A Yotta Insights on Making Money in Mobile, from Dan Shapiro of Ontela

While a lot of people were out enjoying the sunset and discussion at Seattle’s Olympic Sculpture Park last night—see TechFlash and TechCrunch for a nice recap of the Naked Truth startup gathering (and thanks to Seattle 2.0 TV for broadcasting it)—there was another compelling event happening on the Eastside.

This one, hosted in Bellevue by TIE Seattle, was about how to make money in the mobile industry, from an entrepreneur’s point of view. (Sounds like there was some overlap with Urbanspoon co-founder Ethan Lowry’s comments about iPhone apps at Naked Truth.) I asked Dan Shapiro, co-founder and CEO of Seattle-based Ontela, for his thoughts on the mobile event, since he was moderating the panel. He graciously agreed, and I’m printing his comments in full here.

Dan Shapiro writes:

“I had the honor of moderating a distinguished panel tonight for the sold-out TIE dinner event, “Making money in the mobile ecosystem”. Our panel followed the hypothetical conundrum of an entrepreneur with a brilliant idea that could be brought to life on a mobile phone. I was too busy thinking of questions to take notes, so I’ll post my best recollections here and ask for apologies in advance for quotes mangled, misattributed, or misunderstood.

The pre-panel keynote was delivered by Chetan Sharma of Chetan Sharma Consulting. Chetan shared some staggering numbers, most notably that we were on track to store a yottabyte, or a trillion terabytes, of information online in the next few years—and that the amount would double every 11 hours. He challenged everyone in the room to envision that world, and what the mobile interface to it could be.

Then, the panel kicked off. The first order of business was simple: with limited resources, which platform should our entrepreneur support first? John SanGiovanni of Zumobi made the case for the iPhone. With 11 applications in the app store and 8 that have hit top-10 status, his recommendation wasn’t hypothetical. He argued that the iPhone still represents the best intersection of audience size, device capability, and purchase intention. Brendan Benzing of Motricity took an interesting counterpoint and said that it was a trick question: this nascent business should focus on programming for the Web, a capable platform that is evolving rapidly and has the indisputable advantage of actually working on most handsets in the market.

So our entrepreneur, listening to this wise counsel, deploys a Web and iPhone version of the service and meets with a warm reception. Reviews are hot and sales are solid but not enough to make it big yet. How can our valiant developer turn a garage business into a sustainable company? Shiv Bakhshi of Mobile Perspectives put it simply: the elephant in the room is always the carrier. Wireless operators command a huge audience, and the easiest way to scale is through partnering with them. Mobile companies that ignore the operator equation and treat the market as a free-for-all are missing out on the big opportunities: the big moneymakers like Tegic, SnapIn, and Motricity get their money by working with carriers effectively.

Fortunately, we had Sajal Sahay of T-Mobile in the room, who did not appear to take offense at being called an elephant. While carriers may have a reputation of being hard to work with, Sajal told an inspiring story. An entrepreneur came to pitch a product with eight slides and a passionate vision for mobile that nobody else had shown them. They were intrigued, and worked with the entrepreneur to develop the idea further. Some months later, his company is VC funded and his product is ready to roll out to an audience of millions. This entrepreneur didn’t know a soul at the carrier prior to sending them his PowerPoint deck, and he’s now a major partner. The moral, he explained, is that it’s entrepreneurs’ jobs to show a compelling vision of the future. When that happens, carriers listen.

That, of course, brought us to the final challenge this entrepreneur would face this evening: getting funding. What would need to be in place for Len Jordan of Frazier Technology Ventures to write a check? Len gave us a list of his “turn ons” and “turn offs” in mobile. Turn-ons include working product, passionate users, and a space that’s underinvested, like mobile enterprise services and security. Turn-offs were application development shops, charging consumers a fixed fee for software (rather than content or a service), and companies that didn’t have a growth strategy to take them to millions of customers.

A rousing Q&A session from the audience followed, capped with a search for the embodiment of our hypothetical entrepreneur. Was any audience member willing to step up for a challenge: give the panel a 30 second pitch for a killer mobile app, unrehearsed and impromptu? The reward was tantalizing: instant feedback from everyone who mattered in the mobile ecosystem… carrier, analyst, wireless executives, and VC.

A hand shot in the air: Justin Wilcox. Justin was 29 seconds pitch-perfect: an iPhone app that lets you take a picture of text in a foreign language, then translates it instantly. Want to read a menu in China, or at your favorite spot in the I-District for that matter? Snap, and the translation pops up on screen. This $4.99 app is slated to go live in a month, and he wanted the panelists wisdom.

Len led the charge with strong praise. He pointed out that language translation is one of the areas people do pay for in mobile, and said the app sounded genuinely useful. Shiv seconded the motion, explaining that where there’s real need in the ecosystem, there’s money to be made. John suggested that there were real licensing and sponsorship opportunities as well; companies like Rosetta Stone sell products for a huge premium and would probably pay handsomely for new customer acquisition. Sajal was strongly supportive but cautioned him not to oversell the application’s capabilities; apps that overpromise and underdeliver are punished in the instant-feedback world of the app store. Brendan followed up with a cautionary tale about translation and machine vision companies that have to fall back on legions of manual workers, but thought that it was an excellent approach for quick-and-simple, noncritical tasks like translating a street sign or menu.

The information dump left Justin looking happy, if somewhat dazed; he told me afterwards that he’d almost left early, inspired by the discussion to get to coding, but couldn’t have been more glad he stayed. It was a great night for everyone, and no one more so than me: as the moderator, I had the luxury of being the only person in the room who had all my questions about mobile answered by the wisest experts in the field. It was a great night.”

Gregory T. Huang is Xconomy's Editor in Chief. E-mail him at gthuang [at] xconomy.com. Follow @gthuang

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4 responses to “A Yotta Insights on Making Money in Mobile, from Dan Shapiro of Ontela”

  1. Ron Diver says:

    Great narrative. Wish I could have been in two places at once. I’m impressed that Justin Wilcox is rolling out a compelling iPhone app while still running a tight ship during his day job as CTO of http://www.nimbushealth.com!