Mobile Couponing

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Mobile Couponing

Text of Mobile Couponing

GSBA 556 Business Development in the Network Digital Industry Abhinav Astavans

1. The business concept A way to link marketers and users in a mutually beneficial relationship, the SMS based mobile coupon solution. Marketers can identify users most likely to consume their products and increase marketing ROI. And users receive only the most relevant offers, reducing their search costs and helping them get value for their time and money. The business concept is best explained through the following usage scenarios Scenario 1: Sushi Bar in Santa Monica wants to give $10 off to - Males between 18-27, annual income > $50,000, when they are in Santa Monica, Ocean Park or Venice between 12:00 PM and 2:30 PM on Monday, Wednesday. Run for 2 weeks, no more than 100 coupons. SMSs based on Sushi bar campaign are sent, as conditions are met. Scenario 2: You have been going to a circuit city every week (maybe trying a product), next time, when you are about to enter the shop you receive a coupon for 15% off on any purchase. Scenario 3: User asks for Sushi in a text message to GOOGL from the mobile phone. Return SMS lists a sushi bar around the next corner and a $15 off coupon at the bar. The solution is built around the premise that search is the precursor to sale and that, the best search experience is able to predict exactly what the user wants, and the search term is just one among the many variables (about the user) evaluated before rendering results. It is a white label service sold to a carrier that allows them to serve coupons on the mobile phone via text messages. The service takes into account demographic information, location based information and the users own selection to determine a coupon most likely to be redeemed. 2. Why SMS A study by Engadget Mobile says that there will be 100% mobile penetration in the US by 2013. 84% of the US population already has mobile phones in 2008.

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GSBA 556 Business Development in the Network Digital Industry Abhinav Astavans

Also, in terms of mobile phone usage, data (SMS) is claiming an increasing share (as indicated by revenue figures). Data accounted for 17% of the total mobile revenue in 2007. This is expected to increase to 22% by 2017.

Among these data services, SMS (Short messaging) is the most popular. A recent Wirefly survey indicates that 65% subscribers use text messaging. Of this 29% are occasional texters and 36% are heavy texters, sending up to several hundred messages a month!

Clearly this shows the growing popularity of mobile phones and SMS text messaging as a communication medium. Other than the size of the market but what makes the mobile phone an attractive advertising platform is Consumers rarely leave home without their mobile phones. Mobile phones provide the opportunity to serve customers the advertising when they are already in consumption mode. (message me a discount coupon for the pizza chain round the corner, when I query a directory service asking for pizza joints in the area!). With the co-operation of mobile service providers (privacy concerns aside) advertisers can take advantage of the customers current location to serve context sensitive advertising.2

GSBA 556 Business Development in the Network Digital Industry Abhinav Astavans

Consumers carry their mobile phones wherever they go. Moreover, mobile phones are hardly ever switched off. (When was the last time you switched off your mobile phone?) Compared to mobile internet based advertising, SMS is far more widely used and are far less susceptible to the variances in device form factors and capabilities.

3. Why Coupons? Coupons are promotional messages sent to a customer in transaction mode. Jupiter Research estimates that up to 30% of the US mobile subscribers would like to receive mobile coupons. In order to be truly successful, however, such mobile tactics must focus on highly relevant offers, deliver value, manage frequency, and give the consumer control. Even for advertisers mobile couponing has several advantages over standard couponing techniques like Real-time offers Geo-targeting Personalization Time-of-day redemption tracking Triggering impulse purchases Lower cost of delivery 4. The ecosystem Two very distinct groups of customers Customer Group 3 End Users Mobile Coupon Mobile Coupon Companies Companies

Customer Group 1 Advertisers

Customer Group 2 Wireless Careers

Mobile PlatformThe diagram indicates current structure for our product you can visualize the mobile coupon component much more deeply integrated with the carriers (being a white label service)

The SMS based mobile couponing service addresses a 3-sided market between Carriers they get a share of the revenue from the marketers. Marketers subsidize the user. End Users User the service is free to the user. The advertisers pay in this market and the users are the free side of the market.

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GSBA 556 Business Development in the Network Digital Industry Abhinav Astavans

Is this a winner take all market? Multi homing costs are low, it is very quick and easy for the advertisers to signup to use the service and start sending coupons, the entire IT infrastructure is managed by the carrier and the carrier (our product) cares about volumes, security, and maintenance and support costs. The advertisers dont require committing a huge investment up front and having the flexibility to pull the plug whenever they want. Even for the users there are no significant homing costs. There are however strong cross network effects, as the number of advertisers on the platform increase, the users have better choice and more relevant ads can be targeted, users disclose more information about themselves by their purchase behavior and advertisers get higher redemption rates. While the users dont have a preference for special features the advertisers may like additional analytics and campaign management features which help hem better manage their marketing ROI. We feel that while this market is not a winner take all market. if we are able to gain traction with major carriers, we can build switching costs by controlling the analytics on customer buying behavior, advertiser preferences and campaign management and ROI tracking features. We feel that data will set us apart from newer players. Google is ahead of competition because of the troves of data it has. Mobile Coupon EcosystemComplementary

Access platform Access platform Advertisers Promotion Code Providers

Customers

Mobile Coupon Companies

Wireless Wireless Careers Careers

Code Go Green Non-Profits

Our solution differs from existing players like Cellfire, because it is an offering by the carrier A white label solution (green space)

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GSBA 556 Business Development in the Network Digital Industry Abhinav Astavans

Health of the ecosystem Go Green 1. Market size Mobile couponing is nascent and its hard to estimate the market, but some close surrogates provide some guidance. SMS marketing is a large market in the US already. Telephia reports that 63.7% of all American mobile phone subscribers are active users of SMS text messaging. This is up from 41% the year before and 25% this time in 2005. US SMS text messaging traffic saw 93% year-on-year growth in traffic for the second half of 2006 (CTIA). Verizon, the first US SMS text message provider reports more than a message per day being sent by its users. Worldwide mobile phone messaging was a $105B industry in 2007. Over 12.5% of this is premium SMS i.e. voting for American Idol etc. And here the user actually pays a premium to participate in an SMS marketing campaign!! Message-based marketing, where consumers may be strolling by a billboard or watching a television commercial that encourages them to text a code to a number to receive a coupon or enter a sweepstakes. According to eMarketer, this ad category is the largest by far for mobile phones and will reach $4.2 billion in 2008 Even by our own very conservative ground up estimation, this market is about $200M in 2008. A close competitor is Cellfire - which specializes in mobile coupons and is making the vouchers available via its Web site and text messages "We feel like the market is here," said Cellfire chief executive Brent Dusing, whose firm is doing national campaigns for Sears Portrait Studio and Hollywood Video. Cellfire started in 2005, and "when we started, we were just educating consumers. ... Now that we're here in 2008, we feel pretty good about market adoption." 2. Growth rateAll Figures in Billions Number of text messages sent per year Growth Rates Average number of text messages per mobile user in the world per year Growth Rates Average number of text messages per person in the world per year Growth Rates 25 2000 160 2001 250 56% 430 10% 40 60% 2004 500 100% 460 7% 100 150% 2006 1200 140% 560 22% 190 90%

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The market for SMS usage is expanding at a very fast pace. 3. Robustness5

GSBA 556 Business Development in the Network Digital Industry Abhinav Astavans

Currently Cellfire is the dominant player in the market and has been around since 2005. Cellfire has partner ships with several chains and has succeeded in getting its second round of $12M in funding by Silver Creek partners. There are several other companies that are offering variants of the couponing services and doing well. Cellfire has about half a million users today, and 70% are under 35, said CEO Brent Dusing. "There will be millions of people on this program in the future," 4. Niche creation - White spaces Our business model is built around capitalizing one of the many niches available in this market space today. There are huge opportunities in getting information from carriers to create more targeted campaigns. 5. Value proposition

Value to the users The users d