With the turbo-charged proliferation of mobile phones — including “smartphones” — it’s no wonder that consumers are increasingly relying on them for news and information. Likewise, as traditional media companies around the world struggle to retain print subscriptions and monetize the traffic coming to their websites, the demand for sophisticated, efficient mobile software platforms for news and information is growing in leaps and bounds.
That’s not news to Kunal Gupta, co-founder and CEO of Polar Mobile, a startup that develops proprietary content for mobile devices for a range of customers, from Time magazine to The Hockey News. Growing up as the son of Indian immigrants in Canada, Gupta was, at an early age, exposed to the inner workings of running a business and the demands of a seven-day work week. With the University of Waterloo — “the MIT of Canada” — and Blackberry-maker Research in Motion (RIM) in his backyard, Gupta founded Impact Entrepreneur Group, a student-run non-profit promoting entrepreneurship, while studying for a degree in software engineering. He founded Polar Mobile shortly after he graduated in 2007. In an interview with India Knowledge at Wharton, Gupta discusses his upbringing in Canada, his early exposure to entrepreneurship and what the future holds for mobile software.
The following are edited excerpts from the interview.
Knowledge at Wharton: I wanted to start out this interview by talking about something in the news, which is news about news. It’s old news that the Internet and mobile telecommunications are putting traditional media in a terrible bind. There is more and more information out there for consumers, and attempts to charge money for it seem futile. The consumer is now accustomed to getting news and information for free. Aside from The Wall Street Journal, which has an extremely broad and loyal subscriber base, news outlets are forced to find revenues through subscriptions and advertising related to Internet page visits. Other sites have [developed different] revenue streams for enthusiasts, such as ESPN’s fantasy leagues. How does your company, Polar Mobile, capitalize on this trend?
Kunal Gupta: If we look at what happened online, all these traditional media companies — whether they are broadcasters, radio stations, newspapers or magazines — were publishing content online with the goal of reaching more people. The initial thought was to do it for free, [using] page advertising to monetize it. And that worked. But now it’s becoming ineffective from a monetization standpoint … [because it’s not] creating an engaging relationship — a conversation between a market, or brand, and the consumer. Really, that is the media’s job — to connect consumers to the marketers, brands or advertisers. That’s the challenge that people in media are facing online.
There has been a lot of talk recently about paid content. Some places where there is a really loyal fan base — like The Wall Street Journal — you will see that work. It’s not going to work in consumer mass markets. That is our prediction, partly because users [have been] getting so much content for free.
Online, you have a lot of user-generated content through sites like Facebook, Twitter or YouTube. A lot of content is being created and, quite frankly, the quality is very poor. Therefore, one will begin to see a difference between quality content and everything else. Consumers whom advertisers care about are going to want and demand quality content. There is going to be a bifurcation, which doesn’t exist today. Today, everything is blended together. Eventually, you will have a premium content market online.
With that as the context, let us shift to mobile, where our company, Polar Mobile, tries to open up new revenue streams for media brands by leveraging the growth of the mobile market. When we look at mobile from an industry perspective, it starts with infrastructure. Globally, you have carriers and manufacturers — really big companies like Nokia, Samsung, LG, Apple and Blackberry — building handsets to “ride” over the infrastructure. We’re in 2009 entering 2010, and we are at a point where the infrastructure is solid. Mobile handset ownership is growing. There is an opportunity at the top level for products, services and value-added services to [benefit from] the infrastructure built over the last 30 to 40 years.
There are over four billion cell phones on the planet today. That’s more cell phones than TVs, computers and cars combined, and it’s growing. When you look at the developing [world] — whether it’s India, China [or parts of] Africa — the first connection to the [rest of the] world is through the phone. Broadband infrastructure is not being set up and PCs are too expensive. It is a cell tower and a smartphone device that is talking to that cell tower [providing access to] the world.
Our objective at Polar Mobile is to enable brands, advertisers and media players to distribute their content and primarily monetize users through the mobile medium. We do this through software. We have a software platform that connects consumers with media.
Knowledge at Wharton: You just outlined where mobile consumption of information is today and where it may be going. I have questions about some of those assumptions. Question one: Because so much content is available, will there be over the next three to five years a) some natural consolidation of content and/or b) a point when end consumers dictate where that content comes from?
Gupta: It’s more the latter, where the consumer is in control — especially when we look at the mobile medium. We have learned that mobile is a very personal medium. It’s all about “me.” From the cell phone case I own to the wallpaper on my phone screen to my ringtone to my address book — from a communication standpoint, it is a highly personal device and that translates well from a content-consumption standpoint.
In a number of our products, we have enabled users to personalize their “experience,” whether it’s how content looks or even what content they get from a certain brand. For instance, using [Polar Mobile’s] platform to read Time magazine, users can choose how they want to look at articles or the pictures. They also get to choose which sections, authors and content they are interested in consuming. From a market standpoint, it’s not even going to be in the next three to five years, but in the next 24 months, that the user will be in more control.
Knowledge at Wharton: The second question is: With four billion people owning cell phones now, what would be the rough percentage using smartphones?
Knowledge at Wharton: And in 24 months, that will also grow?
Gupta: Yes. By 2012, it is predicted that about 40% to 50% of new devices from the major manufacturers will be smartphones devices. In Europe, one out of every two phones sold will be a smartphone in 2010.
Knowledge at Wharton: Through a smartphone — my iPhone, let’s say — can I use mobile software, such as Polar Mobile’s, to create a more customized news experience than I would be able to on my PC?
Gupta: Correct, because it’s about you as a unique user. That introduces a lot of challenges. The vision is to enable a mobile lifestyle — leveraging the growth of smartphone users. The growth of smartphone adoption, even this year, is about 30%. The mobile industry as a whole is about 6% from a device perspective. The entire market is growing but smartphones are outpacing overall growth.
Knowledge at Wharton: You mentioned in your opening statement that there’s a market for value-added services. Let’s use me as an example. I like to read The New York Times everyday…. I usually browse the paper on my iPhone, or if I am on my laptop and I want a break from what I’m doing, I’ll go to its home page…. I see lots of advertisements in The New York Times … but I have never once purchased any product [because of one of those advertisements] or clicked through any advertisement. How is a company like The New York Times going to benefit from my consumption of its product without ever paying for it?Right now, all my money is going to Comcast or AT&T. Where are the value added services?
Gupta: Good example. Let’s first put aside the thinking that value will come through clicking on ads. Online, 94% of all ads are clicked on by 6% of the people. That’s why you and I will look at each other and ask, “Have you ever clicked on an ad online?” We’re both going to say “no” because we are among the 94% of people who never click on an ad. That’s why online advertising is not growing as fast as content and consumption.
Back to your example. The way you will see products like The New York Times on a device evolve is based on access to premium content — and the key word is “premium” — where the user is willing to pay. If you look at other markets, “micro payments” [for pay-per-view web pages] have been successful. There’s a huge future for micro payments on mobile but it is not easy to do [on a PC] from an infrastructure perspective. You’re not going to enter your credit card on 16 different sites on your laptop. The infrastructure is starting to develop but it will take a long time to get there. On mobile, however, because you get a carrier bill from AT&T every month, you already have a billing relationship. You’ve got iTunes, which has your credit card. There are a number of hooks [to attract] consumers who are already there, which will make it easier [to get] them to adopt [mobile micro payments].
Knowledge at Wharton: If we talk about consumption of The New York Times through my mobile device, whether it’s an iPhone or Blackberry, what are some premium features I would be willing to offer a micro payment for? A few years ago, The New York Times charged consumers for some of its premium content. If I wanted to read Thomas Friedman’s op-eds, I would have to pay. It actually reversed the decision because it didn’t have enough people paying. What premium features are there that will allow mobile customers to take a leap of faith and make micro payments?
Gupta: There are a number of examples. I’ll start listing some of them.
Video is at the top of the list. You can break video down into a few categories. For instance, take the sports vertical and the ability to look at live video, whether it is the Olympic Games or an alert saying the pitcher for the Cubs has gone eight innings without a hit so “tune in now” on your iPhone. Many consumers are probably going to pay. From a sports perspective, the ability to have live video is key. Or, let’s say a goal is scored in a soccer game and a video [of the goal] is then sent to my phone — the timeliness provides a value that the user would pay for.
Another aspect of video is exclusivity. If the only way for me to get video on my phone is by paying for it, then chances are I will pay for it. Let’s consider a hypothetical situation: The head coach of USC’s college football team, Peter Carroll, is a sports celebrity and generates lots of media interest. Let’s say that we stick a Blackberry in Carroll’s hands. During the half-time of a big game, he makes a 15-second clip of himself giving a rousing speech to his players and then he hits “send” so that the clip is broadcasted to everybody following Peter Carroll through their USC football application. Exclusive content to mobile may induce consumers to pay for it.
Knowledge at Wharton: In that case, the person providing the content needs to set up a barrier because the coach of the USC football team could also post that on Twitter.
Gupta: He absolutely could. However, distributing it through this channel creates a monetization option.
You also touched on leveraging personalities — so whether it is Friedman or Carroll or whoever, that brand and that personality will have a following. In effect, we monetize the personality.
[Another aspect of video] is experiences. I can check hockey scores in 20 different ways from my phone. If I were a big hockey fan, would I pay to get alerts in real-time when the goal is scored?We think the answer is “yes. “
Knowledge at Wharton: I used The New York Times as an example because that’s all I know but perhaps it is not the best one. Is there another example in the universe of Polar Mobile showing this already going on?It could be in some field where you could help me understand where the industry is headed.
Gupta: I will give you two examples. In the next 30 days, we will announce a new endeavor in the sports vertical — in hockey — where we are monetizing the content and experience directly with the consumer [as opposed to] leveraging only advertising. Until now, this product has been primarily advertising-based and it will continue to be. However, we’re adding exclusive content, real-time scores and alert functionality, which users will have to pay for.
Knowledge at Wharton: Is this through a contract with the National Hockey League?
Gupta: No. It’s with one of our biggest customers — The Hockey News — which has been extremely successful at mobile to date with a large and growing user database. A reason we are able to launch premium features is because we already have a significant database attached to this brand on mobile. That’s [an important] component needed to make these features work: A captive audience base to market to….
Three years from now, information and consumption will become more virtual. In Japan, there’s a teenage girl with a virtual pet on her phone and she is paying money to feed and dress it. It’s completely virtual. In Europe, you have a flower company that made just over US$3 million this past year on Valentine’s Day by enabling people to send virtual flowers through mobile phones. The whole concept of “virtual” is taking a second life, but personalizing it by building a community aspect and leveraging it through mobile.
Let’s go back to hockey. Let’s say you and I are hockey fans. We’re at a bar following a game and we’re rooting for different teams. We’re playing a head-to-head fantasy game from our phones and I want to throw pie in your face. I pay a dollar and then your screen virtually blows up and you have a pie in your face. That’s just an example of a different monetization stream exclusive to mobile.
Knowledge at Wharton: You’re saying people — whatever their hobbies might be — have almost an almost irrational willingness to pay for them?
Gupta: It sounds like that, right?
Knowledge at Wharton: Right now, when I consume The New York Times … I’m paying X amount of dollars every month to Comcast — my Internet provider — and an additional amount to my telecom carrier, AT&T. In effect, I’m paying the people who have laid down the pipes for the water being delivered. Will the strategies you just mentioned about timeliness, exclusivity alerts and sending gifts virtually be complementary to that? Will it attack that existing price structure?
Gupta: The existing infrastructure, players and companies are vital to making this next layer work. I talked about how the infrastructure and devices there. The reason why there’s an opportunity now is because those players are there. That said, from a price perspective, there will be pressure because consumers are only going to have so much to spend on a monthly basis…. It’s a question of whether 5% or 50% of their monthly spending will go toward value-added services. There is going to be price pressure as there should be.
Knowledge at Wharton: I would like to move from the industry and focus on Polar Mobile. Who are Polar Mobile’s main competitors and how does Polar Mobile differentiate itself from them?
Gupta: We started Polar Mobile with the goal of capitalizing on the growth of smartphones and the need for turning them into entertainment devices from mobile devices. For example, the iPhone — in my experience, it’s actually a terrible phone.
Knowledge at Wharton: It is a computer that happens to have a phone with it.
Gupta: Exactly. Right now, when we pick up a phone, we say it is a phone and it happens to have a camera. One day soon, it will be that this is an entertainment device that happens to make a phone call. We’ve reached the point when we stopped calling it a “phone.” Personally, I hardly make phone calls. Communication is done by other means enabled through these devices. Part of the early momentum and motivation for us at Polar Mobile was capitalizing on the need for all sorts of people to be able to get onto these phones. One of the challenges — and the biggest problems that we solve — is fragmentation in the market.
Mobile is a very fragmented market. We have different devices, screen sizes, operating systems and languages. We have really big companies, such as Nokia, Samsung, LG, Apple, Blackberry, Microsoft and Google that are not going away any time soon. They are investing heavily in mobile and are fragmenting the market even more. That’s why Polar Mobile finds itself in the market as an enabler. Our approach is to enable content through software, so we have built a platform called SMART. We work with media brands — whether it is Time magazine, BusinessWeek, Sports Illustrated, CNNMoney. com or Rogers Sports Net — and media in a very broad context, which license our platform to syndicate their content and advertising to users across different smartphone devices.
Polar Mobile differentiates itself by investing in the platform and that’s where we spend the majority of our effort. The value is in having a platform where all of our customers benefit from the same technology. We’re not a custom development shop. We own our [intellectual property]. We’re innovating and building next-generation solutions when it comes to publishing content on mobile devices. For example, Blackberry might launch three new devices this year, so it’s our job to make sure that all of its customers are supported. When we have 50 applications, it’s not about re-launching 50 applications. It’s about extending our platform. Our customers benefit from economies of scale, from the platform. That’s our biggest point of differentiation.
Knowledge at Wharton: Polar Mobile also emphasizes design for mobile content delivery. What you have talked about is pure function. How does design fit in?When a company focuses on design as well, there’s a significant cost. Are there risks to this approach, either in terms of slower downloading or raising your costs that have to be passed on to your clients?
Gupta: At the end of the day, we create products used by consumers, which for me and the team is very motivating and rewarding. We just issued a press release announcing that over one million people are now using our products. That was just two days ago. We’re actually at 1.3 million, and by the time this story gets published, we might be at two million. When we have that many people using our products, we have to put a lot of thought into design and functionality. The word we use internally is the “experience. “The experience is beyond the logo of the application — if it is Time or CNN — the content or video, or the real-time delivery. It’s the overall experience, from start to finish. We ask ourselves: How do users feel? How engaged are they? Are they going to come back? Are they going to share it with a friend? Are they likely to rely on it? Or is it more of a product to kill time with?
We have in-house designers who work very hard and study every product on the market. We do a lot of iterations with our customers, which is costly. It is an investment that I don’t think — and I’m biased — our customers recognize the amount of work needed to iterate a product to make it look good. But the end users do. And that’s why we do it. It is the right thing to do. If the goal is to create successful products on mobile, our strategy to focus on design and invest in the required resources early on is a valid way of achieving that goal.
Knowledge at Wharton: You mentioned that Polar Mobile has verticals in business, sports, news and lifestyle. Are there plans to expand into other areas?Or is the focus of Polar Mobile fill out these four verticals as much as possible?
Gupta: We are expanding in three ways. The first is globally. Today the majority of our customers are based in North America, but a lot of are global brands, such as Time or even The Hockey News, which is used heavily in Europe. Our products are being used right now in 60 countries, primarily in English and a few in French. Our next phase of growth will be to launch across Asia and Latin America, potentially in the next six months and in different languages. It’s one aspect of growth that shows the demand in the market for our software.
The second area of growth will be platforms. This is staying true to our promise to [address] the fragmentation issue. Let’s consider Android, which is Google’s mobile operating system. LG, Samsung and Motorola — three of the top five cell phone makers in the world — have said openly that they are taking a bet on Android. Today we aren’t talking about Samsung or LG as premium device makers. I bet you, however, that in 12 months, we will be. Potentially one of us might be carrying one of those devices. So the second area of growth is looking at platforms that will be big in the next six to 12 months and investing in them now.
The third area is other verticals…. Retail is probably the most attractive because of the direct link to monetization. We are also interested in enterprise, and we’re starting to understand what we can do there. A lot of players are in the enterprise space, but there is always a need to communicate effectively through mobile devices. Our focus in terms of growth is probably in that order — going global, extending the platform and then exploring new verticals.
Knowledge at Wharton: I want to ask you about your experience as an Indian entrepreneur in Canada and the U.S. Can you start by telling us who you are and how Polar Mobile got started?
Gupta: It’s always fun to tell this part of the story. I was born and brought up in Canada. I grew up in Ottawa and was fairly active in various communities, whether it was in student government or the Indian community, both from a cultural [and a business] standpoint. A city like Ottawa has a very close community. Through my parents and relatives, I was encouraged [toward business] very early on.
I attended the University of Waterloo, which is known as the MIT of Canada — one of the top technical schools in Canada. I studied software engineering, but my real focus for going to Waterloo was … to take advantage of its co-op program, which is one of oldest in the world — over 50 years. [It’s] a very strong program, which after eight months, throws you into the workforce. After graduating, students have two years of work experience at six different employers, which allows them to get an early start in the workplace. On top of this, I was fairly involved in extracurricular activities outside of school.
I started an organization called Impact in my first year at Waterloo with the goal of promoting entrepreneurship to young people. I was 18 and didn’t really know what I was doing, but just wanted to gain exposure to leadership in business and entrepreneurship and I wasn’t getting that in the classroom. I got together with some classmates and friends and put on a conference for entrepreneurship. In the first year, the event hosted 150 students from different universities, with industry [experts] and CEOs [as speakers]. We had big sponsors, like IBM and MasterCard, and it was a big success. That [opened] my eyes to entrepreneurship and doing something at a young age, but also helped Impact grow. In my five years of being involved with Impact, it grew to a team of 120 volunteers running the non-profit and organizing 12 programs a year — conferences, competitions and different outreach initiatives — involving about 15,000 students across Canada. Impact today has offices in four cities. It is completely volunteer-driven and run by 20- and 21-year-olds.
Knowledge at Wharton: As it should be.
Gupta: As it should be. Impact also has major corporate sponsors and government funding. Starting Impact and growing a team [while I was there gave me] my first go at running a company. The purpose was very clear. It was to achieve the vision of the company. There was no personal monetary benefit. If anything, it was cost!
At Waterloo, the co-op was great. I got to work in telecoms, finance and consulting. I got to work for a few start-up companies. I got to work overseas, in the U.S. on the West Coast. I also did an exchange term in Asia. I got to travel the world and build fairly strong [contacts]. Most importantly, I got a lot of good experience early on.
The combination of the co-op, the Waterloo environment and Impact gave me the confidence to start up Polar Mobile as I was finishing university. I studied software engineering and today I’m running a software company. But I haven’t written a single line of code for our platform and I don’t plan to. I now focus on the team. The team at Polar Mobile is one of the strongest and most motivated teams I’ve ever worked with.
Knowledge at Wharton: How did you get the idea for Polar Mobile? Who were the people who had the initial idea?
Gupta: I worked in the U.K. I worked for Teleco in Canada. I lived in Hong Kong for half a year. I visited China. I go to India quite often. Just looking at the European and Asian markets and at how mobile was being adopted there was mindboggling. When I was in Hong Kong, mobile penetration was 126% — more subscribers than people. Today it is 140%. And Waterloo is where the Blackberry was invented. RIM’s worldwide headquarters are in Waterloo. It has 22 buildings right beside the university. I’m one of the few guys on our team who hasn’t worked at Blackberry. In fact, I’m one of the few people in Waterloo who hasn’t worked at Blackberry. Being exposed to Blackberry to such a high degree — being in Blackberry’s backyard for five years — combined with international travel and exposure got me really turned on to the mobile industry and specifically to smartphones. Our thought was that this is a growing market, an exciting market. What can we do in this market that is going to be valuable?….
Knowledge at Wharton: Who is “we”? How did you meet your current team members?
Gupta: The founding team was a combination of former classmates and we set up the company in 2007. Half the people were involved with Impact and helped me start it five years before that — and, frankly, had put up with me for five years. There was a lot of mutual respect and trust, which allowed us to get started without having to worry about establishing trust.
The vision of Polar Mobile was then and remains today about the mobile industry. We intended to capitalize on the mobile industry. Our approach was to do that through software. It was our background. It was low cost. We knew mobile. We had prototyped all sorts of mobile concepts — mobile banking, mobile organizers, aspects of social networking. We probably had half a dozen products that were prototyped. One of them happened to be a mobile newsreader.
We shopped these products around. We got advice. We got feedback from the market. I speak at a lot of entrepreneurship and leadership events for youth. That’s the one piece of advice I always give: Get out there with the product — the prototype, the idea — and talk to as many people as you can. Get feedback. In talking to people, we realized we were way off with some of the ideas. Then our mobile news concept started to stick and we were able to get our first lead customer, which was Rogers Media, Canada’s biggest media company. This was through the Impact network. We knew some of the editors and they introduced us to the publishers and put in a good word. It took awhile to close that first sale, but we eventually brought them on board. That provided the momentum.
Knowledge at Wharton: How do you think your Indian roots have played a role in your founding and leading Polar Mobile and taking it to the three growth areas? How has being of Indian descent in Ottawa affected that trajectory?
Gupta: From a cultural standpoint, I’ve been very fortunate [in] having a big Indian family and a lot of older cousins — i.e., role models, half of whom are running their own companies.
Knowledge at Wharton: It’s in the blood.
Gupta: It’s in the blood. But what I’ve learned is that it takes more than it just being in the blood. It’s having the confidence and people to lean on, people who you trust and who have been there and done that. Taking the Indian culture one degree further, and having a very big family experienced in running [our] own businesses. By the way, no one in my family has done anything in mobile or high tech.
Knowledge at Wharton: What industries have your family, or extended family, created companies?
Gupta: Mostly manufacturing, trade, services, retail — a varying degree and variety of industries. But there are some commonalities in any business, from which I’ve been able to benefit.
Knowledge at Wharton: Can you give some examples about how you were able to lean on your family, a second cousin or a mentor when forming Polar Mobile?
Gupta: Let’s consider a few angles. From inside the family, there’s a financial perspective: Understanding how you budget and plan. It sounds more like housekeeping, but I have learned that fundamental to any good business are strong financial practices, behaviors and attitudes, which I have developed. From a leadership perspective: How do you motivate a team? How do you manage a team and bring everyone together?
[It’s also been valuable] going outside my family for advice and getting access to smart people from a technical perspective. I don’t think it is directly related to the fact that they are probably of Indian decent, but it doesn’t hurt.
Knowledge at Wharton: Was there somebody in your family or your network who nudged you along?
Gupta: My parents have been very, very supportive.
Knowledge at Wharton: It sounds like they were encouraging you at an early age to get exposed to business. Are they in business for themselves?
Gupta: Yes. Like good parents, they have shared certain values, such as instilling confidence and trust — which a lot of young people don’t have, or least not enough of — to take a leap. It’s not only taking that leap and jumping in at the deep end, and once you’re there, figuring out where to go, how to stay afloat and eventually how to support people.
Working hard is something that everybody talks about. I was taught how to work hard beyond an academic sense very early. My parents in the first phase of their businesses were in retail. From the time I was six years old, I was working in stores that we owned across Ottawa and various types of post offices and gift shops. Seeing my parents work seven days a week taught me how to work hard, but the biggest thing [I learned] was that it is okay to work hard. It is okay to pour your heart and soul into something. Sure, their reasons for doing it were different than mine. Their reasons were probably more financial. Financially, I am stable now, but I still pour my heart and soul into Polar Mobile because of my passion, and I got that passion by watching my parents.
Knowledge at Wharton: As you grow globally, expand in platforms and look at other verticals, are thinking about drawing on the Indian diaspora, in North America or Asia?
Gupta: We are getting ready to launch customers all over Asia but India is actually not on the list.
Knowledge at Wharton: Not on the list?
Gupta: We haven’t found a way yet to get into India, probably because it hasn’t been a focus. But I expect in the next six months, we will be making it a focus. We see huge potential in India. Everything from a few of our competitors outsourcing some of their teams to India — so they have a different cost structure, which could give them an advantage over us — to the size of the mobile market there … to using India as a base to support all of Asia.
We haven’t yet developed a strategy for leveraging India. I see a number of benefits in doing that. I do think we will rely on the fact that I am of Indian descent to potentially get a step up on other companies from other countries, to leverage the value that India can bring a company like ours. We haven’t figured that out yet, but we will.