MocoSpace’s Winning Formula for Feature-Phone Social Networking
MocoSpace is one of Boston’s hidden technology success stories. The four-year-old startup, located on the second floor of a classic old office building near Boston’s South Station, has built what is probably the world’s largest standalone social network for mobile phone owners (that is, one that isn’t merely the mobile counterpart of a primarily Web-based community like MySpace or Facebook). The MocoSpace community passed the 6-million-member mark in March—making it more than three times the size it was when I first wrote about the venture-funded startup in January 2008. And it’s accomplished all this by focusing on services for owners of plain-vanilla “feature phones,” at a time when expensive, big-screened smartphones like the Apple iPhone, Android phones like T-Mobile’s G1, and Blackberry devices have been getting all of the technology press’s attention.
I visited MocoSpace in April to connect in person with its co-founders, Jamie Hall and Justin Siegel, and to find out how the company keeps growing so quickly. Its refusal to bow to technological fashion, sticking instead to its core audience of young feature phone owners, is probably part of the answer. About 80 percent of MocoSpace members are younger than 30, according to vice president of marketing Jim Gregoire; 50 percent are under 24, and a quarter are teens.
It’s a group of mobile users who can’t necessarily afford the latest, greatest smartphones—and who may not even own computers—but who are nonetheless highly social, and who want to interact with peers around the corner or across the globe. MocoSpace serves them through a combination of, on the one hand, classic social-networking features like profiles, comments, friend lists, and chat, and on the other, digital content like photos, music, and videos, both user-generated and professional. (In fact, the company recently launched a mobile music store, with special promotions by artists like rapper Rick Ross and labels like Def Jam.)
And the free, ad-supported service is delivered entirely through the Web browsers now found on every mobile phone. Hall (the company’s chief technology officer) and Siegel (its CEO) have deliberately avoided creating specialized mobile applications or building the direct relationships with wireless carriers that could get those apps onto the carriers’ top-level menus or “decks,” relying instead on basic mobile Web technologies and on word-of-mouth to bring mobile users to its site.
As big as it is, MocoSpace still has plenty of room to grow: the company estimates that as many as 30 to 40 million feature-phone owners are under age 30 and have access to data plans. In my conversation with Hall and Siegel, an edited version of which appears below, I asked about how the company optimizes social-networking services for feature phones, how the mobile advertising scene is evolving, and what sorts of new features might be coming down the road. (Don’t be too surprised if MocoSpace eventually gives in to fashion and builds a dedicated iPhone app—as the Apple device becomes more ubiquitous, Hall and Siegel say they want to keep serving the core audience of mobile-addicted young people.)
Xconomy: What metrics do you guys use to measure your growth—and how are you doing?
Justin Siegel: The 6 million users; the page views we’re generating; the fact that when you look at the data guys like AOL or Opera or OpenWave have put out, we’re one of the top destinations on mobile phones in North America. That’s been awesome to see. We’re mentioned in the same breath, consistently, with MySpace and Facebook in the mobile world. It’s validating our hypothesis, which is that there is a market and an opportunity for focusing on feature phones.
X: What type of marketing have you done? I’ve never seen an ad for MocoSpace.
JS: It’s pretty much all word of mouth. In the past we’ve done some marketing and advertising, but nothing in the past year or so. Ultimately, the business model relies on viral growth and word of mouth. That’s certainly been sufficient to get us to where we are.
X: Feature phones come in so many different forms, from so many carriers. How do you overcome that fragmentation to do things like streaming video?
JS: About a third of [feature phone] handsets can stream video, and about two thirds can download video. For some carriers, like Verizon, you have to be an on-deck video partner and anything that’s off-deck, they block. Sprint is the same. AT&T and T-Mobile are more open. So we will stream video and also offer downloads in the 3GP format [a strreamlined version of the MP4 video format, designed for mobile phones] It’s still a very fragmented experience. We try to detect, as best we can, the capabilities of each person’s phone and the restrictions that their network puts in place, and offer up the optimized experience.
X: What kind of optimizing can you do?
Jamie Hall: We do some user interface optimization—for example, if you’ve used MocoSpace on the iPhone or the Android G1 phone we do some optimization around navigation. But it’s mostly around videos and photos. Because of the huge amount of fragmentation in the mobile browser market, there are all kinds of bugs and idiosyncrasies. One of our core areas of expertise is in working around that, since from day one we wanted to attract the broadest possible audience.
X: The first time we talked back in January 2008, you explained that with MocoSpace, unlike your earlier ventures in the mobile business, you specifically wanted to avoid working directly with the wireless carriers, given all the hassles of being on deck. But now that you’re more established and have such a big user base, I wonder whether the carriers are actually coming to you—and whether you’d be open to working with one, if they said they wanted to put you on their deck.
JH: There are different buckets of people at the carriers. The operations guys, the engineers, will look at MocoSpace much sooner. They just see the raw traffic numbers, and they see that it may be, for example, the third largest driver of traffic on their network, and they say “You guys should absolutely be on our deck.” The product guys will say, “Yeah, it should be on the deck, if it’s optimized for us.” But then you have the senior-level marketing guys, who will say ‘We’ve heard of MySpace and Facebook but we’ve never heard of MocoSpace. So why would we do that deal?”
But at the end of the day, the carriers are huge businesses, with billions of dollars a year in revenue…so even the MySpaces and Facebooks have limited clout. These guys are making so much money off their data plans that they are going to do just fine with us or without us.
JS: There are a lot of constraints from being on deck, but there are also some benefits, like co-marketing. We would welcome it, but we don’t aggressively pursue it. A company that gets most of its traffic from relationships with T-Mobile or Verizon is much less valuable than a company that gets most of its business from direct relationships with consumers. T-Mobile or AT&T can change their deck around and drop a partner on a whim, but if you have 6 million users reaching out to you directly it’s harder for any one person to damage your business.
JH: And it speaks to your business when users choose to come to you [over the mobile Web] rather than just having your app on the deck.
X: You introduced the music downloads and videos recently. What other milestones have you reached since we last talked?
JH: One is that we soft-launched our Latino site, aimed at Spanish-speaking U.S. residents. Even before we launched that, we were over-indexing [meaning, seeing higher-than expected participation] on some ethnic groups, including Latinos and African-Americans.
Beyond that, we’ve done some unique content stuff. We have thousands of people a day uploading photos, primarily from their phones, so we’ve developed some unique customization tools that people can use to create slide shows with different transition effects. We also moved all of our photo and video storage to the cloud, using Amazon’s S3 database.
X: Was that a cost-cutting move?
JH: Yes, we have an EMC storage device that is a six-figure expense. We could see the end of that device’s lifetime coming very quickly and we did not want to invest multiples of six figures for the next level up, and worry about adding more disk space and having it become a big potential point of failure. So moving to the cloud makes sense both from an internal-resources perspective and a financial perspective. We had some trepidation at first, but we’ve found that [S3] has been excellent in terms of performance and uptime.
X: You mentioned that thousands of people are uploading photos to MocoSpace every day. What kinds of community standards do you try to maintain for those photos, and how do you enforce them? We’ve written about a locally-based photo sharing service called SnapMyLife that crowdsources photo moderation using Amazon’s Mechanical Turk system.
JS: The main standards are no nudity, no violence, no hate speech, and no drugs. We have a full-time staff that’s working 24/7/365 to pre-screen every photo and video that goes live on MocoSpace. We don’t use Mechanical Turk, because at our volumes, it is not cost effective. Even paying a penny a photo would not be cost effective for us. So in addition to our community management team here in Boston of four people who deal with general customer support, content issues, harassment issues, legal issues, and all of those fun things, we have a full-time team [doing photo and video moderation] in Vietnam.
X: How big a part does mobile gaming play in the MocoSpace experience?
JH: Gaming is not one of the core experiences on MocoSpace, but over time we have evolved that area. Our most recent game is a multiplayer poker game. In general, people find Internet-based games on feature phones less engaging than downloadable games or games like those in the iPhone app store. But still, we find people who will engage with them, and we think it holds a lot of potential for encouraging social interaction. We’re most interested in things that have a multiplayer aspect. But we’ve done very little to date—we have maybe seven or eight games. We will probably be doing more in the future.
X: Advertising is your main revenue stream, but one of the most frequent complaints you hear from developers and publishers in the mobile world is that the advertising market is not very mature yet on the mobile side. Where do you get your ads, and how are sales going?
JS: We work with all of the mobile advertising networks today. We plug them into a platform that allows us to pick and choose and match our inventory to the different ad networks as we see fit. We are considering hiring a direct sales force, and we will probably hire at least one person, and see if we can sell a bit of our inventory directly. The reality is—and this is being written about a lot—that the ad networks are in a race to the bottom in terms of CPMs [the price advertisers will pay per thousand impressions]. Not to be melodramatic, but it’s almost a death spiral. When an advertiser knows that they can buy traffic for 10 cents per click on Google, why would they ever pay a $30 CPM to be on your home page? And once the genie is out of the bottle, it’s very hard to get it back in.
X: Do you try to filter out the ads that go for really low CPMs?
JS: In theory, we try to do that, but the reality is that we’re so big and the ad market is so small that we suck down every bit of inventory. By the end of the day, we’ve worked through all the good inventory and the less good and we get to the bottom of the barrel. Unlike the Web, where there is a very robust marketplace, the number of advertisers on mobile is still relatively small.
X: Do you have enough information about your users to help your advertisers to any behavioral targeting?
JH: That is happening a little bit on mobile, but there is more talk than action. If you don’t have advertisers then it’s'kind of a hypothetical scenario. When 25 or 30 percent of the ad dollars are coming from ringtone providers, what do they care about targeting? Are you going to sell a different ringtone ad to a male or a female?
X: But I imagine you do have good data on your users—is that something that could benefit you in your direct advertising sales efforts?
JS: We do, more so than almost anybody in mobile. Ninety percent of our users supply very specific data about themselves. That will be one very clear approach that we take—that if you want access to this targeting data, you’ve got to buy directly from us. Ultimately, we think that’s how you get the genie back in the bottle.
X: How many of your users are paying for data by the megabyte, and how many are on flat-rate or prepaid data plans? Can you use that data to target ads?
JS: We can’t measure that, but we can back the data out from the carriers, because some carriers only offer pre-paid data plans, and others offer only unlimited.
JH: Everyone on the iPhone has an unlimited plan, for example. And we do see those people over-index, in terms of their mobile Web consumption.
JS: Advertisers are doing that kind of targeting on their own, to some extent. The iPhone is viewed as a high-brow, white-collar device. That will change—it will become a more ubiquitous device—but right now, the odds are that if you have a $400 phone and a $50 a month data plan, you are more economically interesting than if you are using a prepaid device.
X: So many companies are building iPhone apps these days. It would be a break from your browser-based model to do that for MocoSpace, but is it something you would consider?
JH: That’s an obvious discussion to have. Eventually we’ll do it. We don’t view it as an incredibly high priority, but it is a reasonably interesting opportunity. iPhone users are very active, but they are still a very small percentage of the mobile marketplace. Still, I would imagine that by the end of this year we’ll have an iPhone app.