Bangalore-based Inmobi (formerly mKhoj), a mobile advertising network startup, that not only changed its name but its entire business model in its three-year existence, has actually ended up rewriting its destiny.
The risk of altering the business course has paid off for Naveen Tewari (in pic), the co-founder and CEO of Inmobi, which operates in a space that has seen some bulge-bracket global acquisitions in the last two months.
Consider this: Google bought out AdMob, the largest mobile advertising network, for $750 million in stock. Apple acquired Quattro Wireless for a reported $275 million earlier this month. US-based ad network Amobee Media Systems (backed by mobile operators Telefónica and Vodafone) acquired UK’s mobile ad buyer RingRing Media and Norway's browser maker Opera Software buying AdMarvel, a small mobile advertising firm.
Tweaking The Model
InMobi set out three years ago as mKhoj, a mobile platform helping consumers find the best deals in their locality through the use of SMS and WAP.
But, Tewari was quick to realise that the mKhoj model would require lot of time and money to scale. So, six months after starting out, the founding team went back to the angel investors with the new mobile advertising network model.
For InMobi, these are clearly interesting times. The InMobi co-founder feels this sector will continue to attract deals. "The number of people that need to get into mobile advertising are far more than the number of players that exist," he said, in an interview to VCCircle. The global mobile ad spending is expected to surpass $13 billion by 2013, according to a report by Gartner.
The global spotlight on this sector also means great paydays for venture capital investors. InMobi raised $7.1 million from Kleiner, Perkins, Caufield & Byers (KPCB) and Sherpalo Ventures (started by Google's early investor Ram Shriram) in 2008, and turned profitable last year. These VC investors, KPCB and Sherpalo, both early investors in Google, are now buying an additional stake in InMobi.
VCCircle has learned that Mumbai Angels, the seed investors in InMobi, are selling their shares in the company to KPCB and Sherpalo in a secondary transaction. The Mumbai Angels invested $500,000 in 2007, and have seen the valuation of the company rise by over 20-30 times since then. The deal marks the exit of all the angel investors from InMobi. The return on the investment here is tipped to be the best angel investor returns in recent times.
Tewari declined to comment on this transaction. An email sent to KPCB and Sherpalo also did not elicit any response at the time of filing this story.
"Naveen was quick to realise that his initial business model was not working and decided to change it pretty early," said Praveen Chakravarty of Mumbai Angels, who was the founding board member of InMobi. The valuation for this transaction could not be ascertained.
Who Will Buy?
A number of players like Nokia, Microsoft, Yahoo, WPP and Qualcomm could be looking for possible acquisitions in this space. How does a three-year-old Indian company take on the might of Google and Apple? “You cannot compete with them on money,” says Tewari. “The game for us is based on building better technology and a better product,” he added, although it helps if you can hire some key executives from your competitors.
So, that is what he precisely did. InMobi recently poached Rob Jonas, Google's Director of Strategic Partnerships for Europe, Middle East and Africa, to build its business in Europe. It earlier hired former Group M executive Emmanuel Allix as head of Asia Pacific (APAC) operations.
InMobi, which claims to be the largest independent ad network, is now gunning for the developed market to get a larger share of the revenue pie after building a strong presence in Asia and Africa. It's also present in South America, where its ad impressions have grown by 1306%. Since its launch in Europe in August 2009, it has become the second largest player in the region only behind AdMob with 850 million impressions a month. InMobi says, it does 7.5 billion monthly mobile advertising requests globally.
InMobi has built a leadership position in emerging markets like Asia and Africa. While these markets have low adoption rates, their future potential is huge. Mobile internet forms the first internet experience for a lot of users in markets where internet and fixed line connectivity is unreliable. "They have been very smart by initially going after emerging markets where there was no competition and became an established player," said Chakravarty.
Since the mobile advertising market is small in India, InMobi has been expanding overseas with offices in Singapore and Palo Alto, California. With Jonas of Google on board, the company will also have an office in London. “India is an emerging market – its small but it’s something that has the potential to become very large in the next 2-3 years,” said Tewari, an IIT Kanpur and Harvard Business School grad, who has earlier worked with McKinsey & Co and VC firm Charles River Ventures. InMobi’s co-founders are Abhay Singhal and Amit K. Gupta.
The number of people using internet in next three years in India could reach 200-300 million with the advent of smart phones and 3G licenses, he says. Smart phones are expected to account for 45.5% of all mobile phone sales in 2013, up from just over 9% 2008 as per Gartner.
But, InMobi could face severe competition from Internet advertising firms, says an industry tracker, requesting anonymity. While Google is a prime example of an internet ad firm entering this space, other Indian firms like Ybrant Digital and Komli Media can also eye this space. But, Tewari thinks that it might be a little too early for such companies as he prepares InMobi to enter the US market.