Global From Day One: Amobee helps operators adapt to a changing mobile landscape

amobee logoThe mobile telecommunications sector has evolved considerably over the past 3-5 years. The advent of sophisticated mobile application platforms, most notably the iPhone Platform and Google Android, has altered the power dynamics of the sector by allowing third-party application developers to influence the user experience for consumers with (smart) mobile handsets.

While the mobile operator walled-garden is far from dead, voice services are becoming increasingly commoditized. Some argue that mobile operators will ultimately be relegated to the role of ‘dumb pipes’ which provide connectivity, without being able to charge for value-added services. Under this scenario, operators will become the mobile equivalent of ISPs, where the majority of the value is be captured by third-party service providers.

But Amobee, a Redwood City-headquartered startup with offices in London and Herzliya, could play a major role in helping mobile operators avoid the fate of ISPs by helping them to leverage their existing control over content and communications. The company develops a telco-grade ad-serving solution which allows mobile operators to insert advertising as part of user experiencefor SMS, MMS, mobile applications, games and WAP Browsing services.

A banner ad for Domino’s Pizza appearing below an MMS message

A banner ad for Domino’s Pizza appearing below an MMS message

The company has raised a total of $54 million from an esteemed consortium of investors, including Sequioa Capital, Accel Partners, and Motorola Ventures, as well as two strategic investors, Vodafone and Telefonica. Strategic investors can offer startups clear advantages – both Vodafone and Telefonica are Amobee customers, with the latter recently implementing the Amobee Media System across the 18 national markets in which it is active.

However, as some VC bloggers have pointed out, strategic investment can present challenges. For example, Vodafone and Telefonica will always put their interests ahead of Amobee’s (as it is their fiduciary duty to shareholders). And some of Vodafone and Telefonica’s competitors might be deterred from adopting the Amobee solution through fear of exposing sensitive competitive information (though admittedly Admobee does count Orange as one of its customers). This dynamic could have the effect of driving down Amobee’s business prospects and valuation in the eyes of potential acquirers.

A video ad for Lynx appearing before a Madonna music video

A video ad for Lynx appearing before a Madonna music video

Nonetheless Amobee has built, and continues to build, a sizeable business my helping mobile operators ad-fund the communication and content data which flows across mobile networks. The company recently received praise from the World Economic Forum, which named Amobee as a Technology Pioneer 2010. The decision was made by a team of global technology experts which selected companies “involved in the development of life-changing technology innovations and have the potential for long-term impact on business and society”.

Amobee’s versatile solution which, in addition to the mobile centric ad server, includes an ad management system and a reporting solution, helps operators add value to their existing, increasingly commoditized offerings. Clearly, the company has the potential to be a driving force in helping mobile operators avoid a fate similar to the commoditization of ISPs. Whether the strategic interest of mobile operator investors will inhibit the company from pursuing the most promising opportunities in the mobile advertising sector remains to be seen. Ironically, some of the best opportunities might require a bet against traditional mobile operators having a bright future.

gmugliston

Geoffrey Mugliston (mer-gliss-ton) is a London-based Australia-born entrepreneur, strategist and blogger. He began writing for VC Cafe in 2009 with the objective of showcasing promising Israeli startups to the global startup and investment community. He is co-founder of a consumer internet company with its development team based in Haifa (currently in stealth-mode). He also serves as adviser to a pan-European startup which develops software for print service providers. Prior to his current projects, Geoffrey worked in management consulting with a focus on the infrastructure sectors. When not working (though sometimes while working) he enjoys coffee, running and engaging in intense debate. He holds an undergraduate degree in finance from the University of Sydney.

gmugliston

Geoffrey Mugliston (mer-gliss-ton) is a London-based Australia-born entrepreneur, strategist and blogger. He began writing for VC Cafe in 2009 with the objective of showcasing promising Israeli startups to the global startup and investment community. He is co-founder of a consumer internet company with its development team based in Haifa (currently in stealth-mode). He also serves as adviser to a pan-European startup which develops software for print service providers. Prior to his current projects, Geoffrey worked in management consulting with a focus on the infrastructure sectors. When not working (though sometimes while working) he enjoys coffee, running and engaging in intense debate. He holds an undergraduate degree in finance from the University of Sydney.