Mobile entertainment portals disappeared when iTunes and Google Play came along, didn’t they? Absolutely not, says Michael Holmqvist, CEO of Basebone. He’s found a successful formula – and it’s ten years old this summer. He spoke to MEF Minute.
“In high growth markets, people don’t expect to get digital content for free. It’s different in Europe because of the ad culture. But in developing countries, they expect to pay.”
Michael Holmqvist is describing the secret of his company’s success. Thanks to the ‘something for something’ culture of emerging economies, Basebone has expanded its mobile entertainment subscription portals into 10 countries and four continents, with special focus on high growth regions.
As a result, Basebone has grown every year for ten years, is entirely self-funded and is now looking at a new phase of expansion.
The success of the company vindicates a gamble Holmqvist made 10 years ago in July 2007. Having worked at MonsterMob, he’d seen first hand the rise and fall of the first wave of subscription-based mobile content.
With the iPhone and app store model imminent, most people were busy evacuating this market. But Holmqvist saw an opportunity. In part this was thanks to the rise of new mobile markets in Africa, LatAm and Asia Pac. But it was also a function of new social behaviours and of the emergence of digital advertising…
Can you recall the moment when you saw a new kind of content opportunity?
Well, at first I was focused on aggregation. I set up an SMS chat company, and then moved on to delivering bulk SMS for marketing companies. But that brokerage business was disappearing because of interconnect fees.
Then I saw there was a gap for better kind of content service. Around this time there was a big spike in social networking thanks to MySpace and then Facebook. I thought we could adapt this behaviour and embed a social element into content products. The result is a kind of membership club based around particular interests, whether it’s celebrity gossip or gaming or whatever.
How has internet advertising helped?
In the early days, you would put an ad in the mainstream media and aim it at the whole market. But when advertising went online, you could target niche markets in gossip or gardening or cooking and so on. It became much more cost-effective.
Why did you take the decision to go into developing markets?
These markets had very low rates of connectivity, but the mobile penetration was rising extremely quickly. It was obvious to me that there would be great organic growth for any company that established itself in those countries early. It was a good bet, and is most evident in the case of South Africa, where a dominant marketplace position has been achieved.
Where did you go first?
South Africa. It took a while to get right. But it paid off, and then we entered other markets like Kenya, Columbia, Mexico, Argentina, Peru and Chile. We’re now preparing to launch in India, Indonesia, Thailand and Vietnam, where I believe there is a phenomenal opportunity.
What does it take to launch into these diverse markets?
It is not easy. The commercial model with carriers can be tough, then there’s regulation, business licences, the need to source local content, client’s needs and so on. It all adds up to longer lead times to get to market. But you have to assess to life time value of customers. And when you get it right, the opportunity is there.
Is there an issue with data availability?
Obviously there is. What we do is configure the content to the connection type. And we can do things like offer video across HTML5 sites rather than download.
And what about feature phones?
All our content can scale from the most basic to the most advanced handset. But I don’t think this will be an issue for long. If you can get a smartphone for $30, and it can change the way you live your life, I think nearly everyone will have one soon.
What about free content in app stores? If everyone has a smartphone won’t they just switch over to Google Play as they have in Europe?
Again, I come back to this social dimension and the way we target niche groups through advertising. We have built a portal that has thousands of content products for multiple audiences. And actually, we still have a very good business even in countries like France, Belgium and Italy.
Where does your content come from?
Our consumer products provide a diverse digital media library that serve apps, games, media and social connections, a rich all-in-one experience, based on a “glocal” content curation strategy.
For around 90 per cent of it we partner with a large variety of innovative content providers around the world– on a non-exclusive basis from developers. The rest we develop ourselves. For example, we are currently creating about 25 e-learning courses, which will be first launched in the Nigerian market.
What are the expansion plans Basebone is working on?
Basebone is strengthening its overall contribution to the market through different lines of business. In fact, this summer we are going to launch an aggregation business. We’re going back to our roots! Basically, we understand billing and messaging very well, we know what’s required from a technological and regulatory perspective, and we think we can help others where entry barriers are high.
Won’t your customers be your content competitors?
Not really. It’s a separate line of business within the group and I think our potential clients are smart enough to understand there are no secrets given away in this transaction. We are betting on them wanting to work with someone who knows how to succeed in these markets. There are many aggregation companies that promise a great connection service but in fact they add little or no value and often they’re actually using a third or even fourth party service. We can do better than that.
In parallel, we’re also scaling our publishing business and investing into app development, launching our proprietary app on Google Play next month.
An app? Isn’t that contrary to the portal model you have created?
It’s just more diversification.We think we have a really solid idea which combines entertainment and social. We’re excited to see where it goes, and we will definitely do more in the coming months.