New Kids on the Technology Super Block

LAS VEGAS, Jan. 10, 2006 — -- The 2006 Consumer Electronic Show saw the release of thousands of new products. Some were innovative and earned needed attention while others had trouble making a splash. A small-time player's odds of getting noticed were not great. With 2,500 vendors and only four days, the 6,000 members of the media had to make some tough decisions on what technologies to focus on.

Multibillion-dollar, multinational companies like Samsung could afford to drape the exterior of the convention center with their logo. Motorola, Verizon, and high-end cable supplier Monster Inc. invited guests to rock concerts by the Foo Fighters, Maroon 5 and Stevie Wonder at posh Las Vegas nightclubs.

The truth: Unless you had the marketing bucks of the established players, it was difficult to get noticed even if you had an innovative product.

Enter H20 Audio, a company founded by three friends who met at business school at San Diego State University. The three had a passion for surfing, and a couple of them had a background in engineering. The portable MP3 players were the hit of the season, and they decided to build a clear, waterproof housing and headphone combination to protect their music, and it won them their MBA business competition.

Kristian Rauhala (CEO), Carl Pettersen (VP engineering), and Rany Polany (chief of operations) have since sunk $1 million and three years of their lives trying to develop a product that would allow consumers everywhere to combine their passions for music and sport. Their first product was ready for sale at $150 in November of 2004.

"The waterproof housing was not the most difficult part," Pettersen said. "We wanted to make waterproof headphones that sounded great."

This was their first Consumer Electronic Show, and they figured they spent $10,000 on their exhibit, $10,000 on travel and entertainment to Las Vegas, $5,000 for advertising materials, and $6,000 for various publicity costs that came up along the way.

About $3,000 of that cost was set aside to participate in one of several events put on by organizers that were attended exclusively by the media off site from the convention. It was a way to get 50 to 100 new products in a single room and get the media to look at your product with less competition for their attention. An open bar and hors d'oeuvres didn't hurt attendance either.

Team H2O broke even this past summer with tens of thousands of products sold, but as the product line grew along with national distribution partnerships and additional research and development costs, so did its debt. After a good showing at CES, the group hoped to be back in the black at the end of the first quarter of 2006.

During the show, they received some TV and newspaper coverage and -- even more importantly -- some store orders purchased right on the show floor. The innovative submersion display the group had come up with to show their product ended up being stolen as the show was wrapping up. Sometimes for a new company it's two steps forward and one step back.

And if the 1.67 million square feet of convention floor space wasn't enough for attendees, the parking lot in front contained a fully operational concept home to introduce central control and automation.

More than 40,000 attendees passed through the home, experiencing different technologies at play in each room while being maintained by a central server and activated by wall-mounted touch-screen displays. The mood of the house changed instantly when you entered and selected morning or evening from the main menu. Music was selected, lights dimmed, and digital artwork was displayed in the dining room. In the kitchen, there was a sink that could be told when to turn on the water.

Mike Seamons, vice president of marketing for Exceptional Innovation, a partner with Microsoft and Hewlett-Packard, and involved in designing the home, explained the concept. "Entertainment, security, lighting and climate can all be controlled with the touch of a button."

Seamons stressed that the draw of the home was that the technologies featured were all currently on the market. "The home is about showing people what they can go out and buy today, not five years from now. It's about exploring how technology can cater to vastly different lifestyles -- from the working mom, to the college student, to the retiree -- and it brings all these experiences together under one roof."

Just two miles down the road from the convention center, but worlds away in a $1,400-a-night penthouse suite atop the ritzy Bellagio Hotel and Casino, was where the real work at CES got done. ABC News was given unprecedented access to a partner meeting between Tele Atlas, the world's premier miner and distributor of global positioning system data with annual revenues of $150 million, and Car Point, one of Korea's top three GPS device producers with sales in 25 countries and an estimated revenue of $10 million a month and growing.

Tele Atlas sells mapping data along with points of interest to companies like Tom Tom or Mapquest, so that end users are able to find their way around town with the help of the latest technologies. The company was founded in Belgium, and this year it decided to make a marketing push for some brand recognition in the United States. Tele Atlas bought advertising space in the airport and sponsored free Internet kiosks for conference attendees. While staffers were busy promoting its brand identity and marketing executives were busy riding around in the orange data collection van showing the media how the data was constantly being updated, the true negotiating and partnerships were being ironed out hour after hour in the penthouse suite that was reserved a full six months ago for this purpose.

Few attendees know there is more to the show than the release of the latest high-tech gadgetry. The truth is that wining and dining and deal-making meetings are what the conference is all about.

"We have 10 to 15 account executives in meetings all day from 7 a.m. breakfast until 10 p.m. dinner," said Margot Carlson Delogne, Tele Atlas' vice president of global communications. "This is our most busy week of the year. If we were in our Boston office, we would have three or four meetings a week. Here we have big meetings all day long. Every top executive is at CES, and it's a great venue to pack it all in."

Today's meeting took place after the four executives from Car Point flew 15 hours from Seoul, South Korea, to iron out the final details of the agreement with Tele Atlas and to discuss plans to grow their GPS device market share in Europe and the United States. Tele Atlas has partnered with a variety of device makers, giving them the ability to offer an added service besides selling data.

With growing choice in the marketplace and added features like points of interest and real-time weather and traffic updates, Tele Atlas and its partners only see room for growth even if they are all competing in the same marketplace. Delogne explained it this way: "A lot of the work we have been doing recently is providing support for our partners to grow. We have a lot of partners, and there is a competitive cooperation to build the GPS category."