This year's Mediatech conference offered eager entrepreneurs a chance to show off their latest ventures. David Woodward was there
There's a fine line between boom and bubble, but often a useful barometer is the number of VCs in the room. At Mediatech 2007 yesterday, there were almost as many venture capitalists as there were technology entrepreneurs. You can, of course, take that both ways. Doug Richard, chairman of data company (and event organiser) Library house, naturally preferred to focus on the positives. "The UK is sweeping most of the money right now—and most of the deals," he said. Library House data backs that up, with London well ahead of its nearest rivals Paris, Helsinki, Berlin and Tel Aviv, both in number of deals and amount of cash invested.
Richard's company has managed to carve a successful niche out of defining and measuring the tech sector's second bite at the cherry, and perhaps more so than during the last tech boom, it has good news to report. European VC investment into "mediatech" companies has risen by over 50 per cent since 2006. Library House defines mediatech companies as those that supply technology-enabling platforms for video, gaming and music—and the companies that provide that content. There are 2,000 such start-ups in Europe and Israel, said Richard, the majority offering video and mobile services.
Mediatech delegates heard from a variety of entrepreneurs, many of whom delivered high-pressure "elevator" pitches—not easy when you're standing in front of a huge IMAX image of yourself and former BBC Dragon Doug Richard is waiting in the wings to deliver his caustic verdict. Blyk co-founder Antti Öhrling had longer on the podium than most. Back in September, the Finnish entrepreneur helped to launch Blyk, a free mobile network for 16-24 year olds, paid for by advertising. In a direct plea to the media suits in the audience, Öhrling claimed that mobile is the most effective advertising medium. "There are three times as many phones in the world as there are PCs," he said.
But wouldn't savvy 24-year-olds simply skip the ads and claim the free calls anyway? Not if the ads are targeted, reckons Öhrling. Users must divulge their likes and dislikes before they are signed up and Öhrling believes this separates it from spam. "The ads are targeted—they are not annoying," he said. "You cannot exist if you spam your audience. People value ads that help them organise their lives." In tests, Blyk has managed to generate "between 12 and 43 per cent, per campaign," said Öhrling. By contrast, "Online ads are happy to get 0.02 per cent response." Blyk's target for year one in the UK is 100,000 users. "Just think how many views a normal online ad campaign would need in order to generate the number of responses we get. Advertisers want interaction because it gets results."
One of the day's big questions was actually whether start-ups needed advertisers at all. Michael Smith, who at 33 is now considered something of a start-up veteran, used his slot to launch his latest Web venture, Moshi Monsters. The site is aimed at children as young as eight and allows the customisation of individual monster characters that develop through interaction with friends—a kind of social gaming site for Facebookers' kids. "It's not niche," said Smith, who launched his first website, firebox.com, back in 1999, "it's actually quite mainstream when you consider the success of Club Penguin and barbiegirls.com." Nintendogs, he added, sold more than 15 million copies worldwide.
Although the site will be marketed to kids, Smith is banking on their parents stumping up a subscription fee from April next year. But for now the games are free to play. "We won't use traditional marketing methods," he explained, "because one thing we've learnt about these types of sites is that they take off extremely quickly. In any case," he added, "this isn't about marketing, this is about building a compelling product that is simple, straightforward and, most importantly, safe to play."
"Compelling" was word of the day. The entrepreneurs spoke continually of compelling offerings and propositions, but all the VCs wanted to know was how they were going to turn happy customers into paying ones. Emily Melton, a director at US VC Draper Fisher Jurvetson, was keen to hear how all the Facebook clones were going to persuade loyal users to share their homepages with advertisers. "If you're looking at a load of drunk pictures of your friends from last night, then a Miller ad popping up alongside isn't necessarily going to work," she said. "There are different circumstances for getting people to pay for content, one, because they aren't used to it, and two, because there isn't a universal micropayments system that sits underneath it all."
The issue of broadband capacity polarised opinion. Content providers, who some believe should bear part of the financial cost of a network upgrade, were in general happy to skate over concerns that ever-increasing numbers of streamed-content start-ups might cause the net infrastructure to buckle. Channel 4's Cosmo Lush was asked what he thought ISPs should do about it, which was a bit like asking Coca-Cola how the supermarkets could extract more margin from selling soft drinks. Luckily, Lush had a pre-packaged answer: "They need to become content providers themselves," he said. "Tiscali has just done a deal with Setanta," for example, although "investing in content is an expensive game." Technology providers were, perhaps understandably, less sanguine. "Is the bandwidth crunch coming," asked Rawflow's Mikkel Dissing. "Absolutely."
Nobody could tell whether there was a bubble coming, of course—not even the analysts. But some of the talk was suspiciously last-century. Gunnar Larsen, product marketing director for mobile at RealNetworks, had this to say about the ultimate revenue model for mediatech companies: "You don't have to monetize straight away. You can often learn more about your customer first, learn what they like, what they don't, and then start to make the product more compelling." His inference being that you can only start to "monetize" when your product becomes "stickier". Reassuring words for the people at Skype, but he might as well have said: "build it and they'll come."
Posted 21 November 2007 : Director.co.uk