For mobile content players, these are either the best of times or the worst of times. Or, in some cases, both.
Investment money continues to flow into wireless content and marketing. Thumbplay Inc., a direct-to-consumer aggregator, hauled in $10 million in a third round of financing led by Bain Capital Ventures and joined by existing investors SoftBank Capital and i-Hatch Ventures. The company also secured a $5 million credit line with SVB Silicon Valley Bank.
Canadian content-delivery company Wmode Inc. also had a good week, pocketing $6 million in debenture financing from Wellington Financial L.P. The company, which provides content management and billing solutions for carriers and mobile virtual network operators, said it will use the cash to expand its global operations and, possibly, to “facilitate strategic acquisitions.”
In fact, investors poured $153 million into mobile content and marketing in September, according to San Francisco-based analyst firm Rutberg & Co. Much of that cash went to firms that deliver content-such as Wmode-as well as the white-hot wireless advertising space that many hope will help fuel the growth of mobile data.
Last week’s funding announcements stood in stark contrast to news from InfoSpace Inc. that it will suspend investment in its direct-to-consumer business, including its recently launched Moviso storefront.
“I don’t think we’re seeing anything we didn’t expect to see” as the industry matures, said Julie Ask, a research director at JupiterResearch. “I think some of these folks just have too much optimism. But if you’re an entrepreneur in a small company, you have to have too much optimism.”
While the Seattle-area firm could still be well positioned to cash in on the wireless content playground-it has more than $400 million to fuel any initiative-it looks increasingly likely that InfoSpace will redirect its efforts toward its online businesses as well as a mobile search offering the company is polishing.
Perhaps no company represents the tumultuous mobile content space like Motricity Inc. The wireless entertainment company in August closed a $60 million round, pushing its overall funding past the $150 million mark since its 2001 founding, and is moving aggressively into the mobile marketing and messaging arenas. But the 400-employee company three weeks ago announced a reorganization plan to cut 10 of its 400 employees as well as 15 contract workers.
Of course, choppy waters on the mobile content seas are nothing new. Content providers have long been squeezed by carriers’ revenue-share models that can be onerous for both on- and off-deck activity. Network operators are increasingly making deals directly with content owners, cutting aggregators out of the value chain, and direct-to-consumer outfits face a daunting task in drawing users to their Internet storefronts. Some analysts believe that even VeriSign Inc.’s Jamster-the grandfather of the off-deck content business-has never been truly profitable.
While mainstream media companies such as Fox, which recently acquired controlling interest in Jamster, increasingly target consumers directly with mobile content, a handful of aggregators will fight it out to become the Amazon.com of the industry. And investors will continue to line up at the betting window in the hopes of picking the right horse.
“That’s how the VC money works,” Ask said. “They hope to hit-what?-one in a hundred? I don’t think that’s a bad thing.” RCR
