Peter Adderton talks life after Amp'd Mobile

Adderton

Peter Adderton is known as a lot of things: co-founder of Boost Mobile, former head of Amp'd Mobile and even as a recreational helicopter pilot. Most recently, Adderton joined mobile data services provider NeuMedia as its CEO. Adderton recently spoke with Fierce about the future of MVNOs and why Boost succeeded and Amp'd failed. The following is a gently edited transcript of that conversation.

FierceMobileContent: You've worn a number of hats throughout the years. How has your experience dabbling in digital technology, marketing and venture capital prepared you for your position at NeuMedia?

Peter Adderton: I've currently spent many, many years in different facets of digital and wireless and now in social media. I think this is the first publicly traded vehicle that I've been involved in, and obviously I've tried the private route and have had some success with that and some areas which haven't worked out as well as I'd have liked. So this was just a natural evolution for me to move into this sector, and I think that what we're building is very, very different from what is out there in the marketplace.

There is such an incredible change going on in digital technology and wireless--something that I've never seen before in my 10-15 years of being in this business, so I think we've got a pretty good handle on where we want to head and what we want to do. I think the difference between NeuMedia and the other ventures that I've had is that this is obviously a publicly traded vehicle as opposed to a privately held company.

FierceMobileContent: How do you think NeuMedia's corporate strategy will change following the acquisition of Digital Turbine?

Adderton: Well I mean a lot. I've got three strategies that we are building on, and the company is going to have three kind of main channels. The first one is going to be distribution to acquire or build any distribution that we can. NeuMedia has that now with the relationships it has with the global carriers. We are looking right now at acquisitions of some other companies that have increasingly better distribution, as we roll out. The second one is platforms. Everyone's got a unique platform. Obviously Digital Turbine has got a unique platform. It also has distribution into carriers as well. And one of the companies we announced a little while ago is Cameo Stars, which has got a very unique distribution platform for social networks like Facebook and Twitter. And the third one is unique content, so anyone who has got unique content--games, social games, any applications that we find unique that we can push through our distribution pipe--that's in our sweet spot.

So they're really kind of the three pillars we're building out and the foundation there with NeuMedia, and I think we're going to use that to kind of leverage ourselves off. You know, my whole strategy for NeuMedia is to really start to engage and bring the carriers back. I haven't given up on the carriers, that they're on their businesses to the point where they are going away forever. I think our strategy is that at some stage there's going to be a higher break between on-deck and off deck, which leaves NeuMedia right in the middle of there, and I think that we're prepared for when the world comes back that way, and we'll be ready and sitting there in a good spot.

FierceMobileContent: Amp'd Mobile appeared to be based on a model of supplying content to the user. However, most wireless carriers have since gotten out of that business. Do you think this is a mistake?

Adderton: Well yes it is, but I don't think that they necessarily got out of the business. I think I liken this to talking to some of the senior executives at wireless companies. They say, "Oh we're happy in our sandbox theater and carriage" and "we're really in a good space." But you know, to be honest, we got shoved into this sandbox. They think that they got out of it because they had a choice to get out of it. I think they got out of it because literally the world moved on to Apple operating and app stores, and they moved on to Android and everybody else. So to say that they are getting out of it by choice is, I wouldn't necessary say, the right way to put it. I think the carriers need to get back into it. When the rest of the world is learning more and more about their users through social networking and through experiences, the carriers are going in the completely opposite direction. They're learning less and less about their customers.

You know I still own Boost Mobile in Australia and to look at it from a carrier perspective, I'm a carrier down there, and we spent a lot of money and effort building the Boost brand up and the guys will show me the new Android device or the new Microsoft device that they were launching and I'd look at it and go," Boost does all the text messaging and all the boring compartmental stuff, but if you want the excitement, the games, you press the Android button. Is that right?" They said yes, so where's the investment in our brand?

FierceMobileContent: Boost Mobile continues to be a successful endeavor. What factors do you think contributed and continue to contribute to its success?

Adderton: You know I think [it is] its simplicity; its pricing model has really been something that we've set out to do from day one with Boost, and it's working in Australia with the unlimited plans. The generation and the market that we go after is obviously price sensitive. I think it has done well. Prepaid always does well in a recession. I started Boost here in 2000, 2001--which if you remember is another really, really lull period for technology--so we were finding that in tough markets, business does really, really well. It's one of those things where you create a brand; you know you get people to feel loyal to it.

FierceMobileContent: What do you think went wrong with Amp'd Mobile?

Adderton: Interesting question obviously because I've had the last, you know, three or four years to think about it. I think there's two things that we probably did wrong. One was the structure--the financing structure--of the company. Some people ask me why was Boost so successful and Amp'd didn't work out as well as you would have liked. What did you do differently? Well we didn't do anything differently. It's the same kind of model and strategy that we built Boost out with it. But with Boost we had a strategic partner with Nextel. And they understood and got the issues that a company like Boost or Amp'd would face. Be it through billing, be it through infrastructure, reach or distribution, it was a very, very expensive exercise and Boost was as well. But when you've got one strategic partner, you have the ability to be able to go through the bad times and the good times, as long as at the end of the day, you understand where you are going.

So I think that the way that we structured the company [Amp'd] was probably not the right way from the get go. We also knew that it needed an incredible amount of money. Everyone knew that about the MVNO model at the time and you know we had a lot of investors who were private equity investors who invest in smaller sums of money. So this became a kind of cat and mouse game.

And I think the second thing that we did that we probably shouldn't have--we should have slowed down the road. You know you've got to go out there and you've got to raise the capital, you've got to show the results. So I think the two things that I'd change, I just wouldn't be doing. This structure, the public vehicle and working with strategic investors, smaller amounts of investors and making sure that the investors we get have the capital and have the staying power to see the company through its bad times. If you look at the other competitors, well everyone says Amp'd it didn't work but neither did the other MVNOs. Rarely is it written that Helio lost more money than we did. The difference is that they had SK Telecom as their partner, so they could easily take it across and I think they sold it for $30 million--and the net result was that they'd lost $400 or $500.

In order to have a successful MVNO you need to have your carrier partner as your strategic partner.

FierceMobileContent: Can you talk about how the mobile virtual network operator business model in the U.S. market has evolved? After a massive flameout, it seems to be gaining steam again.

Adderton: They are and that's the other thing. I'm still a big believer in the MVNO model. I still think that you can subset to certain brands and demographics that big carriers kind of don't go after. Big carriers make the mentality of dragging a fishnet along to pick up everyone from six to 55. And I think that's their model and it works well for them. [But] there are niche markets that you can go after.

I also think that the rate per minute for an MVNO rate has come down substantially, so you can now have business models that retailers are a lot more open to. But I think it's important that you really have a point of differentiation on that--whether that's content, brand or whether that's price. But I think the days of anyone with a big brain wanting to be an MVNO are gone.

FierceMobileContent: Can you talk about customer ownership? Are smartphone vendors like Google and Apple poised to "own" the customer, or will carriers continue to play a role?

Adderton: Well, there's no doubt that we used to go out banking on those businesses, talking about the lifetime value of a subscriber, and that was one of the ways that the company was valued. Now the relationship is being shifted and is rapidly being shifted across to Apple and Google. There's no doubt about that. The operating system which we used to relegate back behind our user experience has now ended. The fact that Apple is becoming a large retailer, Google is becoming a large retailer, in the mobile wireless space. The fact that developers are starting to spend their energy and effort developing for those platforms--our consumers are now focused on defining excitement is now coming from those marketplaces doesn't bode well for the carrier. I kept saying this but I don't know if the carrier really has a choice with where they want to play right now, along the business with Apple and Google.