Jumbuck, a mobile social network, bought rival Plutolife at the beginning of this month (PDF link here) for $3.7 million. I was interested to hear why. In the last couple of weeks I have been repeatedly asked by Silicon Valley venture capitalists where I see the value of mobile social networks myself and whether these sites would be easier to monetize than their online counterparts.
Australia-based Jumbuck (ASX:JMB) has reported a sales revenue of $7.4M and an EBITDA of $4.1m in the second half-year of 2007. It has offices in Melbourne, London, Cologne and San Francisco. We’ve reported on Jumbuck before, saying that on-deck companies like Jumbuck would feel a particular need to develop an off-deck initiative. I’ve heard rumours that Jumbuck has been lookingto buy a mobile social network with substantial off-deck traffic for some time. I recently asked chief executive Adrian Risch some questions to learn more about the decision.
VentureBeat: Was Plutolife the only candidate? Or did you look for acquisition candidates? If, yes, how long did you search and who did you talk to?
Adrian Risch: We are regularly looking at opportunities in the mobile content space and will continue to do so.
VB: Jumbuck’s business has been on-deck. What does Jumbuck hope to gain with the acquisition.
AR: Plutolife generally uses Premium SMS to monetize their services and they are experts in off-deck mobile communities. Jumbuck makes the majority of revenue ‘on-deck’ using carrier micro-billing systems, so we were keen to boost our exposure to the ‘off-deck’ market and Plutolife was a perfect fit.
VB: How do you describe your value proposition? In your words, what’s your business model?
AR: Jumbuck is a place for people to meet new friends. Our business model revolves around the provision of chatrooms and real-time dating service over mobile and web.
VB: How will you be able to make money out of off-deck mobile social networks?
AR: Plutolife already are making money using Premium SMS. Sometimes they market directly on TV or magazines in partnership with larger media firms, sometimes they promote via a carrier portal. If we can emulate their Nordic success in the US, we are looking at very healthy revenues.
VB: Where do you see the value of mobile social networks ? In particular, where is the value in an off-deck mobile social network?
AR: Well, purely advertising-based off-deck mobile communities are generally struggling from what we have seen. We are still believers that you need to partner with the mobile operators in order to actually make money on-deck or off-deck.
Some carriers are opening up their portals to more of a web-like model and that’s where off-deck services from Plutolife really excel because they use a ‘freemium’ model. The apps are free to use but monetize with Premium SMS features.
VB: What did you like about Plutolife?
AR: We really liked the look and feel of their services, plus the apps were already attracting strong usage on a few US mobile operators such as Alltel and T-Mobile. Plutolife were in the past white-label providers for some major dating brands in the US, changing to 100 percent in-house recently, so globally they are at the cutting edge in this area.
VB: How do you see the take-off of the mobile web?
AR: The mobile web has been growing for years but Apple fired a rocket under it with the iPhone launch. We bought our first iMac six months ago and the PC developers stared at it like that widget in the IBM commercial where someone says ‘does it have an adapter for Europe’. I look forward to vastly quicker mobile web browsing across all devices, so we can offer video, larger images, nicer GUIs and more effective advertising in our products without degrading the user’s browsing experience.
VB: What’s your view on the emergence of Myspace and Facebook in mobile? Are carrier deals harder to get for you these days?
AR: We have a direct relationship with every major North American wireless carrier and many other major carriers globally. So for us it is more of finding great products to deliver to existing customers rather than signing up new customers. Myspace and Facebook are more ‘friend-management’ social networks, where the users plug in all their details and check who is doing what every now and then. Jumbuck is a ‘friend-finder’ social network, where you can meet new friends for a casual chit-chat, flirt or date. So we have co-existed nicely for years with the other larger players and don’t see this changing anytime soon.