Face-Off With Facebook? BuzzCity CEO KF Lai Talks Apps, Advertising & Ecosystems » mobilegroove

Back with an in-depth look at Singapore-based BuzzCity – a major player in the mobile social network space whose ad-funded myGamma community targets blue-collar workers and the newly-connected middle class across emerging markets – and an exclusive interview with KF Lai, BuzzCity CEO. I caught up KF for a long overdue briefing to connect the dots in his ambitious strategy to – as he puts it – “build the number one mobile portal and Long Tail ad network in emerging markets and possibly the world.”

BuzzCity’s keen focus on serving the “unwired” in developing countries – people whose only access to the Internet is their mobile phone – made business sense from the start, allowing it to chalk up 3+ million users across 80 countries (as of December 2008). But it’s the company’s clever approach to mobile advertising that makes it the one to watch. Expect a raft of announcements kicking off at Mobile World Congress (MWC), allowing app and content providers to get more reach (and thus more revenues). This is all I can say under NDA, but think ’social graph meets viral-marketing’ and you’re definitely on the right track.

As KF puts it: “It’s about critical mass, and we have reached a critical mass in myGamma today that has become attractive to developers who want to tap into our community and soon beyond [these] members to friends of friends of myGamma [members].”

To this end, upcoming announcements will emphasize “improvements to our ad network and ad serving system so that it delivers value to advertisers and publishers.”

For now, let’s just say announcements pave the way for application developers to better distribute and monetize their content via the myGamma community and wider network of off-portal publisher sites and destinations BuzzCity has built through partnerships and as a result of the $10 million investment it received last summer from South African media group Naspers.

By way of background, the investment boosts BuzzCity’s profile, powers its expansion plans, and cements Naspers’ position as a formidable force in the evolving media landscape. The key here is convergence, and there’s clear evidence of a business model that could potentially blow other mobile social networks out of the water.

Naspers is a multinational media company headquartered in South Africa, with principal operations in electronic media (including pay-tv, Internet and instant-messaging subscriber platforms, and the provision of related technologies) and print media (including the publishing, distribution and printing of magazines, newspapers, and books). Naspers’ investments include: ACL Wireless Limited, a major provider of mobile value-added services based in India that offers community applications such as chat, IM and social networking, as well as mobile services; Tencent, a provider of Internet and mobile value-added services in China with the largest IM community in China – QQ; Sanook!, the leading Thai language portal in Thailand; and Mail.ru, ranked as the number one email service for Russian speaking users with some 30 million unique monthly visitors, and over two billion monthly page views (according to the website).  And the list goes on…

The goal is to expand the BuzzCity mobile ad network. But there are no plans to manage mobile advertising campaigns. For that, KF would rather team up with companies such as Top Space, the media arm of Sanook!, and be the mobile part of the pitch the company makes to clients. As he puts it: “The idea is to complement the existing offer these companies [in the portfolio] have and extend that reach into mobile.” BuzzCity is also not interested in content creation. “At this stage we have decided that we will not take a stake or invest in a company that develops original content. We want to work with these [content development] companies, allowing them distribution and marketing through our community and [Naspers] portfolio companies.”

Excerpts from the Q&A:

Q: Who are your competitors? We know it’s AdMob when it comes to ad networks – but who are the players that compete against BuzzCity at the big-picture level?

A: Looking at the competitors, I can say we will be the first one in the space to create a real ecosystem. We have community and a complete monetization path, and there’s more to come. [In comparison] the App Store doesn’t have the community, and it doesn’t run ad networks.  App Store is a pure transaction mechanism.  It leverages on the number of people that use iPhones to provide a transaction-based monetization path. So a comparison with Apple is possible, but not accurate. We’re closer to Facebook. It offers a developer platform, allowing developers to build the applications on Facebook and popularize them by offering them to [Facebook] members, but the monetization path is not so clear. Likewise, the ad network isn’t in place to help publishers and merchants monetize the traffic. We have all that, and all the developers have to do is figure out how to make their applications popular. Once they are popular, the way is clear to make money out of them. Then the question becomes: Do I continue to offer it for free, so that I can charge for advertising? Or do I charge for my application? Both options are supported by BuzzCity.

Q: You already have developers offering apps and content to the community? What are the hot items?

A: The most popular applications are ones that allow users to have some fun and express themselves. For example, there is a Tarot card [app] that tells your future and lets you share Tarot cards with your friends. Another popular application is called Hug Me. It’s just a simple hug, and users can give each other virtual hugs and show each other they care. Virtual gifting is very big, and we expect to see quite a number of virtual gifting applications moving forward.

(BTW: This response dovetails well with Tim Green’s observations over at Mobile Entertainment. He points out that virtual gifting is part of a successful monetization scheme for BuzzCity. What’s more, he wouldn’t be surprised “if, a few years from now, Facebook decides the best way to get a presence in mobile in certain geographies is to advertise on BuzzCity’s network.”)

Q: Let’s talk about the release of the BuzzCity Mobile Advertising Index, a report that tracks the growth of off-portal mobile Internet use in more than 200 countries around the world. For Q4 2008 the index shows almost 50 percent growth in paid banner advertisements in the U.S. Specifically, 382 million mobile banner ads were served in the U.S. in the last three months of 2008, a 47 percent increase over the previous quarter, and a 209 percent increase for the year. In a press statement, you said this is an indicator of the resilience of mobile advertising in the face of the current economic downturn, as well as the exponential growth in mobile Internet use among U.S. consumers. Can you elaborate? And what are you seeing now?

A: In the fourth quarter of 2008, just over 7.5 billion advertiser banners were delivered across the network, representing quarterly growth of 40 percent, a slight increase from the previous quarter’s growth of 38 percent. According to our data, we actually only service about one-third of the advertiser demand.  In other words, there is another two-thirds of advertiser dollar [budget] on the table every day that we’re not spending. We have advertiser dollars waiting to be earned, if developers are able to develop compelling applications that users find interesting. We have a board meeting this morning, and I can say I have very happy shareholders today.

Q: Is it the focus on the Long Tail that allows you to profit in a recession?

A: Yes. When we put our Long Tail mobile ad network together, aggregating around 2,000 smaller sites, it was about capturing value offered by the smaller sites – sites that otherwise would not be able to attract advertising on their own. It was also about allowing advertisers to reach a diverse audience. After all, if you want 1,000 people to respond to your offer, you’re more likely to succeed if you try to attract 1,000 people from 1,000 different sites rather than 1,000 visitors to a single site.

In fact, the financial crisis has so far has turned out to be a net positive for us.  We expected two things to happen. We expected venture-funded companies that were buying traffic to drive the downloads would likely reduce their spending because they were worried they might not be able to raise the next round of funding because of financial crisis. This did happen, but the financial crisis hit the U.S. and U.S. companies harder than the rest. Elsewhere, companies that were spending on ad networks to buy traffic have not reduced their spending. In addition, we expected mobile value-added service providers to cut back advertising spending, which also happened. But these [VAS] players appear to have moved larger portions of their advertising budget into mobile Internet, which benefits us. We’re also seeing a rise in spending coming from more traditional businesses, such as financial services. They have increased overall mobile Internet and advertising spending because it’s more controllable and measurable [than other media buys].

For example, in India, advertisers are reducing their overall budgets by up to 50 percent. In fact, [publications like] Hindustan and Times of India are reporting 75 percent reductions in the ad revenue. But, in reality, a shift is taking place and advertisers are moving money from online to the mobile Internet.  So, BuzzCity profits from the financial crisis. You have seen that from quarter to quarter we grew about 40 percent, and from November to December we actually grew 40 percent as well, month to month. In January, we see that the trend has continued and we are quite hopeful that in this quarter [1Q2009] we will report either a similar growth rate or an even bigger one.

Q: Speaking of India, you recently launched a feature that enables brands in India to target ad campaigns to four regions around four major cities: Mumbai, Delhi, Chennai, and Kolkata. How is demand for that?

A: It’s getting very good response from advertisers. But most advertisers are looking for reach and don’t only want to target individual regions. Overall, India has been growing quite well over the last months, with a number of more traditional companies taking their campaigns to mobile.

Q: Can you provide examples?

A:  A lot of activity from banks. In the last months we’ve seen Sri Lankan Airlines advertising to Indian customers. We have also seen campaigns from Toyota, Dell, Renault – and other big brands using mobile to reach Indian consumers. In fact, activity has increased so much over the last six months that we increased our team there from two to five [people]. We are also planning to roll this feature [being able to target regions] out to two more countries over the next six months. We are deciding the countries and I’ll let you know closer to the date.

Q: You recently announced a deal with MCN in Thailand, where you use its MobileSearch.net platform to power content discovery and mobile search for your myGamma community there. I’ve seen other mobile communities embrace search as well, I’m thinking here of the deal between itsmy.com and Taptu. How are members using mobile search?

A: From my initial observations, it doesn’t seem that users like to search as much as they like to discover new things. We’re talking with MCN about how they could use the social graph to make mobile search much more of an activity involving user recommendations. Of course, we will leave the mobile search technology to providers and not develop our own search service. There are a couple of other initiatives that we are pursuing right now but we’re not ready to announce details. I can also say that we are looking at launching keyword search functions in our ad network, letting advertisers target the advertising based on the user query.

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NOTE: I’ll also have more about the nuts and bolts of BuzzCity’s ad network in my upcoming mobile advertising white paper, set to be released in time for MWC. As I wrote earlier, BuzzCity understands advertiser requirements for spending control and improved targeting. More importantly, it walks the talk, providing advertisers a balanced mix of mobile analytics and post-campaign demographic data (based on a representative audience sample). In fact, click analytics from BuzzCity (I ran banner ad campaigns across three mobile social networks, including BuzzCity) showed my audience was predominantly male, with over one-third of my clicks in the U.S. coming from the state of Mississippi.

My take: It’s potentially valuable feedback for advertisers wanting to target campaigns to variables such as gender and location, and a clear competitive advantage for BuzzCity over other ad networks.

Disclaimer: The MSG series of mobile advertising white papers is sponsored by Bango.

Tags: bango, BuzzCity, Facebook. Long Tail, India, MCN, mobile analytics, Mobile Marketing, Taptu, virtual gifting, white paper

This entry was posted on Wednesday, January 28th, 2009 at 1:08 pm and is filed under Content Discovery, Mobile Marketing, Mobile Research, Mobile Search, Mobile Social Media. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.