Krish, Dan and Miles make the Mojiva napkin

News of Mojiva closing a $25M round just a few years after starting up brought a rush of high five from peers, rounds of drinks from friends, and more than a few calls from unknowns trying to sell me things I never knew I needed. The ride so far has been amazing, and not a day goes by that I am not grateful for the courage of my co-founders Krish and Dan, the expertise of our CEO Dave, and the dedication of rest of the team. And with all the skill in the room, I am still also respectful of how much luck and timing have to do with the entire equation.

When she heard of the news, one of my Board members from KFAC had a pretty simple question: what does it really  mean? I had the benefit of some time away to reflect on that while doing my annual cultural lap through southern France and came up with no less than the following.

Mobile is now, and will be, among the most profound effects on our society and civilization of our lifetime. Its impact will be right up there with space exploration (cancelled), HIV (still nasty), Middle East Peace (as if), The Internet (still going), Reality TV (why Snookie why!) and the Fall of the Berlin Wall (still down).

Phil Leigh sums it up artfully:

Today we interact with digital t media nearly as routinely we checked our wristwatches to read time-of-day fifteen years ago. While the conversion might seem radical to consumers from 1996, the advent of portable connected devices such as smartphones and tablet computers implies an even more fundamental change in the future. In short, all media shall become interactive – not just Internet media.

Significantly, app-enabled mobile devices are empowering traditional media to adapt to such a transformation because the portable units are evolving into cognitive prosthetics. Much as experienced amputees routinely use mechanical prosthetics as artificial limb extensions, habitual smartphone and tablet owners are starting to use the devices as convenient intelligence aids. They help users gain more information that would otherwise be unavailable, or difficult to obtain. For example smartphones can find price comparisons merely by scanning barcodes and other implanted signals off shelf merchandise labels. Specifically, a price-comparison app reads the barcode or embedded signal to (1) identify the merchandise and (2) display a website where up-to-date prices for the item from all merchants are complied.

According to www.chetansharma.com, smartphone sales in the United States crossed the 50% market share threshold for the first time in the first calendar quarter of 2011. That’s nearly double the 27% share of only two years ago. Google’s Eric Schmidt proclaims “the smartphone is the new PC”. Similarly, Yankee Group predicts that over 60 million tablet computers will be in use by 2015. Sharma concludes “…mobile will become the platform of everything. Anything that can be connected will be connected.” Among other functions, such devices will evolve into ubiquitous cognitive prosthetics, nearly always available to help us interact with media in all its forms.

I have blogged about my thoughts of how mobile (plus social and local to quote Mary Meeker) will affect a few places I have interest in: how we might visualize health, coupons, high school sports and even how the trust and reputations that we earn (both online and in the real world- an increasingly blurred distinction) will enable us to build an economy of sharing.

What excites me is the tremendous domain expertise and world view I am given by being involved in a company like Mojiva. It’s a box seat with a great view of everything that will play out on the field of mobile in the next few decades. And those things will have profound effect on how our world evolves.

Lucky, lucky me. Up ’til now at least.

~~

If you have mobile social local ideas that you think will solve big problems or make better our world, bring ‘em on!

Michael Arrington is blunt.

That ouchie brought to you by Michael Arrington at a recent Tech Crunch Disrupt Conference.

It’s not as bad as it seems.

I find myself initially defensive at this comment, made by the headline grabbing (headline making!) founder of TechCrunch. I fall on the other side of thirty. If you check out this graph, which represents 300 responses from startups financed by Ron Conway, repeat founders under the age of 30 get more $500M+ exits. 

So if this is true, are old(er) founders more cautious, prudent, and take earlier, cheaper exits for security? Possibly. Whereas a younger founder will let their company brew for a while, gaining value, or be more tolerant of the risk along the way.

Older founders have also likely seen the game played before, and know how to judge incremental success, while a younger buck is more likely to bet the farm. But what is most interesting to me is which of these personalities match best with todays “2 & 20″ VC dynamic, where small hits don’t clear their preference hurdles. If you need a moonshot to make a buck for your portfolio, by all means go find a kid.

But they are getting less naive every day.

Huana AKA Sugar loaf

I was in Deer Valley recently for a Pelion LP meeting and the topic turned to high- altitude climbing. Entrepreneurs that I work with know that I constantly use the experience as an analogly for building companies. (I have analogies for everything, some more crazy than others.  At least, that’s what I’m told).

The basic premise is that, as you get to higher  altitudes, your mind and body play tricks on you. Cognitive powers are altered. Moving carefully and deliberately is important, but so is having a guide to help you move quicker and avoid mis-steps. For a look into real-world mountain climbs, there’s a great book called Into Thin Air by Krakuer that covers it well. (and the rebuttal by Anatoly Bukareev is just as good). As for entrepreneurship, there are very few books about a company’s pending danger and death; most focus on reaching the top. I wrote a bit about that aspect in a prior post called Let ‘em Crash. I personally have been to what I define as” high altitude,” both in climbing and entrepreneurship. (Over 10,000 and over $100M+ in valuation, respectively.) Here’s a hairy story from one climb: entrepreneurs, see if you can pick out the analogie(s).

A trip to Peru brought me to the Machu Picchu lodge and my altitude adjustment was fully set, having begun the trip in Cusco at 11,000 feet. I had climbed Huana Picchu earlier that day, at dawn. I saw the most spectacular sunrise, as many Inca priests had before me (hint, these would be VC’s), and marveled at the symmetry of the Sun Gate and the other temples in the complex. I returned to the lodge for late breakfast. It was there we began talking about Cerro, the peak I had seen obscured by mist from Huana, with a giant flag fluttering at the top. I did some quick calculations and decided I could make it by sundown.

Cerro is the highest immediate peak above Macchu Pichu, but there’s nothing technical about it.  Like most of the Inca trail, .ost of the path is carved rock.  A little slippery at times, and occasionally requiring pull-ups, but mostly the climb is a mental one. I say this because the Urabumba River roars on three sides of the peak, and the drop is about 1,000m, sometimes straight.  After a few thousand feet, the mist socked me in. All there was in front of me were stones, laid by Incas many hundreds of years ago, and vines. And the sound of the river. It became my navigation.  As I heard it down and to my left, I knew I was on the west face; at it switched to my right, I knew I the path had traversed to the west. Half way up, I met two Japanese who were on descent. You alone?, they asked. Yup. Even that small exchange heartened me, not for the guidance, but for the fact someone else would know where I was on the mountain if things got bad. As it was, their estimate was a bit off.

 Ninety minutes later, I came through a skree field of snakestone (awesome green stuff that looks like malachite, but softer) and arrived at a gate of carved rock. It was the first clue I was entering a holy place. From there, I experienced my closest-to-divine moment. The path became flat, and the mist enveloped my feet, such that only my footfall revealed the path in front of me. I was on the spine of the peak, so the sun, or what was left of it, made the way brighter. I noticed orchids, which grow wild at that altitude. And hummingbirds which fluttered around like some  Natural History Museum display. Summit euphoria was taking over, as I heard the flag flapping in the wind in front of me. As I reached it I sat still for twenty minutes, precious time given the daylight. It was total peace. (Have you guessed? This is an exit!) 

When I turned to go, I notice the river roaring about me not on my left or right, but on three sides. With the dimming sun, the mist, the flowers and birds it was truly heaven. The euphoria lasts through the first fifteen minutes of descent, as I passed markings I had made in my mind during the ascent. I allowed myself to gain momentum, feeling free, and frankly as good as a teenager in springtime. Then I mis-stepped. In an instant, I was hurtling down one side of the face, when I instinctively grabbed on of the vines hanging from the face. It caught me, and I quickly recovered, with not a small amount of briars — and a pulse suddenly 2x. I kept rolling, and reached the main Inca village by dusk.

Llamas get around without Merrils

At dinner that night back in Macchu Pichu, one of our guides, Juan —- asked if I had walked or crawled on the spine of Cerro. I told him, and he was surprised. Most people crawl, he said. The spine is only 2m wide, and the drop to the river there is about 800m on the right side, and 1,200m (4,000 feet) on the left. Well, I walked the whole thing… maybe leaning a bit to the right to compensate for the difference…

But the most interesting thing about that climb was what it taught me about the entrepreneurial climb: the height of the ascent is an optional objective… but the return is mandatory!

» Monastario-Cusco
» Machu Pichu Lodge
 and ask for  Juan and Lourdes Sotomayor

Ranjit & Chad. We NEED these guys. (generalization)

One thing I hear month after month at the Next American Economy thinktank breakfast is, “Where are the Jobs Jobs Jobs? “Seems like a giant game of peekaboo.

I have seen scary Powerpoint slides from David Autor (MIT) and Dane Stangler (Kaufman Foundation) about not only the dearth of new jobs, but the dearth of the new businesses that create most of them. (“Dearth” is a double credit word in Scrabble). I touched on this same issue in a previous post Stuck in the Middle with You.

Nobel Laureate Michael Spence and Sandile Hlatshwayo note that the American economy has seen the lower and middle components of the value-added chain moving to the rapidly growing markets abroad and warn that soon, higher-paying jobs may follow low-paying jobs in leaving the United States.

The actions of the free market have made goods less expensive for Americans, but the free flow of labor and capital has also diminished the employment opportunities available in the United States and will, the authors warn, continue to do so at all levels of society. While Spence and Hlatshwayo acknowledge that there’s no simple policy fix to improve the trade-off between inexpensive goods and diminished domestic job opportunities, they argue that given the political policymakers must tackle this enormous question of inequality and economic distribution.

I’ve got a suggestion. Rather than lament our long slide into global parity, let’s do something that will arrest the dive: issue more H1B Visas.

Years ago, super angel Brad Feld was a guest on my show, MoneyHunt, and between filming takes, we talked about how America’s new job creation engine would be pinched by access to tech talent. Wow, was he right (many of Brad’s words follow). As is typical in Washington, the issue bounced around for a decade until Senators Kerry (D-MA), Lugar (R-IN) and Udall (D-CO) unveiled the Startup Visa Act of 2011. This is an updated version of the Startup Visa bill from last year that is aimed at making it much easier for foreign entrepreneurs who want to start a company in the US to get a visa. Today, this process is incredibly difficult and has been stifling the creation of new companies and the corresponding job creation that these companies provide.

VCs... deserve some respect!

As the summer intern wave hits New York, I get my share of inquiries from very smart kids wanting to become VC’s.

And now I know, as Rodney Dangerfield once said, why tigers sometimes eat their young!

It’s that tough a world. Yes, I’ll be the first to tip my hat to some great VC successes (not much ink is wasted on the failures), and it makes a wonderful pickup line for Wedding Crashers.  But being a VC today- or tomorrow- is way harder than it looks. First-time funds, no matter how much they raise, are basically start-ups under intense pressure to provide a preferred return to their investors before they get paid anything special. They have to be incredible consensus-builders within their firm  to get anything approved. And the deals that everyone wants come with incredible competition from everyone else looking at the same thing.  This is not a profession to wander into with stars in your eyes. If you do, expect your Share of Crashes.

According to a recent Cambridge Associates Study, short-term returns in 2010 were fine (based on data from nearly 1,300 funds raised between 1981 and 2010, U.S. venture capital rose from 6.4% at the end of Q2 2010 to 8.2% by the end of Q3 2010,). But venture is a long-term asset class. The median net return to VC fund investors has not been positive for any vintage year since 1998. Cambridge reports that 10-year returns fell from a miserable -4.2% to a downright horrid -4.64% over the relevant period. Five-year returns fell from 4.3% to 4.25%. Think about that for a moment: despite the past decade’s many hits (Google, YouTube, etc.), the typical VC fund has lost money for its limited partners. Even the top-quartile benchmarks over the past decade aren’t very impressive, with the best figure coming in at 5.59% for 2001 vintage funds.

I was a VC for a brief moment in time and it was fun, profitable — and nothing I would ever attempt to repeat.  From 1997 to 2000, Capital Express, having failed to raise any big money like our competitors in the dot.com chase, had a measly $4M to invest. But we picked right (including an IPO that reached a $4 Billion valuation for a moment) and we exited with great timing, returning 100x. It was the top of the bubble. My partners were fantastic, our timing was fortuitous, but I know the difference between luck and skill, and believe me, as good as we thought we were, we were luckier than we will ever know.

Do not try this at home! Your results may vary depending on many circumstances. The mortality rate of VC’s and their funds is stunning.  Thats why I now leave that work to smarter people, and wish them all the best. And I do that often because I see them practically everyday: in the past five years,Vaux’s companies like Cellufun, Operative, Mojiva and more have raised nearly $50M in capital from VCs.  I  sit on panels with them, across board tables from them, and see them constantly in subsequent fund raises for growing companies. They’re incredibly smart, ask great questions, usually have relevant and helpful operating experience, and work really hard. Yet, their fate lies with the luck and timing of a random world.

Is that a profession I would encourage a little cub to venture into? I respect VC’s, I just don’t encourage more of them.

And if they absolutely insist, I wish them all the luck.

the mobile manners meltdown begins

In so many ways, my DNA is old school. Hold the door. Say “please” and “thank you.” Be attentive to others’ needs. Listen first, speak after understanding. BUT we’re in the midst of an epic transformation in mobile communications, and something is being lost in the shuffle.

Namely, mobile manners. While taking analog notes have been a part of “paying attention” for generations, the advent of thumbs-on-screens is less than five years old. An Intel study on Mobile Manners quotes Genevieve Bell, head of interaction and experience research, Intel Labs:

“New digital technologies are becoming a mainstay in consumers’ lives, but we haven’t yet worked out for ourselves, our families, communities and societies what all the right kinds of behaviors and expectations will be,” Bell said. “Our appropriate digital technology behaviors are still embryonic, and it’s important for Intel and the entire industry to maintain a dialogue about the way people use technology and our personal relationships with technology as they continue to help shape societal and cultural norms.”

Consider this: in a business setting of ten or less, most people would accept note-taking with pen and paper as polite.  Even a napkin is accepted. But  replace that snazzy notebook with a PC and it’s rude.  A smartphone seems even worse. And a tablet… who knows?  Taking written notes and converting them later is accepted, but horribly inefficient.

The new digital equivalent involves taking notes via mobile phone,  tablet, or a PC, with a screen up. Using Twitter streams for ideas. Posting on Facebook.

So what’s the big difference between these two scenarios? A few hundred years, give or take, of tradition. Pencils and pens get a free pass based on history. But thumbs on a screen are new. Too many people wonder what you’re up to because of its awesome power to communicate with anyone for anything at anytime. You COULD be taking notes….or score checking…or flirting.  It’s hard to tell with mobile. Move the meeting to a conference for fifty, and you’re less likely to get a frown for your mobile manners, but you’re still not considered to be properly engaged, let alone respectful.

I’m certainly no saint with my personal mobile behavior, and my investments are probably only aggravating the situation. Mojiva is now providing 15,000,000,000 ads per month on mobile devices and apps (which allows publishers to… make more pages and apps) and Cellufun, which diverts attention for 250,000 people a month, 15 minutes at a time. But at least I’ll admit it.

Emily Post chimes in on Mobile Manners with an interesting point: while we’re  easily aggravated by others who make mobile faux pas, we’re not so good at calling our own. She suggests “finding your number”:  notice how many times you use your mobile device in a way that would bother you if someone else did it.  Interesting perspective.

So here’s my point: mobile devices aren’t rude, but people who make poor choices with mobile devices can be. Mobile is here to stay, and a younger generation will eventually use them in more ways than we can imagine now. Working with and leading teams that include them will require everyone to be open to the new possibilities mobile delivers, but we still need to prove we’re engaged. So keep the conversation moving forward. Stay on topic. Never miss a question. Emit no volume. Never leave the room (digitally speaking) for prolonged periods (30 seconds is my goal). And never utter “whoa” with mouth agape while staring at your phone.

Please share your thoughts… anyway you choose!

~

Fantastic 15 minutes on leadership in a digital world from Four-star General Stanley McChrystal at #TED.

Ню Йорк (3-ти октомври 2005 год) – Cellufun, LLC,
водещ доставчик на игри в реално време, мулти-плеър, който може да бъде
Играе се на съществуващите, по-възрастните, както и следващото поколение мобилни телефони, днес
обяви, че играта, на популярни и силно пристрастяване-номер
пъзел игра, която е с голям обхват на планетата, в момента е достъпна за свободно
мобилни изтегляне на Cellufun в http://wap.cellufun.com .?

С пускането на Cellufun е играта,
новите и вече пристрастени към феновете могат да играят играта на мобилния си
телефони по всяко време те ре за един дух-трогателен предизвикателство. Судоку
може да бъде изтеглен безплатно от Cellufun.com, и включва
неограничен брой загадки за тези, които се възползват от безплатно
членство в процес трайни до края на годината .

За да предизвикателство Судоку играчи, Cellufun оферти
пет нива на трудност – елементарна, лесно, средни, твърди и
злото. В играта са включени и функции да помогне на играчите, ако те
се затруднявате решаването на даден пъзел .

Cellufun и играта е съвместима с
Java-поддръжка за мобилни телефони, Windows CE и BREW версии
в близко бъдеще. Играчите могат да впечатлите приятелите си
Днес от качването им най-високи резултати, и скоро ще бъде в състояние да
работата на пъзели с другите чрез мобилния си телефон .

Когато не решаване на пъзели, има много
други дейности Судоку разположение на Cellufun.com да се хранят играчи
пристрастяване. В популярната мобилна портал на Общността за игри, играчи
да съвети и трикове за акция, обсъждат пъзел за решаване на стратегии пост
най-доброто им пъзел-на проекта времето и броя на решените пъзели, за да
виж как са мярка срещу други майстори Судоку .

В много отношения, играе играта на мобилния си телефон
Телефонът е най-добрият начин да се играе играта, а когато сте добавили
Общността и елементи удобство, предлагани от Cellufun, става
Предпочитаният метод за игра, , каза Кари Torkelson, Главен
Технически директор на Cellufun. Cellufun ви позволява да се реши
Судоку пъзели на мобилния си телефон, когато настроението ви удари, и
също толкова забавно, взаимодейства с други любители на играта в един динамичен и
ангажиране онлайн общност.

Заедно с Судоку, Cellufun ще открие днес
няколко игри по време на публични старта си в средата на октомври, в това число
Битката за Орион е колан, пространство битка игра, която предлага
Arcade подобни действия. Фирмата също така разработва MobilePet онлайн
и Texas Hold ги

” Unlike business in the actual retail world, sales of virtual goods are booming, thanks in part to the spike in virtual gift giving this time of year. Even though many virtual goods cost less than $1, these micropurchases add up. The market will reach about $1 billion this year and could grow to $1.6 billion next year, according to a report by market researcher Inside Network.”

Strut Your Stuff, says Cellufun, is a contest to determine who has Cellufun’s hottest avatar, in which women and men dress up their online personas in sexy beachwear with coordinating jewelry and accessories. 

Then, other users on Cellufun vote for their favorites as “Hot” or “Not.” The hottest beach “babes” and “hunks” are tracked on dynamic leader boards, and Cellufun will crown winners at the end of the summer.

The object of the next Beach Party mini game, Sand Castles, is to build the biggest castle on the beach. To do this, users need to enlist the help of other friends on Cellufun to build sections of their castles. 

But, users must watch out, would-be bullies are waiting to ruthlessly kick over sections of their sand castles, meaning users have to start from scratch. Savvy players will hire security guards to protect their castles and keep the bullies at bay.

Finally, in Beach Combing, virtual treasure hunters recruit their friends to help find buried treasure on the beach. Winners get trophies and virtual prizes for all their hard work sifting through sand, informs Cellufun.

Beach Party is available in 10 languages and can be played on any phone with a data plan, according to Cellufun.

So, enough for the metaphors , Let’s get to the predictions.

Where should you be positioned for that enviable wave of profitability?

What will be hot? My top three

-Location Bases Services – For real this time!

The prediction of profitable LBS services has been around for as long as LBS services.  The reason I am now bullish on LBS is the convergence of social networks, large screen devices and third party LBS providers for applications.    The visions of “Minority Report” like talking billboards or auto-generated coupons as you walk past a Starbucks have been the visions of non-visionaries.

Nice for Sci Fi but not in reality.

The popular navigation applications such as VZW navigator have been the first step in this lucrative market.  The integration of LBS with social networking will be the next.

LBS will be the  bridge that will bring virtual social networking back to the real world.  Cool apps like a Google map that automatically shows you the location of your Facebook friends, alerts you if a “friend” is at the same bar, game or locale as you.
This is being developed by Loopt – today.

Legitimate dating services such as Match.Com could obviously benefit from such a service.

Will this make the anonymous rogue of virtual space more dangerous or more marginal?

Regardless, this is coming and will be big   Position your application for this and you will catch the wave

-Mobile Commerce  – The rest of the economy meets wireless

In a previous article I talked about the tipping point of large screen devices and keyboards.  That trend coupled with “open networks” is a perfect storm for true commerce on mobile devices.  The industry will break out of the ringtone and wallpaper commerce “sand box” to address the other 99.9999% of the economy.

We will be evolving from using mobile as an alerting mechanism for transactions such as banking, trading, ebay, sports, etc.  The next step is to use the mobile as the transaction vehicle.

There are already several mobile ticketing trials for airlines and events underway.
Using your mobile as a true mobile wallet is just over the horizon.

The barrier that will have to be removed is the 40-50% share of revenue that carriers take for the existing mobile oriented content.   Credit Card rates for merchants are one tenth of what carriers charge.

The carriers have been providing both a billing service and a “mall owner” function.  Open Networking and free application choice changes this equation.   Either the carriers figure out how to be the clearinghouse for general commerce using their networks, or they will be ultimately bypassed.   The consumer should hope that the carriers continue to play a role and benefit from this increased commerce flow.  Simply , the more revenue the carriers can garner from commerce generation, the less the basic subscription rates have to be.

In either case the revenue flow through mobile will increase geometrically

-Advertising –The arrival of universally acknowledged Mobile ROI

My view is that mobile advertising has been “Swift boated” by the other advertising media outlets.  This makes sense.  If I made my bonus purely on television, radio, print or web advertising, I would be less than happy for a share of those dollars, Euros or Yen to go to mobile platforms.  The claims that mobile advertising is impossible to measure seems rather suspect to me.  You can measure TV audience but can’t measure someone who clicks on your mobile ad?

With so much more content being produced for the larger screen mobile devices, the preferred monetization mechanism will be advertising first, subscription second.  The value chain for mobile ads, from creative, agency, platform, network, publisher and advertiser will mature and become fully mainstream.

More advertising revenue will benefit the traditional media giants as well as the new wave of mobile publishers such as game provider Cellufun.

Eventually the advertising model can help carriers transition the handset subsidy to the providers of goods and services.

These are my waves for the next couple of years, what do you thing I have missed?

Are you poised to cash in?

Moderator Julie Ask at JupiterResearch noted that most people think of Facebook or MySpace when they think of social networking. She asked how social networking played into what each company is doing. Poisson says it’s defined as going into a community space, whether it’s a MySpace or Facebook type of model. Tiny Pictures is a much smaller version: your real social network, the ones you’ve called recently on your mobile phone. Vinding says he feels that what they does competes with Facebook in terms of an application, although they’ll never beat them at their game; but what his company does is built around the mobile platform rather than the “add-on” that Facebook is doing, said Vinding. “Everyone can create personal clubs online and free,” he said. “Through our service via mobile messaging, you can find a list of people from your torn, for example, and in a safe and anonymous way get to know them.”

Social networks are nothing more than a collection of address books, said Bluepulse’s Nguyen. But when you add mobile into it, the game changes. “Mobile is with you all the time and connections are much more likely to be interactive and maintained,” he said. “Add the 4 billion subscriptions we’re at today, and the really interesting opportunity is the mobile social networking space.”

Vinding disagreed with Nguyen’s belief that social networking is nothing more than a collection of address books. “You can update your status, which is stored and logged and can be data-mined,” he noted. “It’s a whole knowledge compendium of what a person is and what they like.”

Nguyen asked to respond. “Behavioral targeting is already proven as something that can make money, but is no where near as effective as [you think]. The value of looking at your yahoo mail traffic is a hundred-fold more important. The time aspect, not the relationship aspect is what people want, and mobile gives you that.”

Cellufun’s Katz said it boils down to the definition of social networking. “Social networking can be a group that has an interest in something and come together in large groups to pursue that,” he said. “We have millions of people into playing casual games on their phones and have learned it can be more fun doing it with a group with similar interests.” It would be hard to describe any part of a group that gets together with similar interests as not being social networking, added Tiny Pictures’ Poisson.

How do you monetize social networking? asked Ask. “You have to have a lot of folks doing it to make it work,” agreed Katz. “We have a pretty simple way of making money which is through display ads. We also do things that we can do because we’re more than a portal. We have a virtual economy, to play games or buy various goods. We’re now incorporating real brands into that mall. So you have to have a lot of people and find other ways of advertising aside from banner ads.”

Most of the growth of his business has been word-of-mouth, said Katz. “There’s also the stickiness factor and that becomes a more compelling message to advertisers.” “The nature of our business is based on the intimate nature of the phone, and it’s naturally viral because you have to get your friends to sign up,” said Poisson. “But you’re much more likely to come back because if I don’t send photos or comment on my friends photos, people will wonder where you are. It’s built into the nature of what we do. People get into the habit of checking every few hours. We’re a totally free, advertising-supported site.”

Tiny Pictures' Poisson; Cellufun's Katz looks on

The most interesting revenue-creation model in his world is to be able to deliver sponsored content into the stream; the user could opt into a “Tropic Thunder” channel, which gave them behind-the-scenes footage of the movie in addition to their friends’ photos. Then consumers had a conversation around that comment. “That speaks to what these media-rich devices can do,” he said.

Social networking is like a big distribution channel, said Vinding. The vast majority of revenue on a Facebook is advertising. Yes, advertising is an immediate thing that can be done now, he said, but don’t just look at this as a social networking site on a PC, because the mobile is also a payment device, especially with premium text services that exists in every country. The third prong they’re looking at is media polling or surveys.

“You make money from the verbs not the nouns,” said Nguyen. “Facebook is a big noun, not a verb; it’s in the action that people express an intent and that’s where the money is to be made. We’re perfectly happy not to have our own social network. I fail to see the significance of social networks as a major money maker; it’s a collection of powerful address books.”

Will social networking on the cell phone be an extension of what goes on on the PC, or something quite different. “I think it’s a very different experience, with the always with you factor, the constant connection,” said Poisson. “Sharing bits of information with your friends all day long, engaging on the go is very different than what’s on the computer.”

Ask noted that teenagers and young adults want that constant checking-in. Will this kind of social networking be limited to youth, or to vertical communities? “I think it feels most relevant to the youth market: they’re comfortable with the technology and comfortable sharing,” said Poisson. “I would never have told my parents what I was doing every day, but my 25 year old sister is constantly texting, calling, sharing. And my mom is now sharing what she’s doing. It spreads from that.” Vinding said he’s seen vertical applications of that, from automotive to medical. “It’s around a specific interest or condition and it expands from there, incorporating all ages,” he said.

Why is the immediacy of the cell phone important for this kind of vertical content? “You can stay in touch, if you’re going someplace,” said Vinding. “The method of access is also important. Not everyone has a PC. Everybody has a mobile phone. If you were doing something where people needed an easy way to update everyday, it’s easy and it’s in your hand. It’s not just immediacy–it’s accessibility.”

“Immediacy is the one thing that’s different with the mobile phone and not on the PC,” agreed Nguyen. “It’s something that you just don’t want but because everyone else has it, you have to.” Do we really need things immediately? “Let’s not conflate immediacy with urgency,” said Poisson. “There is something about immediacy that strikes us all as wasteful or ridiculous. The best example with the younger generation is text-messaging which seems like a stupid, stupid way to communicate. But it has by all measures supplanted every other form of communication for this generation. It doesn’t interrupt you (although you can argue that) but a big part of its value is its immediacy. It’s not about urgency, it’s about now.”

Nguyen said “I think people will die without this stuff.” “I agree with John but I’d push the point further. Immediacy does mean urgency. Let’s say we need to know the population of Zimbabwe. A few years ago, it was reasonable to come back with an answer in a few days. Today, if you can’t come up with an answer in 5 minutes, you’re gone. In the future, if you can’t come up with the answer in 5 seconds, you’re gone. Immediacy is fundamentally transforming media.”

“What the iPhone does is – the UI is completely different which encourages more usage, people who use it are more likely to use gmail mobile and the WiFi platform: all those things conspire to say that we’re at an interesting shift,” said Nguyen. “I don’t think that in a few years we’ll dispute whether you need that piece of information in 5 minutes. You’ll need it.”

Ask asked the panelists if location play a role in social networking services. “We’re trying to figure that out,” admitted Katz. “We’re creating a world travel game, and what we’re doing is implementing a guide system so that if you live near that city you can be a guide and earn extra points for doing that. We think that will create more of a bond. We already see that people with sub-interests beyond gaming are forming their own groups on the site. For example, on their own, hundreds of people are participating in a site on mobile pets, virtual pets, that people are feeding. We’re trying to find ways that can help our users forge alliances based on geography which we think will increase the stickiness of the site.”

Vinding said that location is fun and interesting but in terms of social networking, one of the great benefits is that you can talk to people around the world. “I don’t necessarily want to talk to someone near me unless it’s dating or meeting local people to have beers,” he said. “We don’t see a lot of demand for location-based demands.” The scale and scope issues of location often aren’t discussed, said Poisson. “Location has the potential to be industry and experience changing but there’s a big difference between regionality and sitting in Conference Room 1 at the Marriott. Even with my closest friend, that’s a tough value proposition to get. People don’t even want their close friends to know where they are.”

One-quarter of teens want to track where their friends are, said Ask. They don’t want to be tracked, but they want to be able to track. “If I have taken 10 pictures in a restaurant in San Francisco and Ian and ten of my friends also take those pictures, maybe we’re at the same birthday party and put those pictures together,” said Poisson “I think that’s a lot more interesting than Where’s Ian right now?”

It’s not new to know where you are, said Nguyen. “If you’re late for a meeting, you’ll be able to give a status update,” he said. “Occasionally information about time will be useful but won’t add much to the transactional basis.”

The games are available via wap.aol.com and are provided on a free, ad supported basis, and no downloads are necessary. Advertising inventory will be sold by AOL’s Platform-A’s Third Screen media.

AOL will offer games including Cellufun’s Call of the Pharoah, a game that relies on a social networking “pyramid scheme” to finish it.

New York based Cellufun was founded in 2005 by two former Wall Street security experts Arthur Goikhman and Steven Dacek and has attracted 5 million unique visitors to their games in the past year and 500,000 registered users.

The idea isn’t completely new; boxing games featuring presidential candidates first surfaced in 2004, but the new game claims to take the genre to the next level by weighing the chance of success of each contender based on polling numbers, and also through the results of people playing the game. For example Hillary Clinton leading in the polls over Barack Obama, and knocking out other presidential candidates in the game would give Clinton a higher success rate in the game itself. It’s also claimed to be the first game of this type for mobile phones.

Users can vote on other characters for inclusion in later releases such as “dark-horse candidates” (Ron Paul and Dennis Kucinich aren’t included in the game currently), cable television pundits or currently elected White House officials.

New York based Cellufun was founded in 2005 by two former Wall Street security experts Arthur Goikhman and Steven Dacek and offers a variety of ad supported free mobile games in a fast growing market segment. See our previous coverage here.

“The Space Wars experience is far-reaching and long-lasting because it offers interactive features not normally seen in multiplayer battles,” says Cellufun CEO Arthur Goikhman. “We’ve seen our beta testers take unprecedented and creative approaches to the game, such as launching coordinated attacks in waves.”

The goal is to build an empire, while keeping your populace happy. Space Wars lets players forge alliances using “subspace” chat with other gamers, schedule future activities when not playing in real time.

The game is one of the first ad-supported MMMG, and is compatible with virtually all handsets. Let the universal domination begin.

Cellufun WAP

MobilePet myPhone allows users to care for, play with and feed a virtual pet. Users must keep the virtual pet from getting sick, from feeling neglected and must “avoid visits to the virtual computer store for repair”. MobilePet myPhone users are able to download music from Cellufun’s catalog of artists to entertain their pet. Additionally, users can earn points when their friends visit their pet on their own phones, as well as by successfully caring for their pet; scores are compared with other members in the same gaming community for a place on a scoreboard.

The game is WAP based and ad-supported, delivering a free service that requires no download.

The success of Tamagotchi’s and Nintendo’s Nintendogs would indicate that virtual pet games are wildly popular. Bringing the craze to the iPhone would seem like a logical step.

Because they have MobileSpace, the company can target its advertising more precisely. Users submit information about themselves when they sign up for the community, according to Sawhney, “so that each user receives the most relevant mobile advertisement according to their profile.” Sawhney defends this strategy by citing studies that show users are open to opting-in and viewing relevant, non-intrusive mobile ads if they get something of value in return. According to that theory, users would appreciate Hovr’s highly-targeted ads more than those on other networks.

Advertisers with an especially keen interest in the Hovr network include companies that focus on the youth and young influencers market, including some large name brands. As in the targeted ads seen on Google’s Gmail, user profiles are stored on Hovr’s server, and are not shared with any third parties. Ads can be targeted according to geography, sex, day/time, carrier, handset, interest, behavior, and other factors.

Hovr recently announced that Third Screen Media would be selling and serving ads on their game network. Sawhney reports, “Our deal with Third Screen Media is going well. The integration between Third Screen Media’s ad platform and Hovr’s AdLogic ad server platform has been completed. Third Screen Media’s ad sales team now has access to our ad inventory and they’ve started selling [our ads].”

Mobile carriers offer downloadable games too, of course. Usually they come with no advertising, but at a cost of $7-$10 per game. Sawhney believes that probably only 2-3% of a carrier’s subscribers purchase a mobile game in any given month. A major reason is the cost, and carriers know that. Sawhney says, “Our value proposition to carriers is not necessarily to give away games for free, but perhaps subsidize them via advertising. At this point, we have seen great interest from a number of mobile carriers.”

Launched in February 2007, Hovr’s most popular games include Jewel Digger, Bloktonik, Underground Racer, and PowerBabe – Flirt Club, designed by companies such as Ozura Mobil, Kiloo, and Robotube Games.

- Michael M

Cellufun’s most played mobile game is Sudoku, with more than 8 million puzzles downloaded by 300,000 players. Their chess game is played online 2,000 times a day. The “Why Chicken Why” game allows mobile users to guide chickens across the road – they have a success rate of about 75%.

Other favorite downloads include MobilePets that live in your cellphone. MobilePet Monkeys and MobilePet Dogs are the most popular, though MobilePet Penguin was released last year. The company says they have no plans to introduce a MobilePet Chicken.

In the future, Goikhman says, “User generated content, particularly with a game focus (e.g., scavenger hunt games using camera phones) are likely to play a bigger role.” Cellufun has recently added original comic strips and cartoons to their lineup, and hope to include topical entertainment, with humorous columns and reviews on a variety of topics, “right sized for the limitations of the screen.”

Cellufun’s patent-pending Smooth Move technology relies on continuously adjusting algorithms to provide a similar experience to all players, whether on a 1x, 3G or even a broadband network. “In practical terms,” says Goikhman, “this means that someone on a faster network can’t appear next to you and blow you out of the sky.”

Unlike competitor Greystripe, Cellufun programs all its own games. Goikhman himself was a veteran software developer in the financial industry. Besides using Sun’s J2MEplatform, the company is recruiting game programmers skilled in MIDP1.0 or MIDP 2.0, BREW, Palm OS, Microsoft CE, Symbian or Blackberry.

One reason for Cellufun’s rapid growth is that customers don’t have to pay for their downloads. Though Cellufun’s ads can appear before and after the game, Goikhman insists that product placement during the game is absolutely central to their strategy, for both downloadable and browser-based games. “The goal is to never interfere with game play, and in fact, enhance it when possible, so that games use brands that have natural affinity to the underlying game and make them part of game play.” For example, a racing game might highlight a new car model, or MobilePet Dog might feature a dog food brand.

- Michael M