Jump, Tap, Exit. (Jumptap & Millennial)

by Gary Schwartz (14/08/2013)

Jumptap may be the last man standing of the incumbent mobile ad networks to have their exit. The acquisition by Millennial Media, its erstwhile competitor, in a predominantly stock transaction, may not be the glory finish that many had hoped.   What does consolidation mean to the mobile ad world?

Good things . . . in the long term.

Grooming a network

George Bell came on as the new Jumptap CEO in 2010 to ostensibly position the company for an exit.  Bell was the ideal candidate coming from General Catalyst and being an accomplish network deal maker. Back in 1996, Bell took Excite network public.  Apart from a few digital faux pas such as turning down the then two-year-old startup Google offer of $750,000 for their search engine, the Excite network continued to grow with impressive revenues through 1998.

Over the past two years, under Bell’s leadership Jumptap has grown its position in the crowded media market establishing global partnership into markets in Asia and vied for the budgets of digital agencies, direct response and brand advertisers and the inventory of publishers globally. And mobile budgets have grown for all mobile ad network stakeholders.

In Jumptap’s M&A prep this year, the company took in a $27.5 raise from WPP, Keating Capital and General Catalyst topping their raise to date at $121.5 million. A significant number. Key was Jumptap’s decision to bring on board John Hadl a mobile media veteran and rainmaker who advised Millennial Media, Admob and Quattro Wireless.

2013 was its make or break year.

Patents alone

On patents alone, Jumptap should hold significant market value. After the first patent was issued in June 2009, Jumptap has received 52 patents; at an impressive IP quota of one monthly. It has many more published patent applications in the pipe.

George Bell, has advocated from day one for IP differentiation and has continually stated that patents underscore the company’s commitment to ad targeting and smart ad solutions. The company holds a good spread of patents from ad targeting, coupon selection, bid optimization (realtime bidding) and the management of third-party data.

Augme Technology’s (a mobile media company) lawsuit against Millennial Media over ad targeting last year, patent mud-slinging seemed to be the first indication of a mobile ad war.

The Millennial Media acquisition may not vindicate the hard work and positioning on patents and network growth and may speak more to the general mobile ad market ennui.

Ups and Downs

The mega valuations that Admob and Quattro Wireless commanded from Google and Apple respectively four years ago soon rang hollow after Apple shelved Quattro’s platform and mobile ad sales showed halting growth.  It seemed that the online leviathans were just building a mobile ad network and waiting. Mobile buying remained challenging – there was not the scale and simplicity that is required to attract media dollars.

Then last year the market began to heat up with cool results: InMobi received strategic investment from Softbank,  Opera purchased AdMarvel  and Millennial Media, after trying for a Quattro-like exit, opted for an IPO which was surprisingly successful.

Markets results remained challenging. Velti and Augme, both of which had transitioned their business to mobile advertising away from their traditional higher margin mobile marketing business, showed slowing growth.

Of the ad networks, Millennial Media was the closest to turning a profit and generating consistent positive operating cash flow. Now with its expanded holdings what should the network focus on to grow?

“Cross Screen”

There is an oft-quoted line in technology that many are over optimistic in the short term and overly pessimistic about the long term.

In the short term mobile revenues will grow slowly and organically as budgets move into digital. However, in the long-term there is tremendous opportunity to accelerate these budgets if we can manage to simplify the mobile buy across all digital touch points.

Jumptap’s Unified Audience Exchange and their previous partnership with 24/7 (which has credibility on the PC side) was a sign of a multiscreen ad strategy. Networks like Jumptap and TapAd had begun touting the importance of a cross-channel ad buy.  Paul Palmieri, Millennial Media’s founder and CEO mentioned Jumptap’s expertise in cross-screen media a key asset to their network.

Brands want to follow their consumer across their many interactive screens. Google, Facebook and Pandora have made their mobile offering increasingly advertiser-friendly. Larry Page on his quarter call last month said that Google wants “ to make advertising super simple for customers. Online advertising had developed in very device specific ways with separate campaigns for desktop and mobile. This made arduous work for advertisers and agencies, and meant mobile opportunities often got missed.”

Digital consumer engagement has become a top priority for advertisers and publishers. There is a trend to make mobile advertising easier to buy. Online, mobile and offline media need to be seamlessly connected. Targeting across multiple screens (not just mobile) is essential for brands drive conversion and path-to-purchase.

Millennial will need to navigate through a rash of nimble new start ups in the space (App Nexus, Adelphic, Native, Nextage, Media Math). Consolidation, simplification and cross-screen budgets will help Millennial but it will be difficult for this public company to pivot.

From Singapore to Moscow: Is OPEN a four-letter word?

by Gary Schwartz  (23/07/2013)

I recently returned from speaking in Singapore at the regional CommunicAsia conference and Rasia.com event in Moscow. Innovation was a central theme.

In Singapore I was in a discussion with Google, SingTel and Microsoft. I asked Doug Farber, managing director for Google in Asia-Pacific, if mobile innovation is stifled when there are only a few power brokers that control the mobile ecosystem.

Google has always had a “healthy disregard for the impossible,” Mr. Farber said. Agreed. However, while Google has a healthy internal innovation culture, is it allowing the ecosystem to do the same?

I recall Richard Kramer from Arete Research’s jab that in mobile O-P-E-N is a four-letter word.

There are only a few powers that are trying to lock the mobile ecosystem: Apple, Amazon, Google, Facebook, Microsoft and Du. And while Apple and carrier networks are unabashedly closed fiefdoms, Google’s Android empire may not be truly open.

“But,” Mr. Farber said, “I am the open guy.”

“Open only on the front end,” responded Bill Chang, CEO of group enterprise at SingTel.

Outside of a few global plenipotentiaries, mobile developers have had to pick from the crumbs at the table.

Twenty-five applications command 50 percent of the app store revenue. The billions in revenue do not feed many mouths. The average developer lives on $5,000 per month, which is a bread-and-water diet of $60,000 per year, said Richard Kramer. “Where are the developer’s yachts?”

Hardware innovation has flat-lined and power is exclusively in the hands of Apple and Samsung.

The yearly CES announcements have underwhelmed and recently left the Las Vegas melee altogether. Another handset release with faster “mega” screens does not excite the crowds. With $75 smartphones entering emerging markets, smart has become a commodity.

SingTel’s Mr. Chang said in a market where companies are “cost-cut to death, it is difficult to drive innovation forward. Mobile-first is a challenge.”

Mr. Chang talked about the importance of the CIO is this process. He plays the initialism game that we all do at public events: “The CTO is now the chief transformation officer and the CIO the chief innovation officer.”

But what does that really mean to companies trying to navigate the mobile marketplace?

The CIO never had power, said Michael Thatcher, chief technology officer of Asia for Microsoft. “It is only when something is broken they have power. How can we advance this and stop being tech centric? Stop being reactive. Follow the money.”

But is there money in mobile innovation?

Outside of the big six ecosystem players, there are few that command significant market share. We live in an “app store economy” where we all need to play the piper 30 percent and never own the customer. To make money on Apple’s SDKs or Google’s, dominant big data position is difficult.

The social leviathans are also closed.

Facebook has built a business on connecting people. With its post-IPO revenue focus, it has worked hard to create a media buying tollgate on the impressions and big data that it owns.

In social portals there is little big data sharing and little opportunity to make money as an outside developer. It is a bigger issue for the entire social ecosystem.

The more that these social portals try to leverage these assets to generate revenue, the less socially authentic they become to the consumer. Our social spaces have become more like driving down the public highway.

Social portals such as Tumblr and Instagram have generated such value in the market because they remain authentic – pre-revenue and pre-commercial, of course.

Everything is disintermediated. App stores and social portals are all controlled by Facebook, Amazon, Apple, Microsoft and Google, and somewhere we all have to pay the piper.

Telecommunications is the history of open and then closed systems, from RCA closing down FM Radio and early television.

It is the same recent history of Apple disintermediating the wireless carriers with an “Internet device” and then turning around and using the same iPhone to shut down the mobile Web with a closed App Store.

Are we entering another closed loop where innovation becomes stifled? What does this mean for business?

Google sponsors the ship, “Unreasonable at Sea,” to sail around the world evangelizing entrepreneurism and innovation. How can we make the power brokers more unreasonable at home?

SuperBrands and the Unreasonable Screen

I was speaking with David Epstein, the founder of The Unreasonable Institute, the brainchild of Unreasonable at Sea, the Google sponsored innovation ship that is presently sailing from port to port globally.

Mr. Epstein’s  mission statement is borrowed from George Bernard Shaw who in 1903 wrote in Man and Superman:

“The reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself. Therefore all progress depends on the unreasonable man.”

The Unreasonable Institute, based in Boulder, Colorado and is working to bring entrepreneurs, innovators, thinkers, and investors together for social change. He now has these same folk on a ship sailing the world with that disruptive mandate.

What Mr. Epstein is championing, and what Mr. Shaw posited over 100 years ago is applicable, if not essential, across all verticals today. In the 2010’s, when industry after industry is being rudely disrupted, we may need to be more unreasonable about our search for solutions and our adaptation to the new status quo. We have to become superbrands.

Man and Superman

Music, retail, media buying, broadcast, publishing are all incumbent industries that have, or are, about to pivot in a profound and irreversible way. Many extant business models will dry up. Many old revenue streams will become commodity channels or be circumvented over-the-top by new technologies or new business models.

Telecommunications, more than any other industry, has profoundly impacted businesses. Some bemoan that “mobile” innovation has horizontally cut many companies at the knees.

Telecommunication innovation and disruption is not new. The history of telecommunications is the history of open systems and the invisible hand that attempted to close these systems: From RCA closing down FM Radio and early television. It is the same recent history of Apple disintermediating the wireless carriers with an “internet device” and then turning around and using the same iPhone to shut down the Mobile Web with a closed App Store.

What is new about telecommunications in the 2010s is the pervasive nature of the technology, the democratization of information and access, and the liberation of the consumer.

The new entrepreneurs, innovators, thinkers, and investors that are sailing on Epstein’s ship are the crew of innovators that needed to rethink the way we communicate with this new consumer.

And this requires a motley crew.

Chief Unreasonable Officer

Labels, Retailers, brands, publishers, and broadcasters cannot simply open innovation labs in the vain hope that they can reinvent their business from within. Forces are at play in the mall and in the media houses that will require some unreasonable thought. The walls of our store are porous (Mike Duke) and the internet cloud is in our malls to stay.

To paraphrase Mr. Shaw: The reasonable person adapts to the world; the unreasonable person proactively turns the tables.

How do new-age brands become unreasonable?

  1. Industries need to understand their new world and their new consumer. This world is made up of consumer moments across their connected-screens during the course of the day. Ten years ago, you never needed to follow these consumers; now you need to plot their screen journey in minute detail.
  2. The value may not lie exclusively on the screen but in connecting these screens. In a world where (according to Google’s Multiscreen Report) over 90% of people use more than one screen to accomplish a single task, brands need to focus on the “digital Velcro” to connect these screen experiences. One screen + another screen = a multiple of value: (1+1=3)
  3. Stop relying exclusively on third parties and social networks to find your consumer. “Dating services” are important . . . but you need to get out more. Forge a direct relationship with this new connected consumer.
  4. Be unreasonable. Believe that your consumers can love your product and can share a common dialogue with your brand on their private and personal screen.
  • This maybe simply the ability to shop for a brand seamlessly across their screens understanding the needs of the consumer at that moment of the day on a particular screen form factor.
  • This maybe establishing a common interest (wellness, nightlife, etc.) and become part of their multiscreen narrative.

The new Chief Digital Officer needs to create superbrands, and to do that she needs to be unreasonable across all her consumers’ connected screens.

I am content chair of the MultiScreen Summit in NYC, June 11th and 12th.

MultiScreen Summit
www.thescreensummit.com
June 11-12, 2013
Metropolitan Pavilion
125 West 18th Street
New York City

Mobile Wallet Wars: Winner is the “Final Foot”

As VISA launches the digital wallet V.me, a “digital wallet” in a bid to be relevant in the proliferation of cloud payment credentials, VISA and other incumbent payment providers should be concerned that in a cloud-based economy, it may lose its position in the market.

Presently VISA owns the lion’s share of credit and debit/prepaid plastic in circulation globally. (VISA 2,400MM vs. MasterCard 1,000MM)

Up-starts such as Square and digital innovators such as Paypal are trying to challenge the status quo and change the way people pay with plastic. Google and Apple continue to disintermediate the card vendors by aggregating large volumes of transactions and pass them back to the banks as “prepaid”  with low interchange fees. All in all, new payment players are looking at the old business hegemony of VISA and MasterCard and going OTT (over-the-top).

It is not about eliminating plastic. And it is not really an issue of whether these plastic holders are going the way of vinyl; but more importantly an issue of the business model behind these card and card credentials. Roles are being commoditized.

Cards are simply a way to store and relay banking credentials to the POS in the store and the POS in the cloud. In the US this is no more than a number that is stored on a magnetic swipe and embossed in the plastic. In the rest of the world this number is housed more securely in a chip. A chip that can be emulated securely in the phone chip (or SIM).

It is unlikely that the costly backend systems in the US and Europe that deal with fraud and regulatory issues will be displaced. And that the 2,400MM VISA cards and the 1,000MM MasterCard that use these systems will disappear. (*)

However, as VISA and MasterCard continue to be the trusted brands on every online and physical store they may find that their margins dipping. As banks try to revamp their mobile banking applications and ATMs to be more relevant to their peripatetic customer, fewer value added fees and services will impact their margins.

The question to ask is who owns the customers relationship because it is ultimately this relationship (the final foot) that they can monetize. The emergence of mobile and card-linked offers is making the point-of-sale systems in the cloud and eventually in the store, the new promotional depots for digital deals and coupons. So called “big data” and value added services will ultimately yield the most profit.

*(In emerging markets, where there little infrastructure, companies like M-Pesa service the unbanked via their mobile phone account. VISA has entered these emerging markets through acquisition of Fundamo and MasterCard through a partnership with Telefónica. Similar to the US, these companies are vying for the last-mile relationship.)