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mInfo Sees Opportunity in 3G, SNS
 Last month, mobile search and pull advertising company mInfo partnered with China Telecom (NYSE:CHA, 728.HK) to offer mobile search service to Telecom's 2G and 3G users. JLM Pacific Epoch first interviewed mInfo co-Founder and CEO Alvin Wang Graylin in 2006, and, now that 3G has finally become a reality, we were interested to get an update on the mobile service provider and its take on 3G in China.
JLM: How has 3G affected the mobile search industry?
Alvin Wang Graylin: 3G has been very good for the industry overall. It has created more opportunities, made the carriers a lot more flexible, created more awareness of users and made more hardware platforms available. In general, from an economic and philosophical perspective, it has had a pretty huge impact.
But, from a user perspective, it is still pretty limited. We have, however, seen an increase in WAP [wireless application protocol] traffic because the carriers cut data prices by about half in March.
In general, the 3G networks will probably get better within the next six months, and the impact of that will be seen probably over the next two or three years.
JLM: How do the different mobile operators stack up?
Graylin: Currently, China Mobile (NYSE:CHL, 941.HK) is focusing most of its 3G work on netbooks and landline replacement phones because its network is still not very stable and calls drop quite a bit at this stage. I'm using China Unicom's (NYSE:CHU, 762.HK, 600050.SH) test network and those calls drop frequently when I'm moving, but that should get better soon. China Telecom seems to have the best coverage at this stage since it just needs a software switch to upgrade from CDMA to CDMA2000.
Telecom is adding about 1 million to 1.5 million users a month, so I think its going pretty well for them. Unicom is actually not letting very many 3G users on because it doesn't want to overburden its network. For example, even in Shanghai, only 10,000 test numbers have been released.
JLM: If Telecom offers the best 3G network, why did you go with Unicom?
Graylin: Because my phone supports WCDMA, and I didn't want to get a new handset.
JLM: Can you give us an update on your businesses, and how they have been affected by the financial crisis?
Graylin: We have several key businesses: mInfo search, a domestic product which involves WAP, SMS, mobile and Internet QQ and MSN services; Guanxi, an English language service targeted at the expat market; an advertising business and a carrier business. The mInfo search business has picked up quite a bit, and our advertising sales have gone up as well. Traffic for mobile Internet has been going up overall, and we upgraded our mobile Internet search service in the fourth quarter of last year so that it presorts by content type and offers both natural language and keyword search. The optimization makes the domestic product an infinitely better experience than other local competitors.
With the Guanxi business, we have seen some impact [from the financial crisis] in terms of a lot of expats going home. So, its growth rate has slowed a bit. But we’re still hitting record traffic month to month.
Our advertising business has been really booming in the last three to six months as people are moving away from TV and trying to link things to foot traffic. Mobile coupons, event notifications, prizes and lucky draws can drive foot traffic and get immediate responses, especially as compared to traditional and online media.
We also signed partnerships with some agency groups, who are now feeding many mobile deals to us, so we have been fully utilized.
We are very happy to be in this space even though a lot of our competitors have gone out of business.
JLM: In terms of your carrier business, just last month you partnered with China Telecom on search for 2G and 3G users. Can you talk about the partnership, and how it compares to Baidu's (Nasdaq:BIDU) agreement to provide service to China Telecom's 3G users?
Graylin: It's a very different piece of the business. Baidu has an off-portal WAP search deal on the WAP site of Telecom's 411 service, to which there is still fairly limited traffic. The deal we have is tied to operator calls and free-form SMS search service. Telecom's operator service gets 5 million to 10 million calls a day, so it's a different scale of user engagement.
Through the agreement, we also get special rights to advertising sales, meaning we will essentially be able to sell products under the China Telecom name. So, our carrier business will be expanding rapidly over the next six months.
JLM: In terms of future growth, which of your products will be most important?
Graylin: Long-term growth will definitely be from our domestic product, because the expat population is limited. Another source of growth will be the carrier product because the ability of mobile carriers to grow and expand is ten times our ability.
JLM: In terms of monetization, I know Guanxi charges per text message. What other ways are you generating revenue from your different products?
Graylin: For our other services, users don't pay. For Guanxi, the expat population is so small that, in terms of return on investment, we need something to supplement the advertising fees. Also, expats are not sensitive to a RMB 1 charge whereas locals are. We are working on a new version of the Guanxi client that will allow users to pay less for the service by cutting down paid steps from several text messages to one.
For the local search and carrier businesses, the majority of revenue comes from our advertisers.
JLM: How do your advertisers break down in terms of industry?
Graylin: There is a pretty wide range. A decent amount of it, for our search services, is small and medium-sized businesses, entertainment, lodging and travel. For our mobile advertising business, a lot of advertisers are in FMCG, auto and more high-end products. We have different clients for our different services.
JLM: Apart from people calling in via China Telecom, how would you describe mInfo's current user base?
Graylin: By the end of 2008, the registered user base for our domestic search product was in the eight digits, mostly ages 19-35, with average search count of more than six times per month. For Guanxi, we had more than 400,000 registered users, mostly ages 25-44, average search count was about eight times per month.
Seventy-eight percent of Guanxi users were expats from outside of Mainland China at the end of last year.
JLM: You told us in 2006 that one-third of mInfo search results were revenue generating, is that still the case?
Graylin: It's probably less now because the volume is up. There is a definitely a lot of inventory we could monetize, but we don't want to over monetize and compromise the user experience.
JLM: At the end of 2006, mInfo was rumored to have raised $3.36 million from Staenberg Ventures. Have you received any funding since then?
Graylin: We have had a couple of rounds, but we haven't been very public with it. We are not actively raising funds right now and are close to break even. But if an investor wants to put in some funds, we're open to talk.
JLM: How big is your company?
Graylin: We are about 100 people, with a management team of about seven leading up different departments.
JLM: As of March 2007, mInfo covered 59 cities. Has your coverage expanded since then?
Graylin: If you combine the stuff we are doing with the carriers, than it's probably 100 cities or more. However, we don't get specific information on who is calling the carriers. In terms of our partnership with China Telecom, we do have access to all 80 million of their users. We don't really know how many people are using it, but, for every voice call that comes up, we can send a reminder that the user doesn't have to use the voice service but can send us an SMS instead.
JLM: Do you have any new products in the works?
Graylin: We just released an iPhone version for mInfo available on the iTunes store, which should be helpful to the 3 million iPhone users in China. We also are able to release a new Guanxi client for various mobile phones.
We will release a social networking service for Guanxi in about a month or so, and we just released a Guanxi shopping business for users to buy groceries from their phones. So far, the shop is mostly selling imported premium products. Prices are more expensive than local supermarkets, but cheaper than high-end markets like City Shop and we offer home delivery.
JLM: How many suppliers do you have for the Guanxi shop?
Graylin: We are partnered with Smartdirect to deliver this service.
JLM: To finish up, can you touch on what you see as the future of mobile applications?
Graylin: I definitely think social networks will become increasingly important on mobile because handsets are innately social devices. But I don't know if anyone, even globally, has found the secret formula for a truly effective mobile social network. They've done ok with Facebook on the Internet, but how really mobile is it? They have a mobile site of their webpage, but is that really a mobile social network?
There is a lot we can do to take it a step further and maybe in the next year or two we will come up with some innovation that can be exported elsewhere.
Community notification of events that can help give a more instant response, like Facebook, Google (Nasdaq:GOOG) and Twitter in one product, that is where things are going. And, on the mobile side of that, in China, we are definitely on the leading edge of it.
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