Mobile Content Retailing - Not As Easy As It Looks - Part 2
Last week, I explained some of the complexities within the mobile content retailing market. This week we’ll hear senior execs from Thumbplay, 9Squared/Zed and Flycell talk about what it’s like to play in this space.
Are Traasdahl is the CEO of Thumbplay, the largest direct-to-consumer player in the U.S. An independent company with 100 employees based in New York, Thumbplay is projected to own about 18% of the U.S. off-portal market. The company recently raised $18 million in venture capital to expand operations.
Brian Casazza is CEO of 9Squared, a part of Zed, the leading mobile content retailer in the world with over $500 million in gross revenue annually. Zed has 40 million consumers around the globe who buy on a monthly basis. 9Squared announced earlier this month that they would formally combine operations with Zed.
Guillermo Cengotitabengoa is the VP Marketing for Flycell, a wholly-owned subsidiary of Italian mobile-messaging pioneer Acotel Group. Launched in November of 2004, Flycell provides a broad range of premium mobile content products, including ringtones, games, mobile greeting cards and wallpapers that empower mobile users to customize their phones and make them an extension of their personalities.
I asked each of them about the state of the market, how the regulations were affecting their businesses and what they could do to build brand and grow their businesses.
ON THE CURRENT STATE OF THE MARKET
Traasdahl:
The consumer is maturing and better understands what the offer is. They start with ringtones, then graduate to games, wallpaper, video, etc. Music is the way to get them into the service.
Casazza:
U.S. operators are trying create value, to avoid spam-meisters who can put up a business one day and walk away leaving the carrier with a big problem. But the carrier won’t get the kind of growth and data revenues they want unless they partner with the right folks and give them freedom to build a lot of value to do that efficiently.
Cengotitabengoa:
It used to be that people only wanted music. Music is still the top seller for us — realtones. We have deals with the major labels and can provide the latest music … and a lot of people do want that. Games selection is getting better; there’s more compatibility with handsets and more people are downloading. Text alerts have always been good. We launched real-time sports alerts; those are doing well.
ON REGULATION
Traasdahl:
We are excited every time new rules come out. The more regulation and rules, the better for the industry. It evens the playing field. The ones who are concerned with bringing a good customer experience, double confirm on opt-in, always price front and center in every text message that goes out … those companies are pulling further away.
Casazza:
Self-regulation has been good for the industry, but the implementation has been a problem in terms of really being effective and efficient in deploying products and services. There has been a stifling of how fast those Premium SMS revenues can grow, based on content providers not having a clear or standardized path to market.
Cengotitabengoa:
The good News is that rules exist. Three years ago, there were no rules. Companies were signing people up for double packages. Our philosophy is for long term. Regulations were needed to control parties to make sure it didn’t hurt the market.
ON GROWING THEIR BRAND AND COMPANIES
Traasdahl:
In the product area we are taking music to the next level, to full-track downloads. Think about this: Nokia is the biggest manufacturer of mp3 players, not Apple. We’ve also seen some incredible growth in one- to two-minute downloaded videos, so we are bullish on the growth here.
We are focused on making the customer experience as good as it can be. We just launched a vertical search SMS product. Add an artist name to the word “Get,” such as “GET U2,” text it to our short code and we push a link back bringing the consumer directly to the WAP page with the specific content.
Casazza:
85% of the content from Zed is content we’ve developed internally — games, community tools, music, social networking, messaging — and because of that we are able to continually turbocharge our club by routinely developing this stuff and putting it into the system.
Now we’re taking this legacy and heritage, and plugging that together with what 9squared has done in terms of licensing major content, and working directly with carriers to distribute that content in a meaningful way. Finding this balance between internally developed, user-generated and branded/premium content is one of the areas of focus that is exciting.
Cengotitabengoa:
You have 400 million people here in the U.S., and it’s a newer market. Phone penetration has gone up, people are buying a lot of handsets and people are spending here unlike other countries. If you are a global player, you can’t avoid the U.S. Will it be tougher than three years ago? Most definitely.
Private-label partnerships like we’ve done with Island Def Jam is a growth area. There are plenty of companies in the U.S. who want to get in to the mobile space. Many of them don’t have the knowledge internally, or don’t want to do it themselves. Many companies haven’t done anything mobile yet; B2B is something we can do well in this market.
CONCLUSIONS
Overall, the sentiment is that this market isn’t easy. Success hinges on the ability to differentiate. Exclusive content is a key part of how to build differentiation. It is also going to take identification of new products that will drive into the mainstream. It’s definitely something that is going to happen quickly over the next year or so.
As the phone becomes more of an Internet device, these companies start to compete with the big Internet players and brands that will just start to customize their offering for the mobile phone. The iPhone is a wake-up call for that. There is a small window which these companies and others will have to carve a niche out as a premier mobile brand. I wish them the best of luck.
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