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Posts Tagged ‘offerpal-media’

Yesterday Zynga added offers-for-currency back into its popular Facebook and MySpace games after a two month suspension following the Scamville saga..

Offers from just eight companies are included: Netflix, Discover Card, Blockbuster, HSBC Direct, Gamefly, Book of the Month Club, SnapFish and The New York Times. More will be added over time, each to be reviewed first by Zynga employees for adherence to a “strict set of standards for content and user experience.”

Clearly they are tiptoeing back into offers, and being very careful about how they’re doing it. That’s why it’s fascinating that they’ve chosen Offerpal Media to drive all of the current offers.

Offerpal was at the very heart of the Scamville series. Their CEO, Anu Shukla, kicked things off by losing her temper in responding to a question I had about offer scams (the video of that exchange is at the very bottom of the original Scamville post).

Within a few days Zynga, RockYou and MySpace had all said they would take steps to remove scams from Offerpal and others from their games. And Shukla was out of a job.

New CEO George Garrick promised to clean up Offerpal, saying “we will do everything we can within reason to lead the industry and set the example in these efforts.”

And apparently he has convinced Zynga that he’s done just that. It is an extraordinary turnaround for Offerpal, which has moved from the being the punch line in Silicon Valley jokes to (for now at least) the exclusive provider of offers to the largest social gaming company on the planet.

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How much exactly is the Nexus One line of Android phones worth to Google? The folks at Trefis have modeled Nexus One sales into their financial forecast for Google and estimate that it will account for nearly $20 billion of Google’s market cap (based on its target price pf $659 per share), accounting for 9.3 percent of the total. That is more than its estimated contribution of ad and search partnerships (5.1 percent), Google Apps (3.2 percent) or YouTube (2.4 percent). Only search ads account for more of Google’s total value (68.1 percent).

How does Trefis come up with these numbers? Trefis is an investing site which comes up with financial models for stocks which translate into interactive stock charts and price targets. If you don’t agree with their model, you can change some of the underlying assumption sin the drag-able charts and create your own model (see below). Trefis is assuming Google will sell 5 million Nexus One phones this year, and that the Nexus One market share will grow from 0.4 percent this year to 3.4 percent in 2016, when the iPhone will have an 11.5 percent global mobile phone market share (as shown by the olive-colored line above) and Blackberry will have an 8.2 percent share (green line).

That seems a bit aggressive, but as I mentioned, you can always change the assumptions to something you think makes more sense. For instance, if the Nexus One even manages to capture 1 percent of global mobile phone market share, it would add 2.44 percent to Google’s market share, or about the same as YouTube. The Trefis model takes into account other factors, such as the unsubsidized price and margins declining over time. Remember, even though HTC is making these phones, Google is the one who is selling them, both directly and through carriers such as T-Mobile (who are subsidizing the $530 unlocked price and offering them to consumers for $180 with a contract). The Trefis model projects Nexus One revenues to be:

2010: $2.8 billion
2011: $5.7 billion
2012: $8.5 billion
2013: $11 billion
2014: $14 billion

While it’s fun to play around with these numbers, nobody can really predict how successful the Nexus One family will be. And it is not safe to assume typical mobile phone margins since Google has other motivations for pushing these phones, namely to increase adoption of the mobile Web where it will make its real money through mobile search. Also, this model does not take into account the software revenues from all the other Android phones out there. It is only Nexus One. Trefis estimats that Googl eis making a $231 gross profit on each phone, based on iSuppli’ s$174 component cost estimate plus other costs such as warranty, R&D ($50), and HTC’s cut ($75). Google has publicly stated that the profits from the Nexus One are minimal. Yet, if two thirds of Apple’s market share can be attributed to the iPhone (as estimated by Trefis), it doesn’t seem like a stretch to think that Nexus One can become 9 percent of Google’s.

In fact, if you look at Google’s stock price on the day before the Nexus One was confirmed, it was $590, and it rose to $627 just before the official launch on January 5, adding nearly $12 billion to Google’s market cap in that time alone. Of course, there were other factors contributing to the stock’s rise during that time, but an extra $20 billion on top of Google’s current $185 billion market cap is not unthinkable. (The stock today is trading at $585, after the disclosure that it might be exiting the China market).

How much do you think Nexus One is worth to Google?

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Offerpal Media, the central character in the Scamville drama, is changing CEOs. Anu Shukla is no longer the CEO of the company she cofounded. Veteran executive George Garrick, most recently the CEO of Mochi Media, is now the CEO of the company.

From the press release quietly announcing the change:

Offerpal Media, the leader in virtual currency monetization for online games, virtual worlds and social networks, announced today that George Garrick has been named chief executive officer.

Garrick brings more than 25 years of experience in technology, advertising and consumer businesses to Offerpal Media. His track record of accelerating revenue growth and brokering strategic relationships with customers and partners will be critical assets in leading Offerpal Media.

I had an…interesting public exchange with Shukla last week at the Virtual Goods Summit in San Francisco (see video at end of this post). I’ve also embedded it below.

She vehemently denied that her company’s offers ever scammed users. Despite her defense of the industry, MySpace, Zynga, RockYou and others have since made significant policy changes to protect consumers from the types of offers Offerpal peddles.

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Offerpal Media, an advertising platform concentrated on helping developers monetize social networks by offering virtual currency in exchange for participating in ‘offers’ like online surveys, has filed suit against Kickflip, the company behind the Gambit payment engine.

As first reported in GigaOm, the suit alleges that Kickflip temporarily used Offerpal’s services for the purpose of stealing knowledge of how the service worked, which it then used to start a competitor. From the suit:

[Kickflip] misrepresented its intentions in forming a relationship with Offerpal, and then used the information and trade secrets learned in the course of the relationship to develop and improve Defendant’s own competing service.

Kickflip responds that the suit has “absolutely no merit”. The company originally started off as a game developer in 2007 (you can see a list of their old games here). The company says that during that time it has tried to use OfferPal and SuperRewards (an OfferPal competitor) to monetize their games but that both were unable to meet their needs, so they built their own service. The company’s ‘about’ page offers a similar background:

In 2007, we formed kickflip inc. to build online games, eventually reaching over 7 million users. We had the same problem you have…making money. So we built all the tools we needed to help users pay for our games. Our users loved it. We loved it. So we thought we’d allow a few friends to use it. Surprisingly, the developers and their users liked it too. Since then we’ve been focused on providing the easiest payment solution for online games and communities.

Kickflip has issued the following statement regarding the suit:

We were game makers long before we built Gambit. As game makers, we used the services of both OfferPal and SuperRewards. We noticed these services couldn’t keep up with our needs, so we decided to build our own, which turned into Gambit. Since then we have been building partnerships with game developers. We have a lot of respect for the business OfferPal has developed, and it is unfortunate that they feel it necessary to sue a former customer and game developer. We are confident that this lawsuit has absolutely no merit, and we plan to fully defend ourselves. If you have further questions, feel free to contact our lawyer:

Eric Benisek
Vasquez, Benisek & Lindgren LLP
925-627-4250

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We’re all glad Q1 is behind us.

Silicon Valley and the start-up ecosystem certainly was not immune to the general economic malaise. The TechCrunch sweet spot, early-stage start-ups, was particularly hurt.

The number of start-ups getting started was down 65% vs Q1 2008. We saw just 184 new start-ups formed, down from 546 in 1Q 2008.

Start-Ups Founded: January 2008 - March 2009

Source: CrunchBase

Early-stage start-ups are working hard to do more with less. The average number of staff at new start-ups founded 1Q 2009 was 6, down from 8 a year ago. How do we know? It turns out that there’s a wealth of interesting facts that we can glean from CrunchBase, our structured-wiki startup directory and primary data source for TechCrunch Research. What else did we learn from CrunchBase?

The $3.1 billion in venture capital financing was down 50% from Q1 2008, though up nearly 25% from Q4.

Venture Capital Financings: January 2008 - March 2009

Source: CrunchBase

Here’s the thing, transaction volume was weighted heavily to Series B and later stages of investment, suggesting that VCs were focused on providing additional resources for their top portfolio companies as opposed to new deal flow. By example, only four of the startups founded last quarter also reported the closing of outside funding.

Venture Capital Financings by Stage: 1Q 2008 vs. 2009

Source: CrunchBase

(Excluding the New York Times’ $250 million bailout raise by Carlos Slim), the biggest consumer web and mobile financings were: obopay ($70M), Zag ($70M), Twitter ($35 million), Omniture ($25M) and Pocket Communications Northeast ($25M.) Monetization businesses received attention: Tremor Media ($18M), Offerpal Media ($15M) and AdMob ($12.5M.)

Perhaps most telling of all, no acquisitions were announced by Google, Microsoft, Yahoo!, AOL, or Amazon. We can’t remember a fiscal quarter where none of these companies announced even a small transaction. In total, $1.6 billion in M&A was reported for the quarter, down from $11.9 billion in Q1 2008.

M&A Transaction Values: 1Q 2008 vs. 2009

Source: CrunchBase

There were a total of 82 exits announced for the quarter, and the number of exits was actually higher than the 73 reported Q1 a year ago. In 2009, dealflow was tactical and modest in size. The two big deals of the quarter were Autonomy’s acquisition of Interwoven for $775 million and Cisco’s acquisition of Pure Digital Technologies (aka the Flip) for $590 million.

M&A lTransactions: January 2008 - March 2009

Source: CrunchBase

Despite a number of executive departures and hirings, we’re still waiting to hear new news from big internet media. After budget cuts are complete, what will be the sources of future growth? There is a vast sea of start-ups available at newly rationalized prices.

The full 28-page first-quarter report (including 32 interactive exhibits and charts in excel) is available for $149 as a download here. This quarter, we added all our raw data, charts and tables into excel so readers can easily cut-and-paste charts into their own reports and slice-and-dice the data for their own use. It’s a big improvement to our 2008 Year In Review. Of course, you’re also welcome to grab data free of charge through our CrunchBase open API.

See the report table of contents and table of exhibits here.

BUY the 1Q 2009 Report

$149

BUY the Annual Subscription (2008 Year In Review, 1Q 2009 Report, plus the Q2-3 Reports sent to you as soon as they’re issued)

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