Licensing & Open Source

Volker HirschCEOBlue Beck

Droidcon, Berlin - 4 Nov 2009

Who is this guy?Investment Opportunity: Little World Gifts(redefining digital gifts)OpportunityLittle World Gifts offers an appealing investment opportunity for investors seeking significant returns from early stage investment in

high growth markets. Little World Gifts is positioned to maximise returns through creating a new market for digital goods on mobile starting with the iPhone platform with deep web and social network

(Facebook) integration. The opportunity builds on the exciting landscape of the booming (yet still early and undeveloped) mobile

smartphone space, and the potentially enormous (and also early) digital goods space. With extremely low overheads and high margins, the company is set to turn over £2m in year 1, 50% of

which is profit. With a valuation of £2m (Year 1 profit x2), Little World Gifts is seeking £150,000 Angel investment ahead of launch in exchange for 10% equity in the business. This is an opportunity to get involved early in a

dynamic business at the very leading edge of both the digital goods, and the iPhone / mobile 2.0 sectors.

Enormous Market PotentialThe potential market for Little World Gifts is

large now, and growing rapidly. The Digital Goods Market will see exponential growth in

coming years, and whilst iPhone already has a strong customer base of content hungry consumers (70% of customers pay

on average $80/year) for content in the iTunes App Store), smart phone usage is set

to increase dramatically. Little World Gifts will be on 50% of smart phones by 2014.

Growth in Global Mobile Marketing SpendIn addition there is an increasing demand for mobile marketing

and for digital goods solutions (as a key part of a digital marketing strategy). Mobile will be more appealing and attract

increased marketing spend by brands. ($5.7bn in 2014).

Growth in Digital Goods MarketDigital Goods (and specifically gifts) have been popularised by services such as

QQ.com (China), Cyworld (South Korea), and Habbo Hotel and Facebook (Western Markets). The market is set to grow to

$6.5bn in 2013 and Little World Gifts is ideally placed to take advantage of the

interest in Digital Goods on mobile platforms.

2009 2010 2011 2012 2013 2014

$1.70bn$2.16bn

$5.70bn

$2.33B

$4.67B

$7B

2008 2009 2010 2011 2012 2013

USA Rest of World

Private & Confidential. Not for Distribution without Permission.© Copyright Kisky Netmedia Limited http://www.littleworldgifts.com

!

Corporate Strategy - Licensing - M&A / Corporate Finance

Why am I talking about Licensing?

Here it Comes

Q: Do brands care for open source?

A: No.

Brands are platform-agnostic.

Licensing rationale

Developer

License

$$$

How (on earth) do I get a license?

Common Solutions:

2.1.

The Average Licensing Model(Simplified Version of how it was, is and always has been)

• Licensor puts out RFPOR• Developer approaches licensor directly

• Developer manages to get Licensor’s attention

OR• Developer loses...

• The Parties negotiate hard and for weeks (or months) until they reach common ground (which Licensor think is shabby and leaves Developer wondering how to ever repay his debt...

• Developer prepares reply to RFPOR• Developer prepares offer outlining

creative concept and commercial case.

• Developer (or his banker) gets heart attack and pushes back with elaborate explanation on development effort needed.

• If successful, Licensor comes back with huge royalty (“50% minimum!!!”) and MG demands (including sizable up-front payments; “mid-6 figures”).

• In the latter case, go back to

• Developer gets formal design document under way and files for approval.

• Period of negotiations between expensive lawyers over every little term (“best efforts” vs “commercially reasonable efforts”, etc, etc, etc, etc)

• Deal is signed!

• Kick-off meeting between Licensor and Developer: will include creative teams, approval departments, etc. Look for introductions to other licensees as it helps with co-marketing

• Developer waits for approval.

• Licensor approves design.

• See the green star...

• Developer goes ahead. Finalises beta build and files for approval.

• See green star...

• Game is finished and filed for approval.

• Developer looks at roadmap and realises he needs another license

• Developer distributes through his channelsAND/OR• Developer finds publishers and/or aggregators

to distribute it through

• Go back to

Result

1. Lucky 2. Not so lucky

I am not saying that this is a bad game. But it IS a poor use of a brand.

This game delivered on brand value, execution and commercial success.

Not very compelling.

Show me the money...

It’s in your pocket...

Just ask the right question!

Catchy phrase inspired by Jonathan MacDonald

BRAND Licensing

Q: What do brands look for?

A: Users.

Users are also commonly known as “customers” or “consumers”

Sell or Else...

David Ogilvy

BRANDS...

• Sell Services & products.

• Promote their Image & Message.

• Open additional revenue streams...- Licensing!?

Licensing is NOT core!

Media vs Non-Media Brands

Non-media (e.g. VW, P&G, Carling): extend their brand and image.

Media (e.g. FT, Hasbro, Fox): (also) building additional verticals.

How can you help them?

The right question:

Here’s your Pitch:

Use Media to Extend Reach!

Digital media advantage vs analogue media:

interactive, i.e. multi-directional.

Use Mobile to Extend Reach!

Mobile is the most powerful digital medium to date.

Why?

1.It’s Big (numbers)2.It’s Personal (nature)3.It’s really personal

(Identification of needs)

1,500,000,000

4,600,000,000

1,700,000,000

2,250,000,000

Number of Internet users

Number of credit cards

Number of tooth brushes in use

Number of mobile phone subscriptions

480,000,000Daily global circulation of newspapers

The Nature of Mobile: It’s a 1st!

• Personal mass media• Always carried• Always on• Built-in billing system• Always present at the point of creative

impulse• Accurate audience identification

Tomi Ahonen, Mobile the 7th Mass Media, 2008;Alan Moore & Jonathan MacDonald, The Glittering

Allure of the Mobile Society, 2008

Significance of Mobile to Users...

• 91% of people have their mobile within arm’s reach 24/7.

• 64% of Americans are not willing to share their mobile with anyone. 60% of married people will not share their mobile with their spouse!

• I takes an average of 26 h for a user to report a lost wallet but only 68 minutes to report a lost mobile phone.

Morgan Stanley 2007

Unisys Survey

Wired Magazine 2006

• 8 out of 10 German men would rather lose their wife than their mobile phone.

Jonathan MacDonald; Survey of 10 German men at 1am in a bar...

... and how Brands use it...

• In 2008, Procter & Gamble spent 0.17% of their advertising budget on mobile.

• Volkswagen spent 1% of their DIGITAL budget on mobile (that was 2008...).

Informa/Acision/OgilvyOne

VW CRM Manager cited by Andrew Grill

BUT

Volkswagen also just announced that the ONLY campaign for the 2010 VW Golf GTI will be an iPhone Game (“Real Racing GTI”)... Quick learning!*

* This is autumn 2009

(c) gapingvoid

Change the Language...

Engagement!

• Engage, don’t lecture.• Be Sincere. Mean what you say.• Result: users become brand ambassadors.

No Fine Print+YOU!

Engagement!

• Games & apps are perfect for this!- Interaction.- Less intrusion.- Brand takes centre stage: shine!- Love it, recommend it.

74% of all purchases are made because of recommendations by friends!

Bain Consulting

Old World vs New World: It works now.

176x208 J2ME games Current-generation iPhone games

011001101011010011001001001001010011001001110010101010111001100110101101001100100100100

01100110101101001100100100100

01100110101101001100100100100

01100110101101001100100100100

01100110101101001100100100100

01100110101101001100100100100

01100110101101001100100100100

101001100100111001010101011101010011001001110010101010111010100110010011100101010101110

10100110010011100101010101110

10100110010011100101010101110

10100110010011100101010101110X

Brands’ and Users’ Perspective: Shine, not tech talk.

vs

Where’s Android?

Damn’ it! This all smells of iPhone!

(c) gapingvoid

It’s here:Well, it COULD be here (if the Open

Handset Alliance executes well).

Let’s ask again:

Q: Do brands care for open source?

A: Yes.

123,296,966,069,999,387,456

The Law of Big Numbers

This is why:

How Android apps compare (1)

Distimo, CTIA San Diego, 2009

APPS AVAILABLE

88,000

12,0002,900

Apple Android BlackBerry

FREE AND PAID

Apple App Store

Google Android Market

BlackBerry App World 76%

36%

77%

24%

64%

23%

Free Paid

Total # of apps Paid vs Free

How Android apps compare (2)

Flurry Analytics Blog, 6 Aug. 2009

Android is set to explode.Eric Schmidt, CEO Google

Inspiration!

$

t

Android’s Weapon

OPEN = Infinite scale!

Platforms

Vendors

The Equation:

Brands want users.+ Users want good stuff (and don’t care if it

is open/closed, widget/app, this/that... as long as it works)

+ Brands want big numbers.+ Android has (OK: will have) big numbers.+ Android can deliver kool-aid.

= Great Opportunity for Brands

(= $$$ for Everyone [incl. Developer])

Summing up:

• Engage, don’t lecture. • Treat licensing as a brand extension, not

as a (presumed) means to sell 0.x% more.• Forget tech-heavy preaching. Just deliver

compelling stuff to your users.• Deliver it in big numbers.

Got all that? You have a winner!

BTW: Winner means that the user wins! The rest (incl. $$$) comes then almost on its own...

Image & Video Creditshttp://www.explodingdog.com/drawing/ihavenoidea.jpghttp://1.bp.blogspot.com/_Vr8Xl0cbUZA/SVJzaekjMQI/AAAAAAAAFWU/gvOyNNzcdis/s400/Image+%3D+clueless+is+no+excuse.jpghttp://www.mtco.com/~rkblack/Open-Door_0032a.jpghttp://filmgordon.files.wordpress.com/2009/03/conneryaston.jpghttp://www.gapingvoidgallery.com/images/talkedjgif002.jpg http://www.iphoneincanada.ca/wp-content/uploads/2008/07/carling_ipint.pnghttp://www.mobileshop.com/blog/wp-content/uploads/2008/10/ipint-virtual-beer-under-fire.bmphttp://farm4.static.flickr.com/3250/3074199062_f434be862a_o.jpghttp://miraloqueveo.files.wordpress.com/2008/09/david-ogilvy.jpghttp://www.nationalserviceexpress.com/mogulus-user-uploads.s3.amazonaws.com/B6A8222A-4B39-2BD5-CF85-179823589EF8.jpghttp://gapingvoidgallery.com http://nexus404.com/Blog/2009/10/23/2010-volkswagen-gti-presented-in-iphone-game-play-firement-real-racing-and-win-a-2010-vw-gti-exclusively-on-the-iphone/http://www.toptenreviews.com/i/rev/misc/articles/old_blog/blog_963_1.jpghttp://www.iphonic.tv/assets_c/2009/07/barclaycard-waterslide-extreme-1-thumb-430x285-92255.pnghttp://www.oneighturbo.com/wp-content/uploads/2009/09/01-oneighturbo-sciroccoR-iphone-091509.jpghttp://media.photobucket.com/image/papa%20roach/crazyOAgirlFERlife/Papa_Roach.pnghttp://www.youtube.com/watch?v=dPYM-XTqcechttp://markhirschfeld.files.wordpress.com/2009/08/open-door1.jpghttp://www.freeverse.com/assets/games/9003/screenshots/456/174114905.jpghttp://www.firemint.com/realracing/screenshots.htmlhttp://i264.photobucket.com/albums/ii187/botvinya/worker_mechanic.jpg

Thank you!

@vhirsch

http://vhirsch.com/blog

vhirsch@bluebeck.co.uk

+44 7843 599 678

http://bluebeck.co.uk