CEO Series: Interview with Andrew Osis, CEO Multiplied Media - developers of the Poynt Mobile App

This is the first in a series of interviews conducted with CEOs of interesting Canadian technology companies. The intent of this project is to provide investors with a unique understanding of what various companies are doing - directly from the top dog. Hopefully, the interviews conducted over the next few weeks will help investors to gain insight into the fundamentals of the companies to which they may not otherwise have access.

The first interview conducted is with Andrew Osis, Chief Executive Officer, Multiplied Media (MMC.V). The company is headquartered in Calgary, Alberta and has developed the wildly successful and award-winning mobile search application for Blackberry called Poynt.

RES: Considering that the Poynt application is one of the hottest Blackberry apps on earth right now, what are you doing to maintain momentum?
AO: Yeah, well we're pretty pleased with the ramp so far. We are in four countries right now, which are Canada, the US, all of UK, which includes Scotland, Wales and Ireland, and also Germany. So far, we have had over 3 million downloads and we have 1.5 million regular users a month and we average about 500,000 queries a day. And our user base is growing at about 1% per day. So far, we are the number 3 or 4 most popular RIM app in every country we are in. How are we maintaining momentum? First we are trying to deploy in every country that RIM is in, and on the 15th (Dec) we are scheduled to add France, Spain and Italy. We are also getting great feedback from our customer base, which gives us ideas for new services that they want. On December 15th we will be launching a gas prices service in the US. You'll be able to search for the best gas prices nearest you. Also, if your fuel light is on, you'll be able to search for the closest station. We get 400 emails a day from users giving us ideas so there are likely to be more services added to the platform in the future.

RES: So how do you make money from the new gas price service?
AO: It will be an ad model - its a good spot for gas retailers to advertise, auto insurance, or someone like Tim's. We expect to see meaningful revenues by the end of Q1 or early Q2.

RES: It's pretty well known that most free mobile apps downloaded don't generate any revenue and most are immediately ignored. What's different about Poynt?
AO: first of all, a lot of apps downloaded are novelties like iFart or iPuke which people giggle about for a few minutes, then forget about it. Other than that, most of the free mobile apps downloaded are still games and people tire of them quickly. It's like going to a dollar store and buying a glow-stick. Lots of cheap fun for a few minutes and then the glow-stick dies out. Poynt is a utility that solves real problems and supports a lifestyle. The good thing about it is that it is multi-locational and time-sensitive - it gets people out of jams - so people keep coming back and using it.

RES: So the big question is - how do you make money?
AO: We get paid in a lot of ways. If someone buys a movie ticket, we get $0.25, if someone makes a dinner reservation, we get $0.80. For search, depending on the local partner, we get paid in many ways. We get a query rate from our directory partners ranging from $0.20 to $50.00 depending on the company, the industry and the action taken by the user. In some cases, we receive a click-through fee ranging between $0.20 and $0.30, and we also get a page impression rate like on the web.

RES: Those are a lot of moving parts, so what is the simplest way for an investor to measure the progress of Multiplied Media?
AO: We think tracking user growth is one area. We should enter Q1 with about 2 million users. Right now about 70% of the user base represents about 10 to 12 queries per month. We are at an early stage of monetization, so we are looking at about $0.015 to $0.020 on average per query per month. So we are probably at about $0.20 per month per user going into the new year. As traffic builds, investors can follow us based on that.

RES: What is not well understood about Multiplied Media that investors should know about?
AO: Number one, I think is the revenue ramp over the next twelve months. There is a real multiplier effect - why do you think we call ourselves Multiplied Media? Just kidding. But seriously, we are tracking towards ten million users by the end of 2010. We will enter the year with two million users with four countries and three just launching. We will add several more countries during the year. On top of that we will launch on both the iPhone and the Android platforms during the first half, and add a few more services. But I think the real opportunity is that we are just scratching the surface of monetization. We are averaging just under two cents a query right now. We are learning every day, and the more we learn, the better we get at monetizing. Also, we won't begin benefiting from some advertising programs until Q1, and we won't be adding local couponing until Q3. We can see moving our revenue per query up from two cents to eight cents by the end of 2010. Combine that with 10 million users, and probably more than 10 queries per user per month, and, well, you can see the potential.

Secondly, people do not yet understand the power of Unomobi's intellectual property. It retains patents on GPS and user profiles to push advertising to mobile devices.We see the potential for significant future royalties because anybody who places an ad on a mobile device using GPS violates the patent. Also, it puts us in the position to be dominant among the ten or so serious competitors in local search on smartphones. Unomobi also brings some patents that allow us to deliver ads to feature phones in a similar way. As you know, there are billions of those handsets worldwide.These are key patents that give us a competitive edge.

RES: The Blackberry platform is a great starting point for you. Does RIM care about what you are doing?
AO: As one of the top three or four apps in each of the markets that we are in, RIM has taken notice. We are on RIM's Developer Advisory Committee, so we get really good insight into new capabilities as they are developing. Also, the RIM sales force promotes Poynt to telcos to put us on the deck wherever they have a presence. One day we hope that we are popular enough to be considered a native application.

RES: Porting to the iPhone platform seems like a natural progression. But with over 100,000 mobile applications sitting in the App Store, how to you stand out?
AO: The Poynt application for the iPhone is being reviewed in December by Apple and we expect to be live at the end of the month or in early January. We will have a big launch at the CES (Consumer Electronic Show) that runs from the 7th to the 10th. We will have a booth in the iLounge. Incidentally, we will also have a booth with RIM, too. Apple counts every country deployment as an individual app - so even with 100,000 apps, there is a lot of double counting. There may be around 20,000 actual individual applications on the platform. In our category there are only a handful of players and even fewer that would be considered serious. Probably Yelp, Where.net, and in the UK, Layar. We think that we have a definitive advantage over apps like Where.net and Yelp because we are international. Poynt works as well in London as it does in New York, or Toronto. Where and Yelp are US-based only. I should also say that there is so much room to grow for everyone that there is little chance of head-to-head competition for quite a while. The whole market is just formulating.

RES: Are you fully funded right now?
AO: We are unique in that we are intent on generating cashflow as we scale. We have resisted the advice of many to acquire users at all costs. As a result, we believe that we are fully funded to cashflow breakeven. That being said, if something really big happens like a native app deal, or a major telco platform deployment, we may need some additional working capital. But for now we are good.

RES: What about Android?
AO: We are working on that as the next platform after iPhone and we are targeting a beta launch in February.

RES: What are your per user acquisition costs?
AO: As of now, we have spent $1000.00 total to enter the RIM Developer Challenge and the GSMA developer contest. Since it first launched in the summer of 2008, the growth of the user base has been entirely viral. So, we have essentially spent $0 per user to get to where we are now. We are spending some marketing dollars on brand awareness to the telcos.

RES: At maturity, where do you see your margins?
AO: We don't know when we will get to maturity, but it could be in the next 24 to 36 month, we have near 100% gross margins, and our EBITDA margins could settle in at around 40%. Maturity is tough to predict because we are a fast growing company in a fast growing market.

RES: Where are you concentrating investment?
AO: Customer management, handling feedback and responding to it with new features and improvements. Also, deploying on more platforms.

RES: Do you plan on making any more acquisitions in the near future?
AO: For the next 24 months we are focusing on organic growth. However, if something comes up in the future that improves our technology, or increases our distribution of users, we would look at it. It would have to contribute to speed.

RES: Do you think that Multiplied Media will last until maturity?
AO: We are building a lasting business with a ten year horizon. Although we think it is highly likely that as the market expands someone will come knocking on our door. Local search is an area of intense interest right now so we think there may be companies within the search, handset, telco, and advertising industries that may find what we, and our competitors, are doing to be of interest.

RES: Where is the inflection point to critical mass?
AO: At 700,000 users you can say "we are real". At two to three million users, the industry pays attention. At seven to eight million users you can say you are a bit of a phenomenon. Above that, possibly a juggernaut. We believe that we can get to close to ten million users as we exit 2010.

RES: Now the final classic question, what keeps you up at night?
AO: My kids! Actually, the wind is at our back, and I'm enjoying the ride. The one thing that I think about is, are we going fast enough?

I would like to thank Andrew for his time, and if there are any inaccuracies within the interview, it is probably related to my inability to read my own handwriting.

Based on the momentum showed by this company so far in 2009, look for Multiplied Media to be on the RES Free Thinking Top 5 Pick list for 2010.

Next up: Tom Douroumakos, Chief Executive Officer, Guestlogix.

Disclosure: I own shares of MMC.V and I use the Poynt application a lot.

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