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Despite a few false starts over the last seven years, it looks like mobile media might finally happen-proving the cynics wrong. So now the question becomes: where will the mobile media profits be?

To date, there have been many more disappointments than successes. While I couldn’t even count the number of billion-dollar businesses spawned off the Internet, I can’t think of a single one in the mobile media industry.

Few venture capitalists can claim to have made money on a mobile media company. Jamba was the only European mobile media company that enjoyed a substantial exit when acquired by Verisign for $273 million in 2004 , but its business model suffered from a severe backlash against subscription services directly following the acquisition. In the United States, m-qube was sold for $250 million also to Verisign in 2006, but there again, the long-term value of that business is questionable: Verisign has recently announced that it is refocusing on its core Internet business and divesting its other businesses, presumably including messaging .

Musiwave’s $120 million exit to Openwave wasn’t good news either: Openwave recently announced a $70 million write-down and sale of Musiwave to Microsoft for $46 million . The one and only exception, of course, is Jamdat, which went public in 2004 at a valuation of $16/share, valuing the company at $312 million, and was sold a year later to EA for $680 million.

The outlook isn’t great in the public markets either. There’s Itouch-which went public in the summer of 2000 at a valuation of GBP 200 million and was sold to For-side five years later for GBP 181 million. In the UK, the large majority of mobile value-added services companies that went public between 2003 and 2006 on the AIM market are now trading at significant discounts to their IPO price. While there haven’t been as many IPOs on Nasdaq, Glu Mobile went public at about $12/share in March this year, and is now trading at less than $5 on the back of lower than expected quarterly revenues.

The reasons for the paucity of successes in mobile media are well known and mostly related to the structure of the industry: Carrier control over billing and distribution, closed operating systems, multiplicity and complexity of developer platforms and handsets, and the absence of flat-rate data packages, to name a few.

The good news? Most of these restrictions are gradually being stripped away. Carrier control over billing and distribution is weakening in most of the world, and there is a clear trend toward off-portal distribution. Flat-rate data packages are mushrooming, though have yet to enjoy significant traction. Google’s release of Android has focused the industry on the potential for an open mobile OS that could quickly become a standard.

So this naturally brings us back to our original question: where are the mobile media profits?

Four areas warrant closer inspection:
• Companies that allow access and interaction with your favorite online content or applications through your mobile device. As an example of this trend, Orb recently announced that they hit their two millionth download only two-and-a-half weeks after hitting one million.

• Companies that create new types of communities through mobile interaction. Mig33 recently announced hitting the eight million-member mark; Gofresh has recently announced 500 million monthly page views ; and Flirtomatic recently announced that it broke through the 100 million monthly WAP page impression mark.
• Companies that use the power of mobile to solve concrete problems in developing markets. Given the relatively high penetration of mobile in developing markets, mobile devices are the primary means of access to interactive services for the bulk of those populations. A favorite of mine is Wizzit, which is pioneering branchless cell phone banking in South Africa.

• Companies that create ad-funded revenues for the mobile ecosystem-AdMob is first and foremost in this category.

So-will there actually be any profits in the four areas singled out here? Most companies still suffer from being subscale, and those operating in developing markets are still refining their revenue models, but overall, I wouldn’t be surprised to see a few stars emerge.

Pamir Gelenbe is an Entrepreneur in Residence with Newtonmore, a family office based in London. His most recent investment is Seatwave, Europe’s leading fan-to-fan ticket exchange. He is still looking for a fantastic mobile media company in which to invest. If you know one, Pamir can be reached at gelenbe (at) gmail (dot) com.

• Posted in
• Mobile Social Networking, Web 2.0, Mobile Search, Mobile Music, Mobile Advertising, Mobile Content, Content Discovery

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