Greystripe – Developing a Complete Mobile Phone Advertising System from Scratch

7 May

Greystripe LogoAfter attending a presentation yesterday by CEO and Founder, Michael Chang, and VP of Operations, Kurt Hawks, about their startup, Greystripe, I have a newfound appreciation for the challenges that face entrepreneurs innovating in a part of the market where there is so much uncertainty. Greystripe’s primary revenue stream is from the sale of visual ads placed on mobile phones, but the story of how they got there, and the challenges they had to overcome, was both inspiring and daunting. I want to share a condensed version of that story, although I apologize in advance if any of it has been mangled in the retelling.

Where they are today:

Greystripe is an advertising network, content publishing partner, and distribution network for mobile phones that is VC backed by Steamboat Ventures, Incubic, Monitor Ventures. Its most recent capital round, a series B, raised $9 million. Their free, ad-supported games are being downloaded at a rate of 250,000 per day, by users all over the world.

How they got here:

Chang’s presentation focused on how the company has evolved since getting off the ground in 2005, and the multiple iterations the company has gone through in creating its current business model. The company started with a focus on mobile advertising in a single vertical: location based services. Inherent from day one in this business were challenges of developing content for different screen sizes, across different phone manufacturers (e.g. Nokia, Samsung, Motorola) with different operating system software (e.g. Palm, RIM, Microsoft), operating on different telephone networks (e.g. AT&T, T-mobile, Verizon), with different wireless technologies (e.g. GSM, CDMA). The complexity would not stop there.

As it became clear that location based services were evolving much slower than they had hoped, Greystripe’s focus shifted to a different vertical, gaming and applications. Games were sourced from publishers (e.g. Digital Chocolate, Hands-on Mobile), modified with the company’s AdWRAP technology, which inserts additional blank screen pages for advertisements before and after gameplay, and offered for free to users to download on their mobile phones. The next challenge, then, was to find advertisers who would pay for the full-screen advertising real estate within these games. Their search for an advertising network which could effectively source those ads on their behalf turned up empty, and again the fledgling company was back to the drawing boards.

Developing an advertising network, which places ads on behalf of companies and advertising agencies, would require a larger sales force, and a different business model than Greystripe had originally envisioned. A sales team was hired, relationships developed, and the first ads were placed. As the network took shape, and advertisers began to take notice, two new challenges would emerge. First, visual modifications would have to be made to the ads to serve the multiple screen sizes and formats, and second, the games would have to be distributed to users for download. The second would prove to be particularly daunting: it became clear that there were no effective distribution avenues available to ensure that games could actually reach users.

The next iteration of the company therefore took on this challenge: developing a diverse set of distribution channels for publishers. These have evolved to include mobile providers’ own catalogs of games and applications available for download, the sites of the game publishers, and GameJump, a portal developed by Greystripe.

Greystripe today is fully functional end-to-end, and is revenue generating (though not yet profitable). The company is now in its fifth iteration of its business model, and both Chang and Hawks sounded optimistic that even if not the company’s last, that it offered their greatest chance for success to date. Chang acknowledged that future developments could include gathering more detailed profile information about the users of its ad supported games, layering on location sensing technologies, and using it to more precisely target ads to specific users, allowing them to demand a higher premium per screen view from advertisers.

For the potential entrepreneur’s in the audience, Chang offered several tidbits of advice – including the importance of this kind of iteration and evolution in the formation of a business: “Push things far enough to really test the business model, but without pushing them so far that you run the company into the ground.”

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