Mobile’s Billion Dollar Brand?

I keep coming across this question about if or when mobile will create it’s first billion dollar mobile Internet consumer brand.  Last month, I was on a MITX panel in Boston where an analyst from the Yankee group asked if mobile would produce one.  This week, I was supposed to participate on a panel for Rutberg & Co. (weather prevented me from making it out there) where this question was also going to be posed.

First, I’ll say that I consider a little bit of an honor that they are asking me because in some ways the question implies that MocoSpace could be one.  The short answer to that is, I sure hope so!

I think it’s funny how easily people throw out the billion dollar number.  Maybe it’s just Vermont, but where I live a billion does seem like a lot of money.  And didn’t MySpace get sold for about half that?

The long answer is that I have no reason to believe that mobile will be any less successful than radio, tv, or the Internet.  One could make a lot of arguments that it will be even more successful then them.  Personally, I think there will be a lot of successful companies that make the crossover from tv (think American Idol), the Web (Yahoo, Google, etc.), and radio (I’m sure if Howard Stern wants to do mobile, he’ll pull it off in a big way. Not to mention NPR already has a mobile site).  However, the success of those and many others doesn’t mean that pure mobile plays won’t also find success.  In Europe & Asia they already are.  In the US, we’re starting to see substantial growth driven by favorable trends that should continue to accelerate including the iphone, Verizon opening up, Android, Nokia’s N95, more economical data plans, etc.  I don’t want to say it’s going to play out exactly like the Internet did circa 1994-99, but then again if it looks like a duck, acts like a duck, and quacks like a duck….suffice it to say there are more similarities than there are differences.

So who will the billion dollar mobile companies be? Well, probably similar to the Web, I think there will be billion dollar portals, m commerce sites, and communities.  These are sites that will, like the other mediums, be able to build, engage, and down the road monetize large audiences.

So while Moco is certainly building, engaging and monetizing a large and growing audience, I don’t spend my time thinking about theoretical valuations.  I’m too busy trying to make sure the next person who signs up for Moco has a great experience…

Mobile Advertising

MocoSpace is a mobile community that is entirely supported by advertising.  While it’s still early days compared to the Web, it’s proven to be a viable business model for us.  It wasn’t always so obvious.  Back in 2005 when we started Moco, there were very few companies that enabled businesses like ours to monetize.  Today that’s changed.  Mobile advertising is definitely a hot topic with major players like Google, AOL, & Nokia moving quickly into the space. So far most of what I’ve seen is mobile versions of what’s happened on the Web, ie banner and text ads.  While the dollars are growing quickly, mobile is still a  relatively  small line item on agency budgets.  The fact that it’s on everyone’s radar is a big improvement from 2005, and I think the future gets nothing but brighter from here.

Why do I think mobile advertising works and will continue to work:

1. People like free services in exchange for ads, ie radio, tv, Internet

2. Most of the mobile ads I’ve seen are fairly relevant to the audience so whether its coupons, store locators, ringtones, etc. I think most people find them much more interesting than much of what’s on the Web.

3. Mobile phones are so personal, and surfing on them is such a focused activity that it’s a great platform for branding building.

4. Because Moco has over 1.5 million members and nobody has complained yet

Here’s a list of some of my favorite partners, and a good place to start if you are thinking about advertising or monetizing your mobile site:

1. Admob is an easy to use platform with good reach and lots of ad $$.  It supports CPC and CPM ads. Omar Hamoui (ceo & founder) is a class act as is the rest of the team.  That means you’ll get good service from them, and paid!

2. ThirdScreen, now AOL, is a bit more complicated to use, supports only CPM advertising, but the platform is very rich and lets you do and know a lot about your site, campaigns, etc.  They just got acquired by AOL, but the new team has been cool to work with.

3. Medio is another good choice.  They offer a good, easy to use platform, and have proven to be a reliable partner since as long as we’ve been doing business with them.

There are lots of other companies out there including Yahoo, Google, and Nokia.  I haven’t worked with all of them, so I can’t really recommend them yet.  Yahoo and Google will certainly be players in the space.  If you want to advertise, both Yahoo and Google have good mobile reach, but if you want to monetize your own mobile property I’d recommend giving them a few months to further refine their offerings.

Citigroup

Citi got downgraded today by Goldman Sachs from neutral to sell.  There are two things I find amazing about this.

First of all, how did Citi get into the predicament they’re in?  Between the SIVs, CDOs, MBSs, LBOs, and god only knows what acronyms I’m missing, it’s truly astounding to me that none of the guys & gals making millions thought to hedge any of their positions, increase reserves, limit their acquisitions, or generally practice anything closely resembling common sense! The word stupidity doesn’t even begin to describe the incompetence of Chuck Prince and his team.  Now, I’m no banker, or in Chuck’s case lawyer, but rather just a middle school teacher turned entrepreneur/investor.  Yet even I know that lending people $500k to buy a 1 bedroom winter vacation condo in Miami with nothing but their word that they can afford the interest only mortgage is not really a good idea.  Furthermore, I know that if I do loan them that money for their 2nd or maybe 3rd home (I once heard one of these real estate gurus on CNBC tell a middle class woman she should buy a few condos in different markets to “diversify” her portfolio!) I want to sell that loan off and have no recourse for it.  Maybe it requires a law degree or an MBA (neither of which I have) to understand how being on the hook for billions of $$ of securities backed by no doc loans, subprime arms, and the like is consistent with creating shareholder value, good risk management practice and the like.  Personally, I think a bit of common sense and responsibility would’ve gotten them much farther.  Seriously, you would really have to try, and try hard to create the mess Prince has left behind.  He thinks he was doing the “honorable”  thing to do by resigning.  How about a public letter of apology to all the shareholders, and retirees who depend on Citi’s, now in danger, dividend to make ends meet? How about donating the $40 million exit pkg? Nah, instead he does the honorable thing, resigns, and heads off to lunch at Tavern on the Green. It’s a wonderful life!

Second, as if the Citi debacle isn’t enough to make me think maybe I could run a small international bank, but Goldman comes along after Citi’s shares have dropped from over $50 to the low $30’s and tells us all we should sell Citi with a 12 month target of $33/share, essentially the price it’s been trading at for weeks.  With analysts like that who needs enemies?! Where was this analysis when the shares were at $50? Does this mean I too can be an analyst at one of the most revered firms in the world? Let me give it a shot.  MocoSpace founder & mobile Internet entrepreneur Justin Siegel has issued a neutral/hold rating on shares of Microsoft with a 12 month price target of $34 per share.  Wait, let me check….holy cow I’m good.  Microsoft closed at $33.96 today!

Here’s the good news for Citi, Goldman, and shareholders:

For shareholders – I think Citi is probably a pretty good buy if you are willing to hold it for at least 5 years.

For Citi – I know you probably wanted Thain, but for the right pkg I could be gotten.

For Goldman – Though I’m gainfully employed, a little wining and dining could get you a foot in the door because unlike Mark McGoldrick the first $70 million gets me and I’ll even sign a non compete!

Under The Radar

This week I attended and presented at the Under The Radar conference at Microsoft’s campus in San Jose. I saw some very cool presentations by Jangl (social voice), Hovr (mobile games), and Frengo (mobile widgets). I also had the very cool opportunity to meet Marc Andreessen (yes, the Netscape guy now chairman of Ning ) He seems like a very nice guy, and someone whose brain would be fun to pick.

For some reason MocoSpace was considered a graduate circle company. I guess because we’ve already raised some financing, and have traction in the mobile community space. So unlike most of the other companies, I didn’t get grilled by VC’s after my presentation, which is sort of a shame since I would have been curious to hear their feedback. Well maybe not.

In general, the feedback given to presenting companies was good, but not unexpected, ie “don’t try to be all things to all people”, “you’re too early”, “i don’t think it’s a big enough market” etc. etc. It’s not that VC’s aren’t smart, they are, but just because they are smart doesn’t mean they are right. Some of the people in the audience probably passed on Google way back when, as well as helped drive Friendster into the ground though I’m happy to see them make a bit of comeback.

If you are a technology startup looking for funding, you should give Under The Radar a shot. They do a nice job organizing the event with good food, drinks, and a solid crowd. Plus, my sense was that the VC’s there were serious about looking for companies to fund. A few tips for pitching:

1. One guy I saw pitch was argumentative, arrogant, and rude. Let the VCs have those qualities, but they aren’t likely to get you far with them. Be respectful, a good listener, and all the other things your mom taught you to be around people with hundreds of millions of dollars at their disposal!

2. Be able to summarize your company’s goal in 2 sentences or less. If people can’t figure it out in the first few seconds, then chances are they’re going to check their blackberries until the next company comes up to pitch.

3. It’s ok to say “I don’t know” especially when you don’t!

4. Demo, demo, demo – Demos are worth a thousand words, and they demonstrate bravery since they ALWAYS fail when you need them to.

5. Keep your presentation short & simple. Focus on 3 areas. First, the team. Who are they investing in. Second, the market opportunity. Social networking, microwaveable popcorn, buggywhips, etc. In other words, what’s the market opportunity. Third, what’s the product. Why will your product work, matter, etc.

6. Don’t pitch. I think way too many people think they need to raise money to start their business. The longer you can go without taking money, the better off you’ll be in many cases. If you want to build an oil refinery (btw – we need a few new ones), then you need money before breaking ground, but if you want to build a consumer Internet site you can probably get pretty far along without taking money.