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Making money from mobile: interview with Ray Anderson, CEO of Bango plc

20 March 2009

When it comes to making a success of technology companies, Ray Anderson has an impressive track record. In his latest venture, the techie-turned-entrepreneur and chief executive of AIM listed Bango plc is aiming to cash in on the growing demand for mobile marketing by helping his customers make money using the technology.

Together with directors Anil Malhotra and Peter Saxton, Anderson is behind a business that makes it simple for its customers to bill consumers for content sold to them on mobile phones.

Since coming up with the idea back in 1999 and listing the business in 2005, the Bango team has endured what Anderson describes as “a lot of pain” in developing a technology platform and client roster that is now driving the business towards profitability. Today it counts some of the best known brands in the world as customers and is now beginning to enjoy growing demand for its services as the potential of mobile marketing starts to take off.

“The story of Bango is quite straightforward,” Anderson explains. “There is a huge opportunity ahead for us in that everybody on the planet is going to have an internet browser in their hand all of the time. We’ll know who they are, where they are and, because there is a mobile service provider involved, we’ll be able to bill them.”

Until now, companies that wanted to sell content and services to consumers using mobile phones have faced a major problem in working out how to get money from so many people using so many different mobile networks.

“The question you face is ‘how do I take advantage of who and where they are and how do I bill them?’, Anderson says. “We have experienced a lot of pain preparing for that – our platform was hard to build but it works and it is starting to pay off.”

Products for the mass market

Anderson is no stranger to being ahead of the technology curve. As a computer scientist in the tech-fuelled Cambridge business community, he cut his entrepreneurial teeth with a venture capital-backed company called Torch Computers. Together with Malhotra they developed a business version of the original BBC Microcomputer, with the software eventually sold to Steve Jobs at NeXT (after his forced resignation from Apple), and the hardware to an Australian company.

The experience, he says, not only taught him what a small team could be capable of, but it also highlighted the importance of accepting technical compromises in order to develop products that appealed to the mass market.

His early forays into the potential of mobile technology came during his time as an angel investor during the late nineties. He says that while the technology at the time was limited, there were signs that the surging growth of both the internet and mobile meant the two sides would inevitably meet.

Teaming up once again with Malhotra, they initially focused on hiding the mind-boggling complexity of selling to consumers through lots of different networks. One of the original ideas was to make it possible to go to an internet service just by dialing a number.

However, in 2000 the Bango team was starting to face bigger problems than simply figuring out how to turn a profit using mobile technology.

“When we started it was the beginning of the crash,” he says. “Shareholders had become irritated by continually pumping money into companies that didn’t make a profit. The problem was that you couldn’t sell a service to help people get to these sites if nobody could make money from them. So instead we decided use Bango to help people collect money from users, which meant they could actually sell their services.

International expansion

By 2005, and after pinning down the technical idiosyncrasies of the various mobile operators, it was clear that Bango was generating enough business in the UK to become profitable. But rather than sit and wait for mobile marketing to take-off, the team was keen to expand the service on an international basis – particularly in those countries that looked to be on the cusp of embracing the technology, notably the US, Spain and Germany.

“We had a choice: raise venture capital money, float on AIM or throttle back and coast along in the UK,” Anderson explains. “Given that we wanted to expand worldwide we chose the AIM route, mainly because the valuation was better in those days and it also gave us credibility with some of our customers. We raised £6m and started spending it to penetrate those target countries.”

While progress has been slow – slower then the team expected – the last three years have seen it sign up the likes of Disney, Sky, Sony, MTV and Manchester United to use mobile.

The company responded to the slow progress by streamlining its sales department in an effort to get the cost of sales as low as possible – and it had a marked effect.

“The price we charge has come down so sales haven’t risen in dollar terms, but the good news is that the sales costs have come down dramatically,” he says. “As a result we have been able to continue to grow the business, develop the product and get new customers.

“Now we are starting to see that long-awaited growth materialise, particularly in the US. From a low cost base – because customers can now sign up on the web – we can add customers and drive up margins without driving up the costs.

As a result half-year revenues in the period to September 30, 2008, were stable at £6.75m with year-on-year pre-tax losses nearly halved to £0.59m, bringing the company close to an EBITDA break-even.

“The two main old technologies –the operator on-portal stuff and the old premium SMS world – are worth about £1bn each per year,” Anderson explains. “We see both of those billions moving into our pot, where we can take a margin for facilitating payment. If we can hold our business and keep our costs down it’s hard to see how a competitor can ever catch up with us.

“So we’re now at that interesting point where we are crossing over into profitability and the mobile web is indeed moving forward. We are well positioned in the UK, where we are the market leader, and we are well positioned in the US, where we are also the leader. In Germany and Spain, which haven’t really started taking off, we’re very well positioned. We’re also active in lots of other markets where we can move in as they start to move. So the scene is set for good things in the coming years.”

Ben Hobson, SmallCapNews.co.uk