverse environmental conditions made the management of HWZ
realize that the competitive landscape had fundamentally changed, and that HWZ’s dependency on a
single revenue stream from a single market made the company vulnerable to any form of turbulence
that affected that particular source of income. Based on this new revelation, three new strategies were
formulated with the aim of creating new streams of revenue to bring about financial stability to the
organization. First, based on an analysis of the pool of advertisers that formed the source of their
online advertising revenue, the management of HWZ identified a large, untapped segment of
conservative-minded advertisers that were advertising in the existing printed magazines in the
industry but were resistant to the notion of advertising online. The Product Manager of HWZ
explained the reluctance of this group of advertisers towards online advertising:

“Some advertisers were more conservative and didn’t like to advertise online. They wanted
something that they could see, touch or hold. Online advertising didn’t do it for them”

To cater to this segment of advertisers, the decision to carry out an unprecedented reverse clicks- and-
mortar strategy was made, which led to plans for a printed magazine. The success of HWZ’s website
and the size of its fiercely loyal online community made the planned magazine very attractive in the
eyes of existing and potential advertisers. Marketing the magazine first to HWZ’s existing online
advertisers, and then to the segment of advertisers who were reluctant to advertise online, the idea of
an offline version of HWZ’s existing product was readily accepted. However, to mitigate the
possibility of cannibalization between the printed magazine and the existing website, the content of
the printed magazine and the website had to be deliberately engineered to be complementary. HWM
magazine was launched in July 2001 and achieved a circulation of over 10,000 a month with its
inaugural issue. Within months, it became the best selling IT magazine in Singapore, edging out
several well-established competitors such as Chip and PC World (Singapore).

Second, an analysis of the regional markets revealed contextual conditions that were similar to the
Singapore IT publications industry prior to HWZ’s entry. Consequently, HWZ pursued a
regionalization strategy that sought to replicate its successful clicks and mortar strategy in countries
within the region. Country-specific versions of the HWZ website; named “Portalites” were created in
neighboring countries like Malaysia, Thailand, the Philippines and Australia. Similar to the original
HWZ website, the emphasis of the “portalites” was on delivering comprehensive, up-to-date
information on the IT products specific to the country. In addition, HWM magazine was launched in
Malaysia, Thailand, the Philippines, and Indonesia in quick succession over a period of two and a half
years.
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Web Assimilation at Hardwarezone.com EBIZ – 002

Third, an analysis of its existing community uncovered an underserved demand for content on IT-
related products such as PC gaming, console gaming and digital photography. While community
members were satisfied with HWZ’s comprehensive coverage of local IT products, they had come to
expect a greater variety of content based on their experience with the wide product range of foreign IT
websites such as CNET. Consequently, HWZ pursued a product line extension strategy by
diversifying into IT-related products such as computer gaming, console gaming and digital
photography. Gameaxis.com; devoted to PC games, was launched in February 2002, while
Xboxaxis.com; devoted to the Microsoft Xbox gaming console, was created soon after in November
2002. On the bookshelves, Gameaxis Unwired; a magazine devoted to computer gaming, and Photo I;
a magazine dedicated to digital photography were published in August 2003 and December 2003
respectively as part of HWZ’s expanding product line. The existing market conditions, the strategic
objectives of HWZ during the period of the dotcom crisis, the strategies employed to achieve the new
objectives, and the ways in which web technologies were used to support these strategies during this
period are summarized in Table 2.

Market Uncertainty, instability and high organizational mortality rates due to:
Conditions The advent of the dotcom crisis
The height of the Asian Financial Crisis
HWZ’s revolutionary impact on the IT publications industry
Strategic Creating new streams of revenue to bring about financial stability to HWZ. Market analysis revealed a
Objectives of number of untapped opportunities, which include:
HWZ A large pool of conservative advertisers who were reluctant to advertise online
Contextual conditions that were similar to the Singapore IT publications industry prior to
HWZ’s entry in regional markets
High demand indicated by HWZ’s online community for content on IT-related products such as
PC gaming, console gaming and digital photography
Key Strategies 1. Going into print with the launch of HWM magazine. Content of the new magazine and the
Employed website were engineered to be complementary and mutually reinforcing
2. Launch of Portalites” (localized versions of the HWZ website) and country-specific versions
of HWM magazines in. Malaysia, Thailand, Indonesia, Philippines, Australia
3. Diversified into IT related products with the launch of “GameAxis” for PC gaming,
“XboxAxis” for the Xbox console and “PhotoVideoI” for digital photography
How web The success of the existing website and the large online community made advertisers very
technologies receptive to the idea of a printed magazine
facilitated the Web technologies made it easier and less costly for HWZ to expand into regional markets and
strategy of HWZ diversify into IT-related products
Table 2: Strategies Employed by HWZ during the Dotcom Crisis

The new strategies were instrumental to HWZ’s survival during the dotcom crisis and the immediate
years after. By creating new streams of revenue from new regional and product markets, HWZ
became more stable financially and its profits continued to grow despite the trying environmental
conditions. By 2004, official membership figures of HWZ exceeded 100,000 and the combined
revenue from all revenue streams grew to US$2.6million approximately. Yet, the new strategies had
also inadvertently transformed HWZ into a multi-national organization that resembled the foreign
competitors that they have had to face in the Singapore market, both in terms of organizational
structure and the range of products offered (refer to Figure 2). A senior executive at HWZ elaborated
on the transformation that had taken place:

“…this is one of the key challenges we are facing in the new regional markets we have
entered… These things that we have done; going into print, into gaming, (and) digital
photography… have made us similar to the foreign IT publications that we have had to
compete with… so we have a problem of trying to cater to the local needs…Yet, it was
necessary. I don’t think we would have survived the dotcom crisis if we didn’t adopt these
measures.”

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Web Assimilation at Hardwarezone.com EBIZ – 002

Printed Magazines/ Extended Product Range Regional “Portalites”

Figure 2: New Products Developed during the Dotcom Crisis

Diversifying into New Industries (Early 2005 – Present)

With a discernible decrease in both the rate and magnitude of change in the industry, the aftershocks
of the dotcom crisis have subsided as the market returns to a state of normalcy. An industry insider
gave his assessment of the existing conditions in the market today:

“I think we are witnessing a recovery... since around early 2005…the level of Internet
advertising is almost back to pre-dotcom crisis levels and the situation has more or less
stabilized.”

Having established a firm dominance in the IT publications industry, HWZ is now looking to replicate
their success in other industries that offer opportunities for the organization to use their existing assets
and competencies synergistically. A senior executive at HWZ elaborated on the rationale for
diversification:

“We have reached a point in the IT market where if we want our market share to grow
further, we will have to invest a whole lot more (proportionately). So it makes more sense
for us to invest what it would have taken to grow our market share by a little, in other
markets…”

To date, HWZ’s latest strategy has led to the successive launches of Inside Golf (an online-offline golf
publication), Carma (an online-offline motoring publication), and Jetaway (a travel magazine). The
Managing Director of HWZ elaborated on the role the HWZ community played in influencing the
choice of industries for diversification:

“When people join a community and they identify with it, they start to talk about everything
under the sun including cars, travel… so we looked at their posts and we realized that ‘Hey,
there is a need here and hey, there is a need there’ and we slowly evolved… We looked at
our (membership) database and who did we have? We had (mainly) guys, who are IT
professionals, engineers… slightly ‘richer’ people who can afford your SLRs and your
videocams… who travel, aspire to own cars… and are starting to pick golf…”

To illustrate the critical role the online community played in shaping the new products, a member of
HWZ’s existing community elaborated on how some members contributed to Carma Online, HWZ’s
new motoring website:

“They asked us what we wanted… so we told them we wanted… consolidated price lists,
COE (certificate of entitlement) bidding results for each month…(and a) classified ads
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Web Assimilation at Hardwarezone.com EBIZ – 002

directory…Some of the more (technology-savvy) members even helped with the development
of some of these features.”

To get the new ventures off to a quick start, HWZ also leveraged its existing website and online
community as promotional tools to create awareness and a ready demand for their new products.
Advertisements and links to its new websites are placed prominently in the existing HWZ website and
discussion forums, while existing publications were bundled with the new publications to boost their
initial circulation. Members of the existing community were also invited to join the communities
created for their latest ventures in an attempt to recreate for the new ventures what the existing
community has done for HWZ.

The existing market conditions, HWZ’s latest strategic objectives, the strategies employed to achieve
the objectives, and the ways in which web technologies were used to support these strategies are
summarized in Table 3. While HWZ’s latest diversification initiative has not arrived at fruition,
results from a Nielsens/NetRatings survey conducted in 2006, the latest financial results, and
confident endorsements from its key investors indicate that the organization remains in a state of
ascension. The success of HWZ eventually attracted the attention of a number of potential investors,
and HWZ was eventually acquired by the leading media conglomerate in Singapore, on September
29th 2006 for US$4.6 million.

Market Discernable reduction in organizational mortality rates, as well as the rate and magnitude of change.
Conditions Recovery of industry parameters such as level of online advertising indicates a return to stability.
Strategic Diversify into industries that offer opportunities for using their existing resources and capabilities
Objectives of synergistically:
HWZ A systematic analysis of its existing community reveals that the majority of its members were
young, relatively affluent male professionals. Based on this profile and the feedback received,
the industries for diversification were selected.
Key Strategies 1. Launch of Carma (An online-offline motoring magazine)
Employed 2. Launch of Inside Golf (An online-offline golf magazine)
3. Launch of Jetaway (A printed travel magazine)
How web Strategic positions adopted in the new industries were identified based on the profile and
technologies expressed needs of their existing online community
facilitated the Feedback from the existing virtual community was used to determine the features and content
strategy of HWZ of the new products. Some members of the community were even involved in co-production.
Banner advertisements and links were placed prominently in the existing website to promote
the latest products. Existing IT resources and competencies were also leveraged for the new
products.
Table 3: Strategies Employed by HWZ After the Dotcom Crisis

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