No Israeli company ever touched the heart of the Internet as much as Mirabilis. No other Israeli company could get so many people angry at the same time. No other Israeli company was ever acquired because of its share in the mass market of ordinary users all over the world. No other success story showed other Israeli entrepreneurs so clearly how much they had missed.
First the more than 11 million users of Mirabilis’s ICQ. They are furious. The reactions to the proposed sale of Mirabilis to AOL for $300 million are overwhelmingly negative. Loyal users of ICQ, software that allows users to communicate with friends who happen to be online at the same time, filed short, pained messages to Globes Arena and dozens of other sites all over cyberspace expressing their dismay, anger and disgust. As far as they were concerned, ICQ, was everything that was wonderful about the Internet, because its allowed people to be in touch with their friends. AOL, according to these messages, is everything that tries to make a buck out of the same desire.
Some users said they planned to desert ICQ and move over to similar technologies such as Pow-Wow. Others were worried that they would have to join AOL to keep using ICQ. Many found the news "simply depressing," and hoped the deal would not go through. All of this raises interesting questions about the fine print in the Mirabilis-AOL deal, which nobody except for the principals has actually seen yet. If indeed people start deserting ICQ for competing technologies, will this affect the price? Today? Later on?
Let’s go back in time to the mythical ping pong game which did or did not take place after Sefi Visiger, Yair Goldfinger, Arik Vardi and Arnon Amir, the four young founders, finished work at Zapa Digital Arts. According to local legend the four young technologists were angry because Zapa had just received an injection of capital and they were offered far less stock options than they thought was their due. While playing ping pong, according to the myth, they decided to set up their own operation. At the time the ‘net was just starting to hum with a new (and by now ancient) buzzword: communities. ICQ is essentially an enabling tool for virtual communities. It was not even meant to be their main product – just something that was technically fairly simple and would tide them on till they started to develop their real products. The reaction was so overwhelmingly positive that the "real product" quickly fell by the wayside. On the technology and investment grapevine, people were at first amazed at the numbers, and then taken aback by a singular lack of revenue in the Mirabilis operation. Word went out that they were going through business models like disposable diapers.
In hindsight, the basic decision not to charge money for the software, or accept advertising on the Mirabilis Website, or sell banner ads in the Mirabilis messaging technology, seems incredibly smart. The numbers built up at a crazy rate that reached 56,000 downloads a day. It was smart, because these numbers were achieved thanks to the fact that the tool was free and appeared free of intrusive commercial considerations.
All of this raises interesting ethical and legal questions. Can you sell a virtual community? Or in Mirabilis’s case a community of communities? What’s actually being sold? A customer base? Loyalty? In other words, is the web of connections created by individuals for their own reasons something that can be sold by the company that provides the tools to make these connections? AOL seems to think that one can buy this web. But this is neither a product nor a service. It’s something essentially new in the world of commerce.
The disappointed users of ICQ did not question the idea that the personal connections between them were for sale. Some might choose to use other tools, but the majority will probably complain but stay on. The point about the Mirabilis deal is that an Israeli company is in the process of being acquired for a vast sum of money not because it has a better technological tool, but because it reached the mass market ahead of any other American competitor.
Ubique, an Israeli company that AOL just sold last week to IBM, reportedly helped AOL develop its buddy system of peer to peer communication similar to ICQ. It was sold to IBM’s Lotus division, which is all about peer to peer and other collaborative work systems. When AOL bought Ubique back in 1995, Ubique’s claim to fame was an avatar technology that was also, at the time, seen as a useful tool to build virtual communities. But Ubique was bought for $14 million, as compared to the $300 million paid for Mirabilis, because the tool is far less important than the market.
Mirabilis is not about luck. The founders might have stumbled on ICQ, but once they had created this "in-between" product they realized that the cash would come later. Unlike other Israeli Internet entrepreneurs, the founders realized that their future was not as tool makers. There was also no need to create an expensive marketing mechanism for ICQ with high powered American executives. They realized that the Internet is an essentially different market with different rules, and that they could be as big as they liked.
Other Israeli Internet companies that started life way before Mirabilis are still in the tool making phase, which is fine, but has its own savage irony, because tools makers have to try to anticipate what people might want in the future rather than satisfy them right now.
Published by Israel's Business Arena on May 24, 1998