VC panel on where money can be made in mobile right now - and in the future.
Next up at Heroes Of The Mobile Screen it's a panel of VCs, led by Doug Richard from School for Startups. Having got an opening rant off his chest – fragmentation is evil! - he throws it to the panel, starting with Nenad Marovac from DN Capital.
“If you look at any applications in the last three to five years that have taken off... we think freemium is the way to go,” he says. “Give people a taste then upsell them to something else. You've got to give them value to get them up the stack.”
Now Ian Sigalow from Greycroft, who says he's looked at 1,000 apps over the course of two years - “none of them are making much money – the type of money you'd expect to see for a venture-backed startup... Even AdMob was losing money when it was acquired for $750 million.”
Even so, he says Greycroft is excited about mobile, but that it's hard to make a case for wide-scale investment in mobile right now – for the various platform/revenue issues discussed already at this conference.
Over to Inma Martinez from Stradbroke, who's managed to sell a bunch of startups to Nokia in her time. She thinks mobile video is coming up strong, building on the success of apps like Kyte and Qik. “It's not going to be applications, it's going to be services,” she says. “Next year, Android phones are here to stay. Apple has had a fabulous ride, but I would be watching like a hawk any services built for Android, because I think they're going to take the market.”
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Phil Cox from Silicon Valley Bank Financial Group agrees on the services point. But he also talks about companies working on tech to compress data, or a company that's been making fuel-cell batteries for cars that's looking at making an iPhone battery that lasts for a month between charges...
Everyone in the room has a 'Who? When? Get me one!' look on their faces at this point.
And now to Peter Globokar from Mooreland Partners, who points out that the mobile ecosystem is not just Apple, RIM, Nokia and Google. “The operators are still huge gateways to the market,” he says. “I would put my money on the operators and doing stuff for the operators. Ultmately they're the ones scared to death of the Googles and iPhones, so they're going to come up with the money to compete with the App Store.”
I think this may be from a VC's perspective: if you're looking to fund a startup, fund one that the operators will either panic-buy or award huge contracts to as they try to get their app stores off the ground.
Back to Marovac. “I think the operators should be pipes and shut up!”. But Globokar says he's not disagreeing – but that in the process of the operators becoming pipes, “there's a lot of money to be made... I'm not talking about applications. Yes there is applications, but in order to make all of this work, we still have a huge amount of plumbing that goes behind it, and that's where the money is to be made today.”
Next question – how do devices and sensors change the game? Sigalow first: “For me at least, the phone market in the US looks a lot like the MP3 market used to look in the 90s: hundreds and hundreds of MP3s [devices] from Taiwanese companies, but Apple discovered that a dollar invested in design returned more than a dollar invested in R&D”.
He says the same is true of applications. “The usage of applications on the iPhone – the same applications – is two orders of magnitude better than the same application on a BlackBerry or a feature phone. You'll see business users continue to use a BlackBerry... and you'll have consumers who will gravitate towards one or two other devices.”
Which? “I imagine Apple will continue as they have done in the MP3 market to lead the way with innovative products,” he says. And he points out that some people now think the US has leapfrogged Europe in mobile, thanks to Apple. I think that's a polite way of saying 'I think the US has...' by an American speaking in London...
He also mentions an interesting-sounding company called OnePIN, which makes SIM-based social address books. One to look up.
Martinez now, who disagrees on the BlackBerry point, saying that in Europe “all of the teenagers are on BlackBerries”. Why? “IM”. Although Richard jumps in and says “Actually, they're using it because of Gossip Girl, but you're close... They're the new SideKick, they've done a superb job of getting into teenagers in California as well as Europe.”
Marovac chips in on BlackBerry, saying the market for business apps should be ideally suited to RIM, given its history.
What about the rest of the world, outside the US and Western Europe? Globokar points out that iPhones are thin on the ground in emerging markets, and thinks operators have a big role to play in getting iPhone-like devices with browsers into the hands of users in these markets.
“You have a pretty decent browser in every feature phone, so you can do a job of replicating some of the functionality found in appliations into some of those 700 million feature phones that are sold every year,” he says.
However, Sigalow says the VC firms focusing on India and other emerging markets are NOT funding mobile applications. "It's going to be a long time, and by that time I think they'll have PCs," he says - a controversial point, given the traditional rhetoric of the mobile industry when talking about these markets.
Marovac points out Nokia's big focus on these markets - something that's rarely talked about in the discussion of how the company is faring 'against" iPhone, Android and BlackBerry.
In response to a question, Richard poses the question of whether "having app developer and mobile in the same sentence" is a good idea - shouldn't people just develop on whatever platform suits different markets, whether web or mobile?
And that's a wrap.
