A NEW CHAPTER IN THE BUZZCITY CHRONICLES

By Lai Kok Fung, BuzzCity CEO

Today, I am extremely excited to announce that MIH/Naspers has invested US$10 million in BuzzCity. They are buying a 25% stake in the company. This investment closes one chapter in our company's history and opens another.


THE BACK STORY

We first started talking to MIH (the investment arm of Naspers) about two years ago. BuzzCity's primary growth driver then was paid mobile services, not mobile advertising as it is now. But Naspers, an international media company based in South Africa, didn't find this business strategy exciting enough.

By the end of 2007, our mobile ad business was showing tremendous growth (see Note 1 below), so I contacted MIH again. Now that our business model had become ad-driven, we spoke a language that media companies understand. It didn't take long for MIH to make up its mind. By the beginning of 2008, MIH signaled it wanted in.

SO HOW WILL WE USE THE MONEY?First, I'd like to highlight that BuzzCity’s business is financially viable with earnings that adequately meet our operating expenses. This investment will enable BuzzCity to expand more aggressively than it would have otherwise. We'll put more people on the ground to talk with advertisers and publishers. We can build more localised versions of myGamma. And best of all, we now have the luxury of taking a longer term view. We don't need to be overly obsessed with short term returns in each new market. We can take time to build the brand by investing in marketing and public relations so that more potential business partners know about BuzzCity and the opportunities that exist in mobile social networking and mobile advertising. I expect BuzzCity will expand in Africa, Middle East and Latin America, and strengthen our operations across Asia, Europe and the US.

STRATEGIC BENEFITS
This investment means a lot more to BuzzCity, though, than an infusion of funds. It may sound cliched, but we really are gaining a strategic partner. In particular, there are two benefits that are readily apparent:

One, MIH has a presence and experience in many of the markets where we want to expand. These markets are experiencing explosive mobile Internet growth. But some of these markets are also characterized by difficult and sometimes opaque operating environments. We can tap MIH’s offices and personnel in these countries. This means we may share space with a company in the MIH Group in some countries, rather than open a new office. It also means there are professionals who can offer advice on how best to navigate the local markets.

Two, there are business synergies with a number of companies in the MIH Group, which includes Tencent in China, Mail.ru in Russia, Sanook in Thailand and MXit in South Africa. Some are leading Internet companies, others offer innovative mobile services in the area of instant messaging, billing and content aggregation. Since our offerings are complementary, it makes sense for our companies to go to market together. In the very near future, we expect to create combined offerings that will help BuzzCity attract more advertisers and publishers. In turn, BuzzCity can help MIH portfolio companies mobilize and distribute their existing media properties through our mobile community and monetize the resulting traffic through our mobile ad network.

(We were recently misquoted by a blogger – who was then quoted by other bloggers -- as having said that BuzzCity was in talks with an Indian entity about a strategic partnership. While this was not accurate, MIH/Naspers has equity interest in Indian companies like ACL-Wireless and Ibibo.)

CLOSING ONE DOOR, OPENING ANOTHER
Since MIH confirmed its interest in BuzzCity at the beginning of the year, it's taken a number of months to finalise the investment because BuzzCity is simultaneously restructuring its shareholdings. This required multiple negotiations as three of our initial venture investors – 3i, BancBoston and SPH Multimedia – are taking this opportunity to cash in their chips. (SPH Multimedia is keeping a small stake.) The industry jargon is "selective capital reduction" which simply means that BuzzCity is using a portion of the new round of investments to buy out the other shareholders. 3i, BancBoston and SPH Multimedia have been great partners and I would like to thank them for their support over the last eight years.

In addition, we have taken the important step to convert all existing preferred shares into ordinary shares. As is the case with many start-up companies, our early-round institutional investors purchased stock that carried special rights. Now, all shareholders hold common stock. This simplifies corporate governance and future financing.

I am really excited about the future. MIH's investment is a vote of confidence in BuzzCity's strategy to connect the "UNWIRED". With this new round of financing, I feel like BuzzCity is graduating from our adolescent years and that we are now ready to make an even bigger splash in the world of mobile communities and advertising. Stay tuned, or better yet, come join us on this exciting ride!

Note: A word about advertising. BuzzCity served 445 million ads in December 2007, a ten-fold jump from January. Today, the picture is even stronger. The number of page views served on the myGamma Mobile Ad Network rose 300 percent from August 2007 to August 2008. The index is growing 50 percent on average every quarter.

WHAT OUR INDUSTRY PEERS HAVE TO SAY

It's always great to be recognised and we enjoy reporting fun news, so here's the latest from the Awards Circuit:

FUTURE MOBILE AWARDS – SILVER MEDALIST
BuzzCity has won a Silver Medal for our contribution to Web 2.0 in the Future Mobile Awards.
 

"BuzzCity’s 'myGamma' community has made stunning headway in the mobile social networking space," write the judges. "It has successfully applied the D2C business model in an operator-dominated market (certainly, a Mobile Web 2.0 trait) and established a strong advertising base that hit 1.7 billion paid ad impressions in July 2008 ... (myGamma) is a shining example of how the social web can span demographic, as well as geographic divides."

A panel of judges from Juniper Research used a number of criteria to evaluate candidates, including commercial deployment, customer retention and growth, ease of use, functionality, innovation, pricing, revenue generation and user interface.

Juniper Research writes that The Future Mobile Awards are presented "to companies that (they) believe have made significant progress within their sector during the previous year, and are now poised to make considerable market impact in the future."

You can take a look at the full list of winners here.

ME AWARDS 2008
BuzzCity is a finalist at the ME Awards, which will be presented on 25 September at the Royal Garden Hotel in London. We've been nominated in the Best Communities Company category. These awards are produced by Media Entertainment, a trade publication dedicated to the mobile content industry. The other four finalists in this category are Flirtomatic, GoFresh, Peperoni and Shozu.

And on the conference circuit, Kok Fung will be speaking at the Next Generation Telecom 2008 Conference at The Raffles City Convention Centre, Singapore on 27 – 29 August, 2008; and the Mobie Web Strategies 2008 at Moscone West, San Francisco, on 9 September 2008.

PUTTING THE "SMART" BACK INTO SMART PHONES

By Hisham Isa, Vice President (Marketing)

 

Telephone manufacturers, mobile service providers and content producers need to put the "smart" back in "Smart Phones" by offering applications that improve users' lives.
BuzzCity recently surveyed mobile social networkers in more than ten countries. One theme that clearly emerged from our research is that wireless consumers want to be able to do more with their mobile phones. There's a demand for m-commerce, mobile banking, search, chat, dating and more. In some cases, mobile services like these may already exist in a country but consumers simply don't know about them (which means that providers need to do a better job of getting the word out).

There's no clear industry definition of what constitutes a "Smart Phone" -- but what comes to mind for most people are Palm Pilots, Blackberries and iPhones. These devices are targeted at business users. However executives are just a small segment of the market and these handsets are just one type of smartphone. But what about the phones the rest of us use?

Thanks to improvements in technology, most consumers now have access to multimedia internet-enabled phones. They want practical applications, including product information and the ability to act on it. For example, a supermarket can publish or sponsor mobile sites that offer recipes. The ingredients become a shopping list, which with the right m-commerce applications, consumers can purchase with their phones.

There are already some mobile recipe sites, but there's space for a whole lot more.

• Kraft Foods features a new recipe every day on its mobile website. Users can also search Kraft's databank of recipes, each one obviously featuring a Kraft Foods' product.
• Punjabi-Recipes.com has customised sites for both PC and mobile connections. There are hundreds of recipes here that you can browse by category (rice, snacks, chutney, etc.), popularity or date.
• You can search by ingredient on the Allrecipes.com's mobile site, which also features user-generated reviews and ratings.

None of these mobile sites, though, takes the obvious next step, which is to enable consumers to make a purchase. In the BuzzCity myGamma Digital Lifestyle survey, nearly three-quarters of respondents said they had made a remote purchase (by phone, mail or internet). And half of the respondents indicated they would like to use their phones to make financial transactions. So there is clearly a market here that is just waiting to be tapped.

Recipes are obviously just one example of the type of content that can be used as the basis for mobile communities and applications. Here are a few more:

More than half of our survey respondents are likely to look for a new job within the coming year, either because they will graduate from school or are looking to switch employers. Job Placement companies and online Job Banks, take note.

The electronic media – TV, movies, music – is by far the favourite leisure activity of myGamma members. Yet less than four percent of survey respondents have purchased movie tickets online or via their mobile phones. Either mobile ticketing services are not available or cinemas and ticketing agencies are not doing a good job of getting the word out.

And as mentioned, more than half of the survey respondents say they would use their mobile phones for financial services, if such services were available in their country. One-third would like to be able to transfer money. Yet mobile remittance services are already available in many of these markets. Consumers just don't know it. Banks and companies like Western Union need to step up their public education and marketing programmes if consumers are to use their services.

Of course, not every site needs to be based on commerce. Here's a website that definitely meets a need. With MizPee, you can locate a nearby a toilet and also check out its ranking ("Royal Flush" being the best, "Prison Toilet" the worst). Other pages of this website are based on e-commerce, with restaurant and shopping deals on offer, again based on locality. I'm not sure if MizPee has developed a mobile version, but if they haven't, they should.

So, let's not get too caught up in the iPhone media buzz. For the foreseeable future, the mass market multimedia phone will remain the dominant method of accessing mobile data services. Advertisers, content producers, marketers and publishers who want to tap the potential of the mobile medium need to broaden their focus, look beyond the iPhone and devices like it and develop better consumer services.