Ben Koshy (ben@w3media.net)
Wed, 12 Jul 2000 10:11:52 -0700


Here's an article from the South China news:
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<snip snip>

Garrett Faber is ready to tell all about the goings-on at the ActionAce chat
board, but first he wants to know if his questioner has any Gundam model
kits for trade.
"I recently began to collect them and now I'm hooked," he wrote from his
America Online e-mail address.

Mr Faber and his friends, going by names such as Jedikranma and Krillin,
were regulars on the chat board and AceExchange, along with about 40 to 60
other fans of Japanese animation and toys.

For these users, ActionAce was a godsend, a place where they could get
hard-to-find toys and commune with like-minded folk at the same time. They
were loyal, coming to the site to read comics, chat with their friends,
trade and make the occasional purchase from the e-commerce side of the site.

Unfortunately, this was not enough to sustain ActionAce, which had a staff
of about 75 and operated from a 45,000 square-foot office/warehouse space in
Richmond, California.

The company began life as Comicplanet.com in January 1997, when Casey Lau
and John Wong decided to try selling Japanese action figures and comic books
online. Before starting the site, the pair, who were comics fans themselves,
sold issues that they bought in Asia to collectors in the US through sites
likeEbay.

In mid-1998, David Haines joined as chief executive, bringing with him
venture capital that would help the company gain a higher profile, and, at
the end of 1999, he moved most of its operations to California.

The move presumably served the dual purpose of lowering the company's
shipping costs to its North American customers and giving the company a US
address from which to launch a Nasdaq stock market listing bid sometime this
year.

Going by some measures, ActionAce had been doing quite well. A sales run
rate of about US$2 million annually, profit margins of 45 per cent or more
on many items, average site visits lasting more than 10 minutes - very
"sticky" for the Web, where people can click away anytime they like - and
good word-of-mouth from customers who liked the prices and raved about
getting their orders within a week.

And on looks alone, the site put rivals like Tokyopop.com to shame. It drew
heavy traffic, too: the site had 3.5 million to five million monthly page
views, and 50,000-100,000 unique visitors each month. So why is the site now
up for sale?

"The obvious source of trouble was, as with so many dotcom companies now, a
matter of burn rate," according to a former employee who worked on
ActionAce's "Zine" section, which created the content that kept users logged
onto the site.

"ActionAce was going through its funding faster than it was bringing in new
capital via sales or other investments. But they were by no means alone, in
that most existing e-commerce companies have the same problem, and that is
why so many are failing," he said.

An attempt to go mass-market and compete with companies like Toys R Us and
eToys by offering items such as figurines featuring characters from The
Simpsons and Star Wars also did not go over well, industry sources said.

For one thing, such toys offered far lower margins than hard-to-find
Japanese items that had not yet been officially released in the US.

According to former employees, investors turned off the tap on June 21,
forcing the company to lay off most of its staff and stop taking orders or
updating content on the site. The chat board remained functional for the
week or so, playing host to discussion threads lamenting the closure.

This week, the site reopened for business with 11 employees, including three
at the warehouse, Mr Haines, chief financial officer Steven Blair and
operations chief Eileen Kiyota.

The idea is to sell off the e-commerce side of the business and continue as
a developer of three-dimensional gaming software, according to Hanson Cheah,
managing director of ActionAce investor AsiaTech Ventures.

ActionAce's other institutional investors include Pacific Century
CyberWorks' CyberWorks Ventures and a private equity unit of ING Barings.

ActionAce had been partnering an online gaming company called 3dgroove.com
and sources indicated that ActionAce had made plans to acquire 3dgroove. Mr
Cheah declined to comment on whether ActionAce has already completed the
acquisition.

However, he pointed out that companies like Quake have done well by
licensing 3D rendering engines that allow other people to develop games.

Software margins "could potentially be huge", Mr Cheah said. "How big is
Microsoft's margin, compared to Amazon.com's margins?"

Online gaming may offer bigger margins with low overhead, but it may be just
as competitive an arena as e-commerce. Games giant Hasbro, for example, is
busy developing Games.com into a showcase for games that it owns, such as
Battleship, Scrabble, Risk and Monopoly. Any newcomers will have to compete
with the likes of the already-popular Quake and Ultima.

The two potential buyers for the toy sales part of ActionAce are both
California-based e-commerce companies, YesAsia.com and Entertainment Earth.

Whatever incarnation ActionAce takes on now, it probably will not involve
co-founders Mr Lau and Mr Wong, both of whom have reportedly left the
company. As for the fans, Jedikranma was very excited at the prospect of the
site reopening. The question is whether there are enough people like him to
sustain the business.

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