Wednesday, May 18, 2011

An Insight Into OnMobile's Birth... A True Story

In 2002, Arvind Rao and Mouli Raman came close to shutting OnMobile, the company they had founded two years prior to that. They had nearly exhausted their $15 million of venture capital money , partly because of extensive travels around the world in search of the first customer.

Telecom operators were large, and none wanted to be a guinea pig for OnMobile's untested mobile products such as ringtones, alerts and voice-based searches. Rao remembers sitting in his California office wondering how to lay off his 30-40 people.

"The VC was acting tough. We wondered whether we should shut shop, and just tell the VC we gave it our best shot."
But somewhere deep within, they believed in their idea. "That's what I feel strongly about in entrepreneurship. You have to have conviction that the product will work. We had that conviction. So we decided to stick through the bad phase."

It's not official, but it's possible that OnMobile is today the world's biggest company providing mobile value-added services (VAS) other than voice-calls and SMSes. They have been told by one of the world's largest mobile operators that they account for 30% of the operator's global contentbased VAS revenues. The remaining 70% is fragmented. Large telecom operators in India have said that OnMobile accounts for 2-4 % of their overall revenues. "Worldwide, we have 90 million paying users every month," says Rao.

The story of OnMobile actually begins in Infosys Technologies. Mouli Raman, who grew up in a small town in Tamil Nadu and who had joined Infosys in 1988 after an engineering course in REC Allahabad, was servicing startups in California in the late 1990s. Raman felt it was possible to do in India what these tech startups were doing. It was the peak of the internet boom and he and a group in Infosys thought of developing internet products, and started with one that sent alerts to websites. Infosys encouraged the effort.

"But when the product's first version was ready, we realized we would have to spin it out from Infosys. The people, the risk mindset required for this venture were very different from that of a services company," says Mouli. That's when Rao entered. Rao, who grew up in Mumbai and had left for the US in 1980 after an engineering degree from IIT-Bombay , was in the venture capital industry in New York. He was interested in starting an India technology fund.

"For that, I was one day meeting Nandan (Nilekani) and Phaneesh Murthy in New York. It were the rah-rah days of the internet, and Phaneesh envied the lives of VCs (the superstars of those days). He wanted to get involved in the buzz. Nandan had been funding this Infy (Mouli) group, and he was keen to get it off his back."

Thus was born OnMobile. Rao found Mouli and team to be very good. "But I felt they missed the business model and the target . I was coming to it from the target of mobile and VAS; I felt the internet had a difficult-to-prove business model."

So the website alert product was turned into a mobile alert one. They introduced other applications, including one that allowed users to call up to get cricket scores and cricket biographies.

The first customer break came with Orange (later Hutch) in Mumbai. Asim Ghosh and Sandeep Das, who headed that operation, liked OnMobile's work. "Das was a big cricket fan. He liked our cricket app, but said he cannot pay us anything. So we agreed on a revenue share model," Rao says. This was also around the time that OnMobile went through its crisis , with cash nearly depleted.

The Orange service slowly gained acceptance , and it later took it all-India . "That's when others saw it; Airtel called us, Idea called us. After that we never looked back."

OnMobile's strength was its risk sharing and joint work with operators to make the products a success, instead of simply licensing its technology. It made gaining operator acceptance easy; it also brought them so close to customers that they innovated fast. "We evolved the ringback tone product so well, that though we were not the first with it in the world, ours became a blockbuster success ," says Mouli.

In 2008, they signed two agreements, with Vodafone and Telefonica of Spain, which expanded their global presence phenomenally. Vodafone wanted them to replicate their India success around the world. Telefonica wanted them to launch in 13 countries in Latin America. Mouli says they frequently receive requests from developed market operators to teach them the things being done in Asia. "They are hit by Google and Apple (app stores), and they believe we can help them counter this." source