Can You Hear Me Now?

REVIEW SUMMARY
Businesses. MobileBits, Sarasota; Proximus Mobility, Sarasota and Naples
Industry. Technology, Marketing, Mobile phones
Key. Local firms are trying to capture the next wave of marketing to mobile phone users.

The next technology industry gold rush could be stowed away in some of the four billion mobile phones used throughout the world.

At least that's what a few entrepreneurial Gulf Coast businessman hope to dig in on.

Indeed, three startup technology veterans, one in Naples and two in Sarasota, have bet big money that the Next Big Thing in technology and Internet marketing will be reaching out to people through mobile phone ads and messages. They plan to use a host of new technologies to get there.

“This isn't a fad,” says Dan Miller, a Sarasota entrepreneur who has been behind several mobile-based and technology startup firms over the last decade and is an adviser to one of these new companies. “Content will be created and consumed this way and you will see many entrepreneurs go into the field.”

The trend is also amply supported by the industry's biggest players. For example:

• Google closed on a $750 million stock deal to buy Silicon Valley-based AdMob May 27. AdMob is an advertising marketplace for mobile phones that also offers real-time research on who views ads;

• Apple bought suburban Boston-based Quattro Wireless in January for $275 million. Quattro is considered one of AdMob's largest competitors;

• Microsoft recently launched a Mobile homepage and a voice-powered mobile navigation application;

• Yahoo! recently unveiled search applications for the iPhone.

Two Gulf Coast companies in particular want to get in on the trend in different ways.

One firm, Sarasota-based MobileBits, aims to provide answers and targeted ads to mobile and smart phone users through its patent-pending 'answer engine,' which the company calls an amped up Google for the mobile market. Walter Kostiuk, who helped launch an applications division for BlackBerry when he worked for the mobile phone's Canadian-based parent company in the 1990s, founded MobileBits last year.

MobileBits raised $3 million in startup funds from angel and venture capital investors during the first six months of 2010, says Kostiuk, who hopes to raise an additional $2 million in the next six months. That is on top of the $500,000 of his own money Kostiuk used to fund the company in the early going. Miller sits on MobileBits board of advisers.

“We represent a higher risk investment,” Kostiuk says, “but we have a much higher upside.”

Proximus Mobility, meanwhile, seeks a jumpstart on what some other industry experts consider the next niche within the niche: Mobile phone advertisements and messages that are sent to potential customers at the so-called 'point of sale,' such as the moment they enter a sports stadium, a shopping mall or a big-box store.

Proximus, which has offices in Naples and Sarasota, hopes to sell the hardware and then lease the software for the technology to mall landlords and big-box stores like Best Buy. “The company's primary goal is to eventually create a localized mobile advertising network throughout the world,” it states in an investment prospectus.

Competitive advantage
Proximus plans to charge $500 for the hardware, which is a black box the size of a soda can that plugs into a wall outlet. Then a retailer or landlord would lease the software through a two-year contract for $100 a month per device. The devices work at a range of about 270 feet from the box.

Here's how it works: When a consumer walks into an entity using Proximus, say a mall or a football stadium, his mobile phone will get instantly get zapped with ads or marketing messages. It could be for a sale on TVs that ends in 15 minutes or a message to buy one hot dog, get one free.

The product can work with a variety of mobile phone connections and technologies, including Wi-Fi and Bluetooth. That's a distinct competitive advantage, Proximus co-founder Michael Zeto says, because some of the firm's competitors can't work on Wi-Fi.

Zeto, who lives and works in Naples, co-founded the company last year with David Rippetoe, who works out of a Sarasota office. The pair met when they worked at Naples-based INgage Networks, an Internet software firm that changed its name from Neighborhood America last year. (Miller, the MobileBits adviser, is an executive vice president with INgage Networks.)

Rippetoe and Zeto are working with partners in India and Brazil and hope to eventually reach into Canada, in addition to the United States. The products are currently in a test phase in a few markets and stores, including a sports bar in Naples co-owned by Zeto.

The co-founders have self-funded Proximus so far, at a cost of about $100,000. They now seek up to $1 million in angel and venture capital money to pay for more research and development, in addition to sales efforts. The company has two fulltime employees in addition to Rippetoe and Zeto.

Raising capital has been a challenge, but not necessarily because the recession has pushed away potential investors, Zeto says. Instead, the challenge lies in finding angel investors who understand the company's risk, potential and business model. “The hardest part has been getting angels engaged,” says Zeto.

Rippetoe and Zeto pitched Proximus to a room full of potential investors at a recent Gulf Coast Venture Forum meeting. But no one took the plunge. Zeto and Rippetoe also recently talked startup strategy with top executives at Sarasota-based IntegraClick, a $120 million online marketing company run by John Lemp, the Review's 2010 Entreprenuer of the Year.

If several ifs go their way, and they get more funding, Rippetoe and Zeto can see Proximus becoming a $5 million or $10 million company in a few years.

“There is no clear market leader [and] our timing is good,” says Rippetoe. “We are ahead of the market.”

Answers in Motion
Like Zeto and Rippetoe, Walter Kostiuk of MobileBits oozes optimism.

“People want to ask questions and get answers in one click,” Kostiuk says. “And they want to do that in the quickest and easiest way possible.”

Kostiuk hopes that way will be through the MobileBits Answer Engine. The idea is to take the success of Google and make it work on mobile and smart phones, but in the form of answers to questions, not links to other sites.

The technology behind MobileBits uses what's known as semantic search methods, which is a way of interpreting search requests based on a full phrase, not just keywords.

MobileBits plans to generate revenue from its answer engine through selling ad space to specific clients related to the searches and answers — a similar concept to ads that show up on Google searches.

Kostiuk has been involved in mobile phone technology for more than 10 years. In the late 1990s he worked for BlackBerry manufacturer Research in Motion, where his roles included developing software and applications for the phones.

That's how he and a team of engineers created AskMeNow, an early mobile phone answer engine. “People loved using the applications,” says Kostiuk, “but we found we couldn't make any money off it.”

Kostiuk, however, hopes to make money on MobileBits, which is publicly traded (OTC symbol: MBIT). In fact, a MobileBits investment document projects the company will have annual revenues of more than $10 million within two years of the product's full and official release — which Kostiuk says is at least a few months away.

In the meantime, Kostiuk recently hired a few people to build and protect MobileBits. The new hires include a director of marketing and advertising and a fulltime on-staff attorney.

One advantage Kostiuk says he has is that the industry is so vast and wide, and, like Zeto and Rippetoe at Proximus, he's in it early. Still, he also knows timing is crucial, because the industry's giants are already lurking.

“We feel like we have a window of opportunity here,” says Kostiuk. “It's just a matter of time before Google closes [it].”

Elevator Rides

The elevator pitch, a staple of any entrepreneur's playbook, gained popularity in the late 1990s when venture capitalists and other investors were eager to fund startup technology firms.

The elevator pitch should still be a key part of a startup's efforts to raise capital — even in the recession, where investors are harder to find. The idea is to have a 30-second pitch on the company's high points, in case you meet a potential investor in an elevator.

Here are elevator pitches for two Gulf Coast technology startups, MobileBits and Proximus Mobility.

• MobileBits:

MobileBits is a global technology company specializing in delivering automated mobile answers and highly targeted advertisements through its MobileBits answer engine.

Utilizing its proprietary technology to offer natural language interaction, MobileBits is able to respond to user queries posed in common language and deliver a relevant answer as well as related information. Answers to queries are sent back via customized mobile web interfaces found on leading mobile smart phones such as the iPhone, BlackBerry and others. 

• Proximus Mobility:

Proximus has developed a proximity marketing, hardware and software solution that distributes rich content (coupons, offers, video and music clips) to mobile phones in localized areas. Proximus' ideal customers include retail locations, restaurants, stadiums/arenas and malls.

This allows consumers to easily find offers, information and discounts from businesses around them. And it makes it very easy for them to take action at that point in time or later, while giving them the ability to filter and screen offers, all while engaging in a green friendly marketing approach which they can forward to their friends.