VLAB Mobile Application

Attended the VLAB monthly series this evening which had some really good take aways. However, the one thing they didnt' touch on that I wanted to hear more about was advertising within mobile applications. There are a couple of really interesting companies trying to innovate on this idea such as Mojiva and OMG Media. However it seems that its still to early to really be the sole source of revenue for these app companies.


Much of the panel focused on developers and what it takes to get strong traction. They felt that a focus on a simple and clean U.I. and a focus on the users feedback. By using payment models such as a free trial application vs. a strictly paid upfront fee, they are able to achieve downloads of a 10/1 ratio. By then offering premium services or a subscription model, they have been able to create strong conversion.

The other question that all entrepreneurs focus on when having a VC like Matt Murphy on the panel, is funding within the space, and what exactly the VC's are looking for. Matt explained that they're really focused on new mobile behavior and think that investing in mobile companies is one of the most dynamic growth markets. While they've invested in 7 companies out of their $100MM iFund, he expected that they would actually break the cap given the amount of potential they had seen. Furthermore, he felt that VC type returns were very achievable based upon the results he had seen so far in their investments. With the upcomming update for the iPhone OS which allowed for in application purchases, he felt that virtual good and purchases would create a thriving market, citing two Japanese companies who each were generating $1BB in revenue, with 80% coming from virtual good. Off hand, Zynga, one of their investments, is estimated to be doing over $100MM from virtual good sales and Tencent in China is another highly publicized example of the potential for virtual goods.

Circling back to the venture debt world, I think that the key to lending and banking these mobile companies will require a strict discipline to stick to banking principles. Its easy, much like in the Web 2.0 bubble, to lend in a sense on hype and user adoption. However, given the volatility of consumer behavior, until those users turn in to at least somewhat predictable revenue generation, caution must be exhibited.