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Licensing & Open Source

Droidcon, Berlin - 4 Nov 2009

Volker Hirsch
CEO
Blue Beck
Who is this guy?
Investment Opportunity: Little World Gifts
(redefining digital gifts)
Opportunity
Little World Gifts offers an appealing investment opportunity for
investors seeking significant returns from early stage investment in
high growth markets. Little World Gifts is positioned to maximise
returns through creating a new market for digital goods on mobile
starting with the iPhone platform with deep web and social network
(Facebook) integration. The opportunity builds on the exciting
landscape of the booming (yet still early and undeveloped) mobile
smartphone space, and the potentially enormous (and also early)
digital goods space. With extremely low overheads and high
margins, the company is set to turn over £2m in year 1, 50% of
which is profit. With a valuation of £2m (Year 1 profit x2), Little World Gifts is seeking £150,000 Angel investment
ahead of launch in exchange for 10% equity in the business. This is an opportunity to get involved early in a
dynamic business at the very leading edge of both the digital goods, and the iPhone / mobile 2.0 sectors.

Enormous Market Potential


Corporate Strategy - Licensing - M&A
The potential market / isCorporate Finance
for Little World Gifts
large now, and growing rapidly. The Digital
Goods Market will see exponential growth in
coming years, and whilst iPhone already
has a strong customer base of content
hungry consumers (70% of customers pay
on average $80/year) for content in the
iTunes App Store), smart phone usage is set
to increase dramatically. Little World Gifts
will be on 50% of smart phones by 2014.
Growth in Global Mobile Marketing Spend
$5.70bn !
In addition there is an increasing demand for mobile marketing
and for digital goods solutions (as a key part of a digital
marketing strategy). Mobile will be more appealing and attract
$2.16bn increased marketing spend by brands. ($5.7bn in 2014).
$1.70bn

2009 2010 2011 2012 2013 2014

Growth in Digital Goods Market


$7B
Digital Goods (and specifically gifts) have
been popularised by services such as
QQ.com (China), Cyworld (South Korea), $4.67B
Why am I talking about Licensing?
Here it Comes
Q: Do brands care for open source?

A: No.

Brands are platform-agnostic.


Licensing rationale

Developer

License

$$ $
How (on earth) do I
get a license?
Common Solutions:

1. 2.
The Average Licensing Model
(Simplified Version of how it was, is and always has been)
• Go back to

• Developer looks at
roadmap and realises he
needs another license

• Developer distributes through his channels


• Licensor puts out RFP AND/OR
OR • Developer finds publishers and/or aggregators
• Developer approaches licensor directly to distribute it through • See green star...

• Game is finished and


filed for approval.
• See the green star...
• Developer prepares reply to RFP
OR • Developer waits for
• Developer prepares offer outlining • Developer goes ahead. approval.
creative concept and commercial case. Finalises beta build and
files for approval. • Licensor approves
design.

• Developer gets formal


• Developer manages to get Licensor’s design document under
• Kick-off meeting between
attention way and files for
Licensor and Developer: will
OR approval.
include creative teams, approval
• Developer loses...
departments, etc. Look for
introductions to other licensees
• In the latter case, go back to as it helps with co-marketing
• Deal is signed!

• If successful, Licensor comes back with


huge royalty (“50% minimum!!!”) and MG • Period of negotiations between expensive lawyers
demands (including sizable up-front over every little term (“best efforts” vs
payments; “mid-6 figures”). “commercially reasonable efforts”, etc, etc, etc, etc)

• Developer (or his banker) gets heart attack and pushes


back with elaborate explanation on development effort
needed. • The Parties negotiate hard and for weeks
(or months) until they reach common
ground (which Licensor think is shabby
and leaves Developer wondering how to
ever repay his debt...
Result

1. Lucky 2. Not so lucky

This game delivered on brand value, I am not saying that this is a bad game.
execution and commercial success. But it IS a poor use of a brand.
Not very compelling.
Show me the money...
It’s in your pocket...
Catchy phrase inspired by Jonathan MacDonald

Just ask the right question!


BRAND Licensing

Q: What do brands look for?


A: Users.

Users are also commonly known as “customers” or “consumers”


Sell or Else...

David Ogilvy
BRANDS...

• Sell Services & products.

• Promote their Image & Message.

• Open additional revenue streams...


- Licensing!?

Licensing is NOT core!


Media vs Non-Media Brands

Non-media (e.g. VW, P&G, Carling):


extend their brand and image.

Media (e.g. FT, Hasbro, Fox):


(also) building additional verticals.
The right question:

How can you help them?


Here’s your Pitch:
Use Media to Extend Reach!

Digital media advantage vs


analogue media:

interactive, i.e. multi-directional.


Use Mobile to Extend Reach!

Mobile is the most powerful


digital medium to date.

Why?

1.It’s Big (numbers)


2.It’s Personal (nature)
3.It’s really personal
(Identification of needs)
480,000,000
Daily global circulation of newspapers

1,500,000,000
Number of Internet users

1,700,000,000
Number of credit cards

2,250,000,000
Number of tooth brushes in use

4,600,000,000
Number of mobile phone subscriptions
The Nature of Mobile: It’s a 1st!

• Personal mass media


• Always carried
• Always on
• Built-in billing system
• Always present at the point of creative
impulse
• Accurate audience identification

Tomi Ahonen, Mobile the 7th Mass Media, 2008;


Alan Moore & Jonathan MacDonald, The Glittering
Allure of the Mobile Society, 2008
Significance of Mobile to Users...

• 91% of people have their mobile within arm’s reach 24/7.


Morgan Stanley 2007

• 64% of Americans are not willing to share their mobile with


anyone. 60% of married people will not share their mobile
with their spouse! Wired Magazine 2006

• I takes an average of 26 h for a user to report a lost wallet


but only 68 minutes to report a lost mobile phone.
Unisys Survey

• 8 out of 10 German men would rather lose their wife than


their mobile phone.
Jonathan MacDonald; Survey of 10
German men at 1am in a bar...
... and how Brands use it...

• In 2008, Procter & Gamble spent 0.17% of their


advertising budget on mobile.
Informa/Acision/OgilvyOne

• Volkswagen spent 1% of their DIGITAL budget on


mobile (that was 2008...).
VW CRM Manager cited by Andrew Grill

BUT

Volkswagen also just announced that the ONLY


campaign for the 2010 VW Golf GTI will be an
iPhone Game (“Real Racing GTI”)... Quick learning!*
* This is autumn 2009
(c) gapingvoid
Change the Language...
Engagement!
• Engage, don’t lecture.
• Be Sincere. Mean what you say.
• Result: users become brand ambassadors.

+ No Fine Print

YOU!
Engagement!
• Games & apps are perfect for this!
- Interaction.
- Less intrusion.
- Brand takes centre stage: shine!
- Love it, recommend it.
74% of all purchases are made because of
recommendations by friends!
Bain Consulting
Old World vs New World: It works now.
176x208 J2ME games Current-generation iPhone games
X
01100110101101001100100100100
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01100110101101001100100100100
10100110010011100101010101110
01100110101101001100100100100
Brands’ and Users’ Perspective:
Shine, not tech talk.

vs
Damn’ it! This all smells of
iPhone!

Where’s Android?

(c) gapingvoid
It’s here: Well, it COULD be here (if the Open
Handset Alliance executes well).
Let’s ask again:

Q: Do brands care for open source?

A: Yes.
This is why:

123,296,966,069,999,387,456

The Law of Big Numbers


How Android apps compare (1)
APPS AVAILABLE FREE AND PAID
Total # of apps Paid vs Free
Apple Android BlackBerry Free Paid

12,000 Apple App Store 23% 77%


2,900

Google Android Market 64% 36%

88,000 BlackBerry App World 24% 76%

Distimo, CTIA San Diego, 2009


How Android apps compare (2)

Flurry Analytics Blog, 6 Aug. 2009


Android is set to explode.
Eric Schmidt, CEO Google
Inspiration!

t
Android’s Weapon

OPEN = Infinite scale!


Platforms

Vendors
The Equation:
Brands want users.
+ Users want good stuff (and don’t care if it
is open/closed, widget/app, this/that... as
long as it works)
+ Brands want big numbers.
+ Android has (OK: will have) big numbers.
+ Android can deliver kool-aid.

= Great Opportunity for Brands

(= $$ $ for Everyone [incl. Developer])


Summing up:

• Engage, don’t lecture.


• Treat licensing as a brand extension, not
as a (presumed) means to sell 0.x% more.
• Forget tech-heavy preaching. Just deliver
compelling stuff to your users.
• Deliver it in big numbers.

Got all that? You have a winner!

BTW: Winner means that the user wins! The rest (incl. $$$) comes then almost on its own...
Image & Video Credits
http://www.explodingdog.com/drawing/ihavenoidea.jpg
http://1.bp.blogspot.com/_Vr8Xl0cbUZA/SVJzaekjMQI/AAAAAAAAFWU/gvOyNNzcdis/s400/Image+%3D+clueless+is+no+excuse.jpg
http://www.mtco.com/~rkblack/Open-Door_0032a.jpg
http://filmgordon.files.wordpress.com/2009/03/conneryaston.jpg
http://www.gapingvoidgallery.com/images/talkedjgif002.jpg
http://www.iphoneincanada.ca/wp-content/uploads/2008/07/carling_ipint.png
http://www.mobileshop.com/blog/wp-content/uploads/2008/10/ipint-virtual-beer-under-fire.bmp
http://farm4.static.flickr.com/3250/3074199062_f434be862a_o.jpg
http://miraloqueveo.files.wordpress.com/2008/09/david-ogilvy.jpg
http://www.nationalserviceexpress.com/mogulus-user-uploads.s3.amazonaws.com/B6A8222A-4B39-2BD5-CF85-179823589EF8.jpg
http://gapingvoidgallery.com
http://nexus404.com/Blog/2009/10/23/2010-volkswagen-gti-presented-in-iphone-game-play-firement-real-racing-and-win-a-2010-vw-
gti-exclusively-on-the-iphone/
http://www.toptenreviews.com/i/rev/misc/articles/old_blog/blog_963_1.jpg
http://www.iphonic.tv/assets_c/2009/07/barclaycard-waterslide-extreme-1-thumb-430x285-92255.png
http://www.oneighturbo.com/wp-content/uploads/2009/09/01-oneighturbo-sciroccoR-iphone-091509.jpg
http://media.photobucket.com/image/papa%20roach/crazyOAgirlFERlife/Papa_Roach.png
http://www.youtube.com/watch?v=dPYM-XTqcec
http://markhirschfeld.files.wordpress.com/2009/08/open-door1.jpg
http://www.freeverse.com/assets/games/9003/screenshots/456/174114905.jpg
http://www.firemint.com/realracing/screenshots.html
http://i264.photobucket.com/albums/ii187/botvinya/worker_mechanic.jpg
Thank you!

+44 7843 599 678

@vhirsch

vhirsch@bluebeck.co.uk

http://bluebeck.co.uk

http://vhirsch.com/blog