Milestone Group Quarterly: July 2009

Articles

• Face to Face: Brian Lent, Chairman & CEO, Medio Systems
• Investment Viewpoint: David Aslin, Venture Partner, Nexit Ventures
• By Invitation: Chetan Sharma, Founder & President, Chetan Sharma Consulting
• Milestone POV: Evolve or Commoditize - Telecoms in the Advent of Cloud Computing by Anselm Magel, Milestone Group

Face to Face:

Brian Lent, Chairman & CEO, Medio Systems

Milestone: Tell us about Medio Systems.

Lent: Medio is in its fifth year of operation. We are a pure play within the mobile space, the most recent iteration of our platform technology is our Version 3.0 product – we call it the Medio Mobile Integrated Services Platform (MISP). Fundamentally, what we have done over our life span is bring Web 2.0 type technologies to mobile operators as they help grow their revenue streams and particularly their data ecosystems. By serving as a “web-to-mobile” integration layer for Operators, we enable most of our operator partners to deploy more advanced products than they might otherwise on their own and integrate to web-based content sources or other third parties as well.

I think the most straightforward example of Medio is around mobile search and mobile advertising. We look at mobile search as a vertical application. When I started the company five years ago, that was probably in the most desperate need for consumers that wanted to have a unique experience on their mobile device. Really understanding how mobile is different than the PC, recognizing the diversity of operating systems, screen sizes, processing elements, network bandwidth, keyboard input or voice input. We are probably the first mobile search company to have deployed an analytics-based voice search product in production in North America; that was with Verizon Wireless about three years ago.

We have really tried to optimize those types of elements. Once you do that level of integration then you get into refinements and that is what has really led us deeper into analytics and understanding how analytics can yield significant improvements for the business processes of mobile operators.

My background is deep in analytics, so it was in our DNA to begin with, but I think you will see us do a much broader set of applications outside of search and advertising, the most obvious ones for us historically.

Milestone: What are the drivers and economics in the mobile search and analytics space overall? What kind of pain are operators experiencing with mobile search and analytics today?

Lent: If you take search, as an example, part of the problem most consumers worldwide face is the ability to get access to whatever information they’re looking for but do it either efficiently or do it in a way that they actually get the answer they are looking for. It’s certainly different when you are looking at a device that has five percent of the real estate of a 17” PC monitor and you don’t have a full keyboard. There is sort of a discoverability aspect that makes it a challenge. I think as consumers become more advanced and sophisticated and as networks get more sophisticated, you have things like location enablement. So people do start to do searches for the nearest dry cleaner, etc. They want to take advantage of the fact that they are mobile and not at their PC. It’s a usability challenge and then there’s a back end supporting technology challenge and that still exists today.

You can look at particular examples like the iPhone or Google’s G1 and G2 now at T-Mobile and certainly those devices have a different way of operating and a different form of interaction than a lot of other feature phones do not. Clearly you see some of the positive aspects of how they are driving data for their respective networks. I think a design goal we’d like to have is that every consumer gets an “iPhone like” experience even if they just have a regular feature phone. I think that is what is driving a lot of mobile search improvements.

Analytics is a little bit different - I would say that it is less driven by consumer and more by technology adoption as operators want to differentiate their networks, as they really want to understand how they can increase their data revenues, but not necessarily have the consumer pay for it. That's where the analytics come in, in terms of optimizing their overall delivery of their data experience and understanding at a fundamental level their own subscriber's behaviors.

Milestone: Measuring mobile doesn't appear very easy. You have diversity of technology; rapid evolution of the mobile industry has created lots of devices and protocols, different software and requirements. What's the horizon for all of this complexity to either maintain itself or ease off a bit? How do you get around the whole idea of measuring with all these moving parts?

Lent: I think that’s a problem in any industry for the most part. It may be a little bit harder with the mobile industry but if you’re on the web and implementing changes, you still have the issue of how to measure new growth and performance. I do think that is a little bit more challenging. It does depend on what metric you are following, and by that I mean you can look at data revenues and say those are growing at a significant rate and that’s a positive thing. Regarding say SMS messaging, if your underlying network cost to deliver those bits over the air is outpacing your margin on the data products then it’s obviously not a good idea. From our perspective, I think you get into rates of adoption, number of unique data subscribers, data plan attach rates are key. What percent of a consumer’s device that are sold actually have data plans that go along with them? What percent usage of those plans, if someone pays a $10 a month plan but they are not using it, that’s not necessarily a positive thing. We try to center a lot of it around data uptake improvements using analytics. Obviously, our technologies, help consumers with that, be it search or analytics.  

Milestone: Mobile analytics appears to have 30+ companies competing in the space. Where does value really migrate in that space and how does it pan out?

Lent: Unfortunately, I think analytics suffers a little bit from lots of different naming conventions, so that is part of the issue. If you look at companies in the mobile space that do mention analytics, I think you will find many of them will be more what I would call website analytics. In other words, they are just doing basic reporting on the number of unique visitors, what time of day is most popular, what is the referring URL, those types of things and that's now quite what Medio does. Medio is more at the network infrastructure level. We're applying analytics to the actual subscriber data, trying to impute value, estimations or recommendations. We know people who buy these things also like to buy these other things, similar to what you might see on an Amazon.com, as an example. Our analytics tend to be considerably more sophisticated and behavioral-based than a lot of others in the space.  

Milestone: So what does that mean for average revenue per user (ARPU)? Are mobile operators looking to your technology to drive ARPU by mining that subscriber's data better?

Lent: Yes, absolutely. Data ARPU is one metric and that is exactly what they are using the analytics for – to measure and raise ARPU. Certain users may need more data products where others don’t, so it’s that blend that is extremely important to perfect. Exactly that type of example, using analytics to improve the operator’s data revenues.

Milestone: What's your view on mobile operators and their ability to adopt innovative technologies overall? Are they ready for this so-called impending data tsunami?

Lent: That’s a tough one to answer. To some degree the answer better be yes, because we are a young company. They are large companies and corporations and on top of that, they often time have some Telco DNA in there, which I think statistically has not necessarily been the early adopters of new web-based technology. That is a little bit more of a mixed bag. I do think because of particular data points, referring back to the iPhone or Google’s Android operating system; I think they are starting to see the value of having a more data consumptive environment. Pursuing technologies that help support their data plans is beneficial. From that regard, it seems mobile operators are increasing investments in these areas. Obviously time will tell and we’re hitching our ride onto mobile operators for the large part. We sell to other constituents other than them but we are focused on their ability to adopt new technologies. Everything that I have seen, especially in the last year, tends to suggest they are looking more towards the younger Silicon Valley type startups to get that type of aggressive ramp on data services. 

Milestone: Are any mobile operators out ahead with mobile analytics? Seems most of the value benefit today is migrating to the advertisers and the marketers utilizing these applications. Any insights that the operators themselves are benefitting from mobile and analytics behavior within their customer base?

Lent: I can reference our customers, Medio’s predominant customers here in North America – Telus Mobility, Verizon, and T-Mobile US. Some of our publishers like CBS, ABC and Disney; they all have different instances of our analytics engine at different stages in our lifecycle of that engagement or customer. They are definitely getting value from it; there is no doubt about it. We are frankly held accountable for how much lift that we are providing the business. That’s actually a key part of it. I think generally not a single operator is out ahead - they’re all slightly at different stages. One operator here in North America is more focused on WiMax; that’s their focus of optimization and less about their own on-deck experience. Another operator is more focused on on-deck and has yet to open doors to the off-deck world completely. Interestingly enough, they are all slightly different data points but I think taken collectively they show that a uniform kind of platform solution can give the operator community a pretty big advantage if they were to deploy ubiquitously.

Milestone: How do browser wars come into mobile analytics and mobile search? One would think that Chrome, IE, Firefox and Opera would all like to think that they can force and insert themselves into the mobile search and mobile analytics value chain, because so much goes into the mobile browser. How do you think the mobile browser war is going to impact mobile analytics?

Lent: I am not sure it will really impact mobile analytics per se; I think it has a bigger chance of impacting consumer adoption. Ironically, I think that is where it is similar to the PC. People have IE, Netscape, Firefox/Mozilla and Chrome. I think people have a choice and it doesn’t necessarily affect the net behavior. From our experience and perspective, most of the value is in the analytics and the data, and is ultimately owned by the operator because they are the ones that have the end user license agreement and the billing relationship with the consumer. From our perspective we support all major browsers and take maximum advantage of the data they are logging, recording or the benefit they might show to the consumer. Typically we work our relationship through the carrier. Let them then drive the standards and then they come back to us and show us the product portfolio they want us to operate under. We definitely have a very strong aspect of our platform around the browser display presentation layer, as there are three core components to our technology.

One is the presentation layer; that supports feature phones or smart phones, takes advantage of the latest browser standards. We optimize every application or portal or whatever it might be; for a given device, so we really have to support all of them (I think today we support more than 5,900 mobile User-Agents).

Then we have our service integration layer that is all the glue that integrates all the components and the back end data and the analytics engine. It's an important component to us, but we would not be able to be successful with most of the operators we deployed if we didn't take maximum advantage of each of those browser clients.

The final product in our platform is the Analytics Engine.

Milestone: In the current struggling economy, what way, if any, have you changed the focus of Medio?

Lent: We will be focusing more around analytics as a core and letting others that we partner with build the applications or value on top of that. We did some reference implementations with search, advertising and portals and not to say we will de-emphasize those, but I think we will probably re-double our efforts around the core engine and the analytics. That is certainly the secret sauce - where we have developed a lot of IP in the past, four plus years of operating the platform. In general from a business perspective, making sure that we are focused on profitable licensing arrangements with our partners will be a business priority.

Milestone: What are Medio's plans for the future? You laid out more of a product strategy around analytics and letting the applications and the use cases develop by other parties, but what are the plans for the business going forward?

Lent: What you will find is that we will be developing a lot of interfaces to what is otherwise Web 2.0, for lack of a better phrase, standards out there. Our goal in doing that is to help operators start to adapt and take advantage of the openness of the community that's growing on the Internet. By building these kind of connectors and yet focusing on the data and analytics, we are always making them better. It's just not the user going to Facebook on their mobile phone, but it's optimized to where after they do that two or three times, it learns the steps needed and saves that consumer those steps.  So it becomes a more efficient experience by taking those Internet based applications or APIs or frameworks and making them available to the operator automatically, again with an analytics focus. I think that's where you are going to see us drive more so for the next three years. I see others in the industry starting to put more and more energy towards this direction.

Milestone: Thanks, Brian, terrific stuff. 

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Brian Lent is Chairman & CEO of Medio Systems, a company he co-founded in 2004 from his role as Entrepreneur-in-Residence at Mohr Davidow Ventures. Lent has driven Medio's growth to the forefront as the leading mobile-optimized platform to enable mobile search, advertising and analytics technologies for mobile operators and publishers. Under Lent's leadership, the company has been recognized as a World Economic Forum Technology Pioneer in 2008 and again in 2009, was named one of IDC's 10 Wireless Entertainment Players to Watch in 2008 and was a recipient of Frost & Sullivan's 2008 North American Mobility Award. Lent studied in the PhD program at Stanford University and there he co-founded MIDAS (Mining Data at Stanford), the lab that incubated the Google crawler and search engine. Lent holds a BS in Computer Science from the University of Nevada, Rena and an MS and PhD Candidacy in Computer Science from Stanford University.