History on the Finnish Digital Media
== The pioneering years (end of 1980s – mid 1990s) ==
The Finnish digital media industry has its roots in the CD-ROM production and computer-based learning companies formed in late 1980s and early 1990s. One of the key centres of development was the Tampere University Hypermedia Laboratory (formed in 1992). Through quality training and piloting projects several industry pioneers became inspired to start their private enterprises to start operating in the emerging field of digital solution production, such as Tietovalta, Sansibar and Works.
Other key centres that had a major impact to the early digital industry development in Finland were the University of Design and Arts/Helsinki and Helsinki University of Technology. Companies that emerged from this substance were e.g. Everscreen MediaTeam and To The Point. The business in the early years was characterised by non-stabilised technology, hobbyism, CD-ROM production, communications solutions and minor turnover and business impact of the production. For the analysis purposes it is important to understand the many of these original pioneers are still actively participant in the industry and carry potentially the broadest substance understanding of digital media interaction.
== Hypergrowth and rapid internationalisation (1996 – 2000) ==
The dramatic change of the industry started by the need for the graphical online solutions – the Internet. For the pioneering companies the very limited transmission and storage as well as screen interaction capabilities did not attract the pioneering companies to rush into this new field. Yet, several newcomers entered the field of online communications in the period from 1994 to 1997. These included companies such as Mindworks, Nedecon, Netmill, Terranova, Interweb Design, Verkkojulkaisut and Key Partners . These companies had very ambitious business goals to start expanding their business and also initial considerations of the business impact of the e-business possibilities. Yet, the first company that took the full advantage of booming online business was Interaktiivinen Satama (later Satama Interactive ).
[[Satama Interactive]] was formed as a merger of the three small digital media agencies (incl. Interweb Design) and the digital media unit a Finnish media company, Talentum . Investments to the company by the key owners (Talentum and venture capitalist CapMan ) were larger than to any professional business service start-up before in the Finnish economic history (~10 million euros). Satama set its targets very high – to obtain a leading international position in the digital service business and getting listed to a stock exchange as soon as possible. This establishment started a rapid boom of international expansion and was constantly linked to the rapid development of so-called “dotcom”-companies and “the internet bubble”. A more detailed description of selected case companies is presented in the end of this section.
Multiple Finnish digital media companies grew and expanded their customer portfolio. Their customers, Finnish corporations, all wanted to produce their own “internet pages” and the emergent service companies filled the gap. The markets were for a while suppliers’ – there existed a shortage of professionals being able to master the HTML-based production as well as the possibilities and capabilities of the “new media”. Aggregate turnover of the companies grew 50-100%/year and strong optimism prevailed among the companies. In addition, venture a capital flood into industry and thus several international operations were started with both greenfield investments and international acquisitions. Several Finnish companies were also acquired for larger foreign service companies, such as Icon Medialab (Works), Razorfish (Spray Finland) and Adcore (Netmill).
In addition to digital solutions and dotcom-companies, the Finnish digital media boom was characterised by mobile solutions . The success of Nokia attracted venture capital to several Finnish start-ups and the buzz around the “mobile revolution” overdid even the most optimistic digital solution providers. Expectations for rapid adaptation of mobile technology and m-commerce solutions lead investors to take large risks in their mobile technology investments. Yet, the telecom operators Europe-wide took the highest risks in their participation to the auctions for 3G-technology licences.
== The crash and rationalisation efforts (mid 2000-2003) ==
The Internet hype peaked in early 2000, when Internet business-related companies worldwide were valued in many cased to possess more assets than traditional giant such as airlines, media companies and manufacturing firms. In Finland, the high valuation was illustrated in practice when Satama Interactive listed in the Helsinki Stock Exchange in March 2000. It was for a very short moment valued higher than e.g. the Finnish leading airline, Finnair . Moreover, in 2000 a Spanish mobile telecom operator, Terra Mobile , purchased a Finnish mobile start-up, IoBox, with more close to 220 million euros . Consequently, there was only one option to come – the financial bubble had to burst.
The stock market crash started during summer 2000. Market values of ICT related companies dropped rapidly 70-90 % of their highest value. The trend was global and naturally affected the market valuations of the Finnish companies, too. Digital media companies built on risk-taking and growth-focused strategies had to rapidly start changing their focus into more cost-efficient operation modes. But the cautious customers of digital media companies created the real impact – business benefits were being sought, it was no longer “hip to be online”. The companies that were purely communications focused experienced a dramatic drop of nearly 60 % of their turnover due to this purchasing habit change.
The downward trend was intensified by the disappointing launch of interactive mobile services (WAP-services). Hence, the worsening situation lead to major cuts in personnel and even dramatic bankcrupties of several key actors in the markets. For example, Razorfish Finland and Adcore Finland withdrew totally from their Finnish operations and the units filed bankcrupty in 2001.
== Efficient and profitable future? ==
Although, the markets are no longer in hypergrowth phase, it is important to notice that digital services have formed a sound position in the current business environment. Companies and consumers use them still on increasing pace and the technological adaptation and development of digital solutions are still at the early phases on development. The economic downturn was bound to happen as in any emerging industry. The entrepreneurs of Finnish digital media industry are expecting a small positive change by 2005 and possible from there on a more steady growth. The following sub-chapter will focus on more detail in the current market situation.