Bango’s presentation to investors and analysts in London on 25th November 2008 was well attended. Notes were taken during the Q&A session, and a summary is provided below. Please read in conjunction with the presentation: http://bangoinvestor.files.wordpress.com/2008/11/bgo_interims_ppt_sep_2008.pdf
Q: Can you explain the differences between premium text based services and the mobile web based payment systems provided by Bango?
A: Traditionally, a customer would send a text to a service provider and the reply message would cost them money, and contain or point to the required content or service. With the mobile internet, a customer browses or searches to find the content they want, then clicks an “agree to payment link” to buy the content.
The problem with a text approach – in addition to the hassle of composing and sending a text message compared with clicking a linki – is that they are open to abuse. Mobile operators subscribers have been harmed by the abuse of text based payment systems. Hefty fines have been levied on those who cause problems but the abuses have continued. With mobile web payments, there is auditable proof that a user has clicked to agree to a set of terms and conditions.
Mobile operators want to move to a more consumer friendly and clearer model. In the USA the MMA guidelines have been established to encourage good behaviour. A similar thing is happening in the UK with PayForIt guidelines. Overall there is a strong move from text to mobile web.
Q: Content providers reported problems with buying mobile search traffic and advertising on some UK mobile operators. What is the problem and when will we see this traffic pick up again?
A: Two of the UK mobile operators changed their search suppliers for their on-portal search, and they had both technical and operational problems making this change. Bango is working to help these operators overcome their problems. All parties involved are keen to sort it these problems out and are motivated to do so. Changes are expected during and shortly after the calendar year end which should resolve some of these problems.
Q: Is there a risk to Bango Analytics from established PC Analytics companies like Omniture offering something similar?
A: PC Analytics companies will need to respond as their customers start to expand their activities into the fast growing mobile web. Existing PC analytics products don’t work on mobile devices. For example, java-script only works on a few mobiles, cookies don’t work reliably and the IP address of a user is shared with millions of others coming from the same mobile network. PC analytics suppliers do not have the relationships, data or technologies to address these challenges. There is an opportunity for Bango to partner with these companies, to provide them with data that can be integrated into ther systems. Bango already works with several Omniture customers and recently announced a partnership with Adversitement – a leading Omniture integrator – to better integrate Bango Analytics with the Omniture system.
Q: Can you talk about Nokia’s efforts to build a web-based platform?
A: We have many interactions with Nokia, who are starting to take a great deal of interest in the web and internet. They are following the “open model” promoted for the last 8 years by Bango, and we expect they will help grow the market. They also represent a potential customer for Bango Analytics and for Bango Payment products.
Q: How interesting is the U.S?
A: Very interesting. When we floated Bango we stated that our main focus in the future would be the US market. It is where the world’s internet leaders are based and it also has a vibrant and large domestic market. Our investment is starting to bear fruit. At the moment it is the most exciting market we have.
Q: Are you going to have a presence in the U.S. or expand your presence there?
A: We have a presence – we have a team in New York and they are integrated with our team in the UK. We will expand our presence as appropriate, but at the moment we are finding that our existing team – supported by our self service model at www.bango.com is meeting demand.
Q: The cost of selling Payment products to content-providers seems to be falling – what is the expectation for Analytics products going forward?
A: The Analytics sales model is actually a lower touch model than that for payments. 90% of analytics customers are pure web-self service compared. The sales process is simpler as it does not involve the complexities of billing requirements and pricing policies. We have also had a great deal of success working with partners who take our product to market alongside their own products or services.
Q: Can you explain the movements in overall gross margin?
A: Bango’s overall gross margin is a result of the mix from the monthly fees paid by content providers for access to the bango platform – which has a gross margin of around 95% – and the margin Bango makes from a share of revenues on payment transactions – which overall is around 8%. If you refer to slide 8 of the Interims presentation, you will see how that margin is made up.
You will see that the margin on end user transaction activity has increased slightly from 7.3% to 7.9% from the previous half year, and the margin on fees is 95%. In the last half year, the growth in end user spending was faster than the growth in content provider fees, so the mix moved slightly downwards in overall percentage margin.
Q: How do you expect the mix to develop?
A: End user spend should continue to grow based on the success of our content provider customers growing their businesses. In addition the fee revenues will increase based on increasing numbers of customer sign-ups and the increasing use of Bango Analytics. The mix will be affected by the relative speed of growth between these different margin sources. That’s why we report on our progress with both sources of margin separately.
Q: Based on current cash burn, cash looks adequate for the future, but can you say more about the RBS loan facility?
A: The RBS facility enables us to accelerate cash-flow to content providers, where this is in the interests of Bango and helpful to the content provider. Selected content providers are offered a one month “acceleration” of the revenues we will be paying them in return for a small fee. This should be an attractive source of funding for them, and enables them to increase their marketing spend going forward.
