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San Francisco, August, 2007
Mobile Musings

The What Principle and The Who Effect
By: Tony Fish of AMF Ventures

This Viewpoint focuses on where value is being created. As professionals and industry leaders we understand that market development through the integration of mobile, TV and web creates possibilities and complexity. Whilst it is evident that new interactive and customer engaging services can be created, without the enormous development costs of pre-Internet days; where our limited resources should be focused is still a significant concern. Balancing risk and reward is as much an executive skill today as at any time in corporate history.

With the attention of the world press, Apple has launched the iPhone, however, the iphone doesn’t create additional value for the device and telecoms market. Apple sells devices at the expense of Nokia and Motorola, AT acquires additional subscribers from competitors by forced churn, but these activities don’t grow the market. Apple and its global telecom partners hope that through personalization, the newly acquired customers will not churn again, therefore retaining value for themselves through the introduction of a new device (and its children); but no new incremental market value has been created.

The WHAT principle

The focus of today’s services is personalization – the making of your user experience, creating value from the reduction in churn and incremental service revenue, assuming that any incremental margin is not eroded by competitive pressures. The focus on personalization is, to AMF Ventures understanding, a focus on WHAT:– what you as a user want to do; what service you want; what is needed now. The sole benefactor is the individual, but does this create any value? The assumption is that personalization provides focus, and that this focus leads to the ability to deliver engaging and personalized services including advertising. This advertising being derived from the same advertising budgets, which is now redirected from other display channels. Therefore does personalization actually create any new value and will it actually grow the overall spend of the entire market?

Commentators, consultants and media sellers will provide convincing evidence to back their own propositions and the purpose of this Viewpoint is not to debate the personalization opportunity but to introduce the WHO effect. While personalization will increase value for the provider; assuming that there is value for the user, it does not itself create new value for the entire converged industries. However mobile personalization could create value, if the focus is on WHO and not WHAT!

The Who effect

Personalization has been about the WHAT principle. This has focused on a single customer: ‘you’. The WHO effect is the multiplier. The focus shifts from WHAT, to orientate on WHO you are doing something with. In simple terms when you go for dinner, who are you with? When you are in a business meeting or seminar, who are you with? When you are at a concert, in school, or on holiday – who are you with? The opportunity is that these ‘WHO’s’ are gravitating toward and enjoying the same experiences as ‘you’. The additional profiles of those who you are with, can combine to create a new and incremental market value!

Consider the advertising issue created through personalization, it reaches you – one person in two billion. The world is divided into two billion personalized worlds, only relevant to one person at any given time, and each person with an unequal bite of the advertising spend! The WHO effect would suggest that as you are enjoying something with others, even though it is outside of their personalized preference, it is possible that it would be worth providing information on products and services to the group. The WHO effect is the electronic ‘word of mouth’. It assumes and depends on the fact that we adopt at different rates and some not at all. These issues provide the limitation to personalization and the WHAT principle, but opportunity to the WHO effect.

This WHO effect is not open to the traditional broadcast, TV and entertainment companies, although they are the traditional home of the display advertising budgets. This service could be offered by Web companies, however as your profile and personalization has a dependency on your web access time, it could be difficult. The major benefactor of the WHO effect will be mobile companies as the mobile device becomes the platform to collect data, interrupt the connection and deliver the value.

The opportunity to exploit the WHO effect is not open to companies who want to ‘control’ the user experience and developer environment such as Apple, they can only enjoy the WHAT principle. Open mobile platforms, open access services and developers who services work across all devices will be able to exploit the WHO effect. The multiplier value of mobile is not in knowing WHAT you are doing (location and attention), but WHO you are doing it with; surely the outcome is WHO Google buys and not WHAT! Gerbsman Partners is pleased to have Tony Fish of AMF Ventures in London, England participate with his insight into Musings on Mobile 2.0.

Please feel free to email your comments to Tony, or visit him at AMF Ventures website

All Amp'd Up
By: Brent Chapman of Instantania Media

Exuberance greeted the market place when Amp’d Mobile stormed onto the scene in 2005. Raising monies that hadn’t been seen since the Webvan days, Amp’d Mobile was funded and had all the right deals in place – Viacom for content, sports, live music – you name it, they had it! Amp’d Mobile raised over a quarter of a billion dollars and they are now in bankruptcy.

Sports fans couldn’t miss if they tried the rise and quick fall of ESPN Mobile. Despite spending $150 million dollars on the product, ESPN was only able to attract 30,000 subscribers. 13 months and ESPN Mobile was no more.

MVNO’s were all the rage just a year ago. Not so fast. Consumers aren’t buying cell phones to get better music, shows or sports updates, they want clear calls and perhaps some added services.

When looking at the mobile phone market from the point of view of an investor it is most important to look at actual customer behavior. What do people normally do with their mobile phone – well here in the US, they mostly talk on the phone. Sure texting has become a part of our culture and people are often times snapping photos or even some video with their phones, but when it comes down to it, phones today are there for talking and talking some more.

So what should we be looking closely at as the mobile market moves into the second half of 2007? Of course the iPhone is interesting and with Wall Street expressing its dismay at the low numbers of iPhone subscribers to date, Apple could be looking at the ESPN phenomenon – that is a great product with a high price ($550) and likely well ahead of the market.

Our view of the mobile world is this –keep it simple. Look at what customer’s are actually doing and then move just so slightly ahead. We see things like GPS and mobile interactivity as being interesting. Consumers carry their phones with them all the time. Reports show that a mobile phone being lost will be noticed quicker than a wallet being lost. Thus, providing relevant information to a consumer in real time will not only be welcomed but rewarded. Shopping for shoes, a note that Nordstrom has a sale right now, or a traffic suggestion, or even a reminder that you need to pick up milk on the way home will be welcomed by consumers. Similarly turning a phone into a remote device when at the mall or movie theater is another extension of normal consumer behavior. While waiting online at a movie theater, allow consumers to play a game with their phone or view trailers. These are examples of simple behaviors that are well within a consumer’s likely scope of possible behaviors.

2007 is a year of retrenchment for the mobile space. We strongly believe that the next big thing in mobile isn’t all that big – it is simple extensions of web based behaviors, mapping and interactivity.

Gerbsman Partners is pleased to have Brent Chapman of Instantania Media in New York, participate with his insight on Mobile Musings 2.0. Please feel free to email your comments to Brent.

About Gerbsman Partners

Gerbsman Partners focuses on maximizing enterprise value for stakeholders and shareholders in under-performing, under-capitalized and under-valued companies and their Intellectual Property, as well as assisting Mobile 2.0 companies with strategic alliances, M&A distribution of content and licensing.

In the past 60 months, Gerbsman Partners has been involved in maximizing value for 32 Technology and Life Science companies and their Intellectual Property and has restructured/terminated over $700 million of real estate executory contracts and equipment lease/sub-debt obligations. Since inception, Gerbsman Partners has been involved in over $2.1 billion of financings, restructurings and M&A transactions.

Gerbsman Partners has offices and strategic alliances in North America, Europe and Israel.

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