Emperor of the Internet

By FRANK GIBNEY JR.

Go online this week to buy a Christmas present, e-mail a friend or sell a stock, and chances are you are going to click on a piece of Masayoshi Son's empire. You won't know it--and you probably don't know his name--but that's O.K. by Son. Soft-spoken, quick to smile, often cloaked in a slightly rumpled golf sweater, "Masa" Son is the unlikely man who would be emperor of the Internet. He has a 300-year--yes, that's 300-year--plan to invest in so many companies on the Web that no matter what country you're in, whether you're looking for a broker or a bouquet of flowers, a car or a doctor, you'll have to enter his realm.

In a world where Microsoft is under attack for it and America Online is envied for it, size matters, and today nobody owns more real estate on the Internet than Son. His holding company, Softbank, based in Tokyo, has a stake in more e-businesses in more countries than any other cyberprospector out there. Yahoo? Softbank is the largest single investor, with 23%. PeoplePC, the $24.95-a-month service that gives you a free computer and online access, is a Softbank-affiliated company. So is online grocer Webvan, whose initial public offering three weeks ago soared 66% on Day One. So too is Global Sports, which just launched shopping sites for Athlete's Foot and a host of other sporting-goods stores. And so on, to the tune of more than $40 billion in around 130 companies (even Softbank executives have trouble counting) or by various estimates, about 10% of the companies that do business on the Web. And that was yesterday.

Son, 42, isn't some dotcom gold prospector who made a lucky bet. He is a messiah for a new commercial order based on e-capitalism. "Our 300-year plan is the long-term structure we need to fit our goals," deadpans the Netrepreneur. "Long horizons change your priorities."

Softbank's basic plan is simple: invest early and often. By buying more tickets in the e-commerce game than anyone else, the company improves its chances of winning the lottery--even if there is a massive shakeout. In effect, Citizen Son is establishing the world's first virtual conglomerate. He wants to be the patriarch of a loose but fiercely loyal network of companies that span the globe, feeding each other and starving the competition.

Son calls his empire an Internet zaibatsu. It is a reference to the pre-World War II forerunners of a corporate form better known as keiretsu, those vertically integrated manufacturing and trading cartels that gave Japan Inc. its fearsome reputation in the 1980s. Son doesn't want to own his companies outright, or to run them. He aims to gain implicit control with a 20%-to-30% stake in each and to build a web of mutual cross-investments with sales, marketing and supply ties. "I want us to be No. 1 in every area," says Son. In five years he expects the global Softbank family to grow to 780 companies.

The one--and perhaps the only--reason to believe in Son's ambitious plan is that it already seems to be working. Yahoo, E*Trade and GeoCities, among others, are not only dominant among U.S. customers but lead a long list of Softbank companies that Son and his lieutenants say account for more than 90% of all Internet commerce in Japan. As the world's second largest economy has caught on to the power of the Net in the past year, Softbank's stock, which is traded on the Tokyo exchange, has soared. The company's market capitalization is a stunning $79 billion, which puts it ahead of Sony. Softbank has also landed in Europe, establishing joint ventures with Vivendi in France and News Corp. in Britain. Rupert Murdoch is one of Son's growing legion of high-flying fans.

Son's grand vision of the world's Internet future has been gestating since he was a very determined little boy in Kyushu, Japan. Born of Korean heritage in a place with little tolerance of foreigners (particularly Koreans), Son has fought the battles of an outsider all his life. He bore the boyhood name-calling stoically and tried to toughen himself physically by inserting weights in his shoes to strengthen his legs (the better to play soccer). He left for the U.S. when still in high school, graduated from the University of California, Berkeley with an economics degree and, upon his return to Japan, insisted on using his Korean surname, Son, instead of Yasumoto, the Japanese name his parents had taken.

By 1980, he had made his first million by selling a design for an electronic translator to Sharp Corp. He was so absorbed in the process that he forgot to wheel his Porsche over to Berkeley city hall for his own wedding. He founded Softbank Corp. in Tokyo in 1981. Legend has it that after he stood atop a crate and ranted about the company's future domination of the PC industry, his first two employees quit on the spot. Despite that vote of no confidence, Softbank went on to become Japan's leading software distributor by far.

Still, it wasn't until after he signed a deal to represent hardware maker Cisco Systems in Japan in 1993 that Son's grand Internet vision began to fall into place. "When you have the railroad being laid, you can see the train, you start to imagine the passengers, and you know there will be department stores going up around the station," he says in the midst of one of his characteristic soliloquies. "I had a feeling this was going to be big."

Always the outsider, Son didn't have much of a Silicon Valley Rolodex in 1995, when he returned to the States. But he did have nearly a billion dollars to spend, money practically handed to him by Japanese bankers desperate to breathe life into their country's sagging economy. Son lured a couple of Silicon Valley veterans to run Softbank Technology Ventures, the San Jose partnership that has become the heart of his Internet empire. And so the shopping spree began, as Softbank scooped up the trade-show group that organizes Comdex, the computer industry's biggest convention, and Kingston Technology, a memory-board maker. Son bought all of Ziff-Davis Publishing and its television and Internet assets for $3.2 billion, a price considered at the time a few degrees north of insane.

Since then, it is as if Son & Co. trained a fire hose on Silicon Valley and pumped in a steady stream of cash. President Gary Rieschel figures that in 1996, with Softbank Technology Ventures still an unknown in the valley, it invested $200 million in 55 companies in four months-- although "investing" hardly describes the act of writing checks as fast as you can. Last month Softbank opened Hotbank, an incubator for start-ups. There has been no need to advertise. Each week hundreds of applications pour into Hotbank; out come announcements of new Softbank allies: PeoplePC, Webvan, Global Sports, InsWeb, WebMD.

Son's strategy is putting pressure on the competition. Traditional venture-capital outfits like Kleiner Perkins and powerful newcomers such as David Weatherell's CMGI have been assembling their own Internet conglomerates. Now they may have to do battle with Softbank. "These keiretsu are going to face off like football teams," says Howard Anderson, founder of consultants the Yankee Group. Yahoo competes with Lycos, which CMGI covets, and Kleiner Perkins' WebGrocer will be up against Softbank's Webvan, another online supermarket based in California.

Softbank's rivals can take some solace in knowing that Son's mistakes have been spectacular. He wasted billions of dollars on Ziff-Davis, which he is trying to sell off piece by piece. He sold Kingston at a loss, and some of his start-ups, as start-ups are wont to do, went south. Son would say these failures are the price of admission. If you don't play, you can't win.

The real question is whether an impulsive entrepreneur like Son can actually manage this empire. Softbank's U.S. chief executive, Ron Fisher, is struggling to staff the U.S.-based venture business, hiring analysts, consultants and even a public relations staff. But some of its clients complain that unless they fly as high as Yahoo, they don't get enough attention. "We are not at the stage we want to be," admits Fisher.

Even so, the scale of Softbank's ambitions could transform e-commerce. In a world where every company, every billionaire with spare change, is forming an Internet investment arm, the competition for start-up dollars is shifting into a battle over who gets to invest in the next hot company. Son's premise is simple: there may be a litter of online pet-supply stores today, but only the best will survive.

Perhaps to remind himself how tough a world lies ahead, Son practices his golf game at home, on an electronic range that reproduces the toughest competitive conditions, including wind and rain. Anything to be No. 1.

--With reporting by Michael Krantz/San Francisco and Donald MacIntyre/Tokyo

With reporting by Michael Krantz/San Francisco and Donald MacIntyre/Tokyo