Taking The Plunge
How do you get people to pay for a Web browser? Opera Software CEO Jon von Tetzchner found the answer by diving into wireless.
(Business 2.0) - Jon von Tetzchner, chief executive officer and co-founder of Oslo-based Opera Software, is accustomed to people snickering about his grand aspirations. So he didn't mind drumming up some publicity by making a laughable promise: Tetzchner vowed to swim from Norway to America if a million copies of the company's Web browser were downloaded in four days.
But here's the really funny part: Pretty soon Tetzchner was in the icy waters of the Norwegian Sea, valiantly plowing westward. He didn't make it all the way to America, but he and Opera have been making a splash nonetheless. In April customers downloaded 2 million copies of the browser that Opera proclaims is the "fastest on Earth," and the pace has hardly slackened since. In total, more than 100 million copies of the Opera browser have been distributed over the years. Impressively, a fair number of those customers actually paid for the privilege. In an era when every browser of note--from newbies like Firefox to old warhorses like Microsoft Internet Explorer--is given away for free, Opera has created a unique approach that allows it to make money from its product while innovating with cutting-edge features like support for BitTorrent file sharing.
It's a neat trick--but not Tetzchner's most lucrative one. Opera began selling browsers for non-PC devices like cell phones and set-top boxes in 2002. Now, with the explosion in mobile computing, its business has really taken flight: The company's revenue more than doubled last year to $28.2 million, and profit rose 40-fold to $9.4 million (a result helped by the settlement of a lawsuit against Microsoft). Opera had a modest loss for the first quarter of 2005, but it expects full-year growth in both revenue and profit. The company's stock, traded on the Oslo Stock Exchange, is up more than 19 percent over the past 12 months. Business 2.0 caught up with Tetzchner--safely back on dry land--to ask him about the secret of Opera's success, where the company is headed, and how it feels to be the one doing most of the laughing these days.
You've surprised people by getting customers to pay for something that's normally free. How do you manage that?
This is a choice people make. Some people choose to use the free version of Opera, which runs banner ads. If you pay for the browser, you don't get ads. But when we asked people why they've chosen to pay, the No. 1 reason is that they want to contribute to the Opera community. They really like the product, and they want to contribute to its continued success. And if you think about it, Internet Explorer is not really free. Microsoft first included it and later increased the price of Windows. Consumers are paying for a product they do not particularly want. That's quite visible in the number of people who are switching browsers even though they've been forced to pay more for Windows to get Internet Explorer.
How many of your customers use Opera for free, and how many pay?
About 100,000 choose to pay for Opera each year, paying about $39 per copy. So that's one revenue stream. But only about a third of our revenue comes from our desktop business. On the desktop side, I'd guess we have between 10 million and 15 million active Opera users. On the non-PC side, we sold 200,000 copies of the browser in 2002, 2 million in 2003, and 8.8 million in 2004. We are expecting even higher numbers in 2005. That's where the bulk of our revenue is coming from, and where we expect a lot of growth.
That's not much, given that Firefox has seen 67 million downloads in its first year and now claims more than 8 percent of the desktop market, while you're stuck at 1 percent.
People have been laughing at us for a long time. We have been there from the days of Mosaic. When Netscape came along, people thought it was all over for us. Then there was Microsoft. So we are used to it. Firefox is getting a lot of publicity, but our business hasn't stopped growing. We've grown 30 percent every year, just on the desktop, for nearly 10 years. We've grown from two employees to more than 200. To me, that's pretty good.
Do the security problems with Internet Explorer help you?
In the PC market, people are looking for an alternative. I think Microsoft made a big mistake by integrating the browser into Windows, and it's haunting them right now. I'm pretty confident of our future on the desktop.
Still, the desktop seems so old-school. Shouldn't you be focusing all your energies on mobile and non-PC devices?
The mobile market is progressing as we said it would. We knew that the WAP browsers in most phones wouldn't work out; they don't even let you see a webpage on your phone. We knew that phone makers would want a full Web-compatible browser on their handsets. We started working on this in 1998. Today our browser works in most midrange to high-end phones. We can easily adapt them to any mobile platform. We even have a browser for Microsoft smartphones. It's better than Microsoft's own mobile browser.
Do people really want to surf the Web on a tiny screen?
You'd be surprised. People use a browser on a PC, and when you have an Opera browser on a phone, you suddenly see the data usage on the phone go up. So people do use it to surf. We are now working with carriers like Vodafone and NTT DoCoMo. Their phones open up to a custom screen, which is nothing but a special webpage running on Opera.
Nokia, a big customer of yours, recently started working on an open-source browser with Apple. Are you concerned?
Nokia clearly is afraid to be dependent on a relatively small company like us. They want more browser choices. They've picked a good browser technology, but making a browser for phones is not a trivial task. It's taken us a long time--seven years. Nokia made a similar announcement a year ago. They didn't make it the last time. I think it will take Nokia some time to build this browser. We already have it.
Apart from Nokia, what other major phone makers are bundling Opera--and do they pay for it?
Motorola, Sony Ericsson, Kyocera, BenQ, Casio--and we get paid for each unit shipped.
Put on a visionary hat. Where does the browser go next?
Set-top boxes and cars are two other areas we think will be big. I think any device that is connected and has a screen is an opportunity for us. In the United States, we're working with one of Paul Allen's companies, Digeo. It makes a cable set-top box called Moxi that uses our browser. The interface is based on Opera technology. Britain's NDS, a pay-TV technology maker, has deployed our boxes through Canal Satellite. Over time you will find browsers in just about any device that has a user interface--mobile phones, set-top boxes, TVs, cars, airplanes for in-flight entertainment. Browsers will be in stereos and cameras. The list goes on and on.
And now for the big question: How far did you actually get on that swim to America?
On day two we had a bit of a mishap. Eskil Sivertsen, the public relations executive who came up with the idea, was accompanying me on a raft, and the raft sprung a leak. Eskil can't swim, and so I ended up rescuing him and had to abandon the journey. Just as well. I'm not that great a swimmer anyway. And the water was really cold.To send a letter to the editor about this story, click here.