A.The mobile VAS (value added services) industry is a nascent industry and all the companies in this space are no more than two to four years old. We set up operations in 2003: Gopala Krishnan and I (the co-founders) started with just a small team of three people and now we are up to 145 people. For us, to get to the next stage and look at more mobile consumer focused revenue, we thought it would be a good addition to have someone on board who has broad experience in building companies that are consumer revenue focused � and the investors realised that we needed someone heavyweight on board, someone who can actually help take the company to the next level.

We got Rajat on board as CEO and MD of the company, so the three of us make up the senior management team. I continue to do exactly what I was doing for the last four years, which is to see how Mobile2win can work more closely with clients and partners globally in the wireless space and essentially drive revenues and transactions in India as well as globally. Gopala Krishnan�s role is evolving right now. He has a lot of experience in technology and is a great innovator. He will probably take on strategy and innovation along with technology.

Rajat is a heavyweight and he brings a lot of experience in dealing with the regulatory authorities, maybe not that much with operators. I think, overall, it raises the bar of mobile content companies to a large extent with the government and the outside authorities, whether DoT (Department of Telecommunications) or TRAI (Telecom Regulatory Authority of India) or even the operator ecosystem.

Q. Speaking of the operator ecosystem, everyone's fairly optimistic about the medium and long term future, but for now, everyone is badmouthing the operator�

A. I think the operators get shafted for more than they should get shafted for...

Q. You�re being diplomatic now!

A. No, I am serious. I think that the operators need to change around the revenue shares. We have a common grouse in the industry and I don't think we need to get into that because I think it's heavily skewed in their favour.

Q. And how will that move?

A. There is no timeline on it. It's a question of a lot of companies getting together in one voice, vis-�-vis operators, and getting the TRAI involved if they can, to possibly look at changing content and platform revenue shares. Even a small change, as low as 5 per cent, given the volumes that we are looking at in the years to come, make a good deal of difference. Talks with operators have not moved forward, probably because each company is trying to do its own bit and there has been no effective joint effort by the players in this space to actually go with one voice. And that really needs to change drastically. Only when that happens, will they start listening to us, forget even doing something.

To be fair to them, I think right now for the operators, in the pecking order, we are at the bottom of the list. But on the flip side, they are dealing with more fundamental issues such as the basic mess around spectrum and 3G, over which I think some of them have thrown up their hands in frustration!

Q. The revenue share issue is a clear one, but in general, how do you feel operators are reacting to VAS as a revenue stream?

A. I think they are very upbeat about it. Their ARPU (average revenue per user) is declining every month or two. In the last six months, ARPU has declined by about Rs 20-30 and, if you multiply this number with the number of subscribers they have, that's a large amount. So, they are obviously looking to offset that with data revenue and that is the VAS revenue. Therefore, the thrust on voice services and thrust to get into the 3G space, which is actually getting delayed.

There are so many different services that are dependent on 3G. A key one is mobile TV and we have been talking about it for the last two years. Right now, globally, there are 4.5 million mobile TV users and a number of them are in Europe, Korea and Japan. Reports are projecting that by 2011-12, there will be 155 million consumers of mobile TV and India will be a large consumer. It's VAS that operators are looking forward to. In addition, operators will have to do a balancing act between launching new services for existing VAS consumers and pushing the existing old services to new consumers in rural India and Tier II and III towns.

Q. What categories are moving ahead in VAS? Voice is still ruling. In the US, eBay is planning voice-based ads...

A. I see voice-based services continuing to grow. WAP-based (wireless access protocol) services, GPRS-based services and data services are growing. SMS will always be there because that is the fundamental feature of a basic phone, irrespective of whether it has GPRS or not. But for rich data to be passed through, there is the requirement for a GPRS connection and, therefore, for getting consumers to activate WAP sites on their phones from operators. So, voice will continue to be the number one and a variety of applications and services on voice will keep on growing for the next three to four years.

The current trend we have is going to continue for a while as we have a tele-density in India of just 8-10 per cent and the tele-density in rural India is so low. So, the opportunity for operators right now to work with companies like us to push their VAS and data services is tremendous. There is a need for regional content and regional services. It�s already started off in small numbers.

Q. Given that context, what regulatory roadmap do you see going forward and how you are going to tackle issues such as permission based marketing?

A. We would like to see more support from the government and the powers that run organisations such as DoT and TRAI to be more supportive in mobile content vis-a-vis the operators. As operators have their own agenda and priorities, right now, players like us are getting squeezed. There needs to be some sort of organisation that is represented by the government, or maybe set up by them, or set up jointly by the government and the players, to help companies like us flourish, grow and survive in this space.
There needs to be a framework. VAS might be a small thing for them (the government), where the overall business is concerned, but it's going to grow rapidly. We are drafting a document so we know what needs to be done jointly in the next two to three years, rather than circulars being sent out de facto and our teams scurrying around for the next few months trying to send out letters, asking them to delay it for the next five to six months. This does not serve to grow the ecosystem at all. It actually puts the entire VAS ecosystem back.

Q. Tell me more about the DND (Do Not Disturb) issue...

A. What�s going to happen right now is that operators will have to work closely with us to create a DND list and we have to do promotions with those who have not signed the DND list. We don�t know yet if it will affect VAS revenue. But any legislation that prevents consumers who are currently downloading content from getting content will have a temporary impact on revenues. I don�t think it will be too large because the percentage of people who don�t want to get disturbed are people who actually don�t download content regularly.

Q. I think your number perception is right because it will be a small number of people that goes in for DND...

A. It�s not going to be a large number. So, you will have 10-15 per cent of the subscribers who sign up for DND and the remaining 85 per cent will still be there and this will make us more targeted. There are a lot of people who make a noise that they don�t want to get disturbed, but only those people will sign up who really feel that their life is getting disturbed.

These initiatives started a long time ago, even though there was no legislation on it. We started this about three years ago for a lot of campaigns with media partners, where we actually got people to be part of a Wireless Club. Basically, that's a club of people who do not mind receiving offers and promotions from Mobile2win. So, Wireless Club users are around 180,000 in India, and they are ready to receive offers and updates for different categories of mobile content and messages from advertisers.

Now, they are going to force us to set up the DND list and, in my view, that will not impact us and the entire VAS ecosystem. But let�s see what happens in the next two to three months. It�s going to be very interesting whether the companies will come back with lower monthly numbers than what is projected. We'll wait and see...

Q. Shifting track a bit, what are the response rates on mobile advertising in general? Will there be ad networks for the mobile space as we have on the PC Internet?

A. There was an earlier form of what I call mobile advertising 1.0 till about a few months ago, which was basically restricted to short code based marketing and responses on return messages. We have to move up the value chain because it is totally dependent on media companies and brands to actually push their marketing communication for consumers to respond to on a short code. We are looking at moving up the value chain and how we can get consumers to interact with the brand in an environment where they come to the brands on a daily basis. So, we are looking at WAP advertising, in-game placements, wraparound ads and Bluetooth marketing.

CTRs (click through rates) in terms of mobile WAP advertising are right now anywhere between 4-6 per cent, which is a relatively decent number given that the brand is on the WAP site of the operator. Right now, the demographic targeting with the operator is not done well, but the ability of the operator to actually target the demographic based on the content downloaded by consumer the day before is there. We need to work with the operators and actually get them to share that data with us (they are very careful in sharing data as they don�t want it to be misused).

If we work with them in a way that banners will be served to only those relevant consumers who have downloaded cricket content yesterday, and we serve them ads for Nike or Reebok shoes � this has a tremendous opportunity. I see the CTRs should be at 7-8 per cent with more and more targeting capabilities in WAP advertising.

Q. What about short code responses in the current environment?

A. Short code-based advertising right now is not more than 1.5-2 per cent. But there is a huge difference because when we talk about short code marketing, we are talking about far more handsets as everyone can send SMSes and download. So, we are talking about a far higher number of people responding, but CTRs are far less. And mobile advertising is very akin and will be very akin to the Internet advertising in India of six to eight years ago, where the pricing model started off on a fixed rate basis � a flat fee for one week or one month, moved down to CPM (cost per thousand) and then to CPC (cost per click).

That's where we hope it ends because advertisers are asking for CPA (cost per acquisition). Mobile advertising will go down the same route. We will have independent sellers of inventory. Ultimately, it will move to an ad network model because the operator will want to partner with those people who cannot only get ads or brands on the table, but can also serve impressions or ads with the platform in place. The platform will sit on the top of operator servers � and then it�s a function of clubbing in more and more campaigns as they come by on a monthly basis.

Q. Are you looking at doing something like this?

A. We are evaluating this. Operators are looking at companies like Mobile2win and other companies like us for getting brands and advertisers on board and it�s for such companies to actually take the lead and say that 'I will bring the ad service platform on board, sit on the operator�s server and actually do both for you that ultimately may work out in the long run'.

Q. Both Yahoo and Google are getting into this (mobile) space big time, in search. It�s definitely the beginning. Where do you think this is headed? Will they move towards networks?

A. This is a question I have been trying to figure out in my mind, especially since, in the last three months, both Google and Yahoo have launched search-based ad service models internationally. But that�s a part of their core business. So, serving a search-based ad service model on mobile was the next logical step. Whether they will extend this to non-search-based and basic advertising for brands on mobile to partner with carriers is something we are not sure about. For their own services, yes. But I would not be surprised if these two giants actually say that we got the network, we got the clients, now we can also offer it to the operators.

Q. It's a pretty logical thought. What have you decided on setting up an ad network?

A. To be effective, an ad-serving platform has to be partner agnostic. So, whether we come as a platform or a third-party company � or Google or Yahoo come as a platform � at the end of the day, an operator realises the need to work with two or three close partners who can bring him those advertisers and brands on the table to feed into that platform. It is those companies that have been in that space locally for four to five years, working with the brands, that will be recognised as leaders in this space. And that is who the operators are looking at.

Q. How much revenue is Mobile2win generating?

A. We are not comfortable talking about numbers.

Q. Tell me about the size of the VAS industry.

A. The total VAS industry, including operator revenue, consumer revenue and including CRBTs (caller ring back tones) and all is Rs 2,000 crore. Out of that, companies like us get not more than Rs 250 crore � the rest belongs to the operator. And I know your next question, how much share we have in VAS. I�m not answering that!

Q. You have got huge funding of around $15 million. How are you are going to deploy it?

A. I am not confirming that figure...We will beef up the India business, whether it is media, telecom or mobile advertising. We are very bullish about the mobile advertising business and will do whatever it takes to become a leader in that space. We are still battling it out over a platform � whether we do it or not. In case the investments are there, we will do whatever it takes to become a leader in that space.

Thanks, Rajiv.