SendMe: Watch Out, iPhone App Makers

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Price Transparency a Plus

The company has also capitalized on a structural change in the market, whereby software developers can build applications that will work on a variety of mobile operating systems; in the past you had to build an app on a system-by-system basis. And because it's downloadable via the Web, SendMe can market directly to consumers. It uses low-cost marketing vehicles such as search ads on Google (GOOG) and Microsoft's (MSFT) Bing, and partnerships with companies including imeem, Eventful, and Univision.

The company was started by Russell Klein and two former colleagues, Markus Mullarkey and Tom Santosusso, who met while they were working on the business side at Cnet Networks. Before starting SendMe, Klein handled corporate development at Hands-On Mobile, a maker of mobile games and entertainment, where he went on a spree acquiring media companies in Europe, Asia, and North America. Jon Callahan of True Ventures says far from being flashy, the group sets itself apart through hard work and attention to detail. "They're more than a little anal-retentive," Callahan says.

Consider their focus on price transparency. Klein says some mobile-content businesses lure subscribers through bait-and-switch tactics—say getting kids to sign up for software their parents would later have to pay for. SendMe is up-front about fees, requiring users to opt-in more than once to subscribe. It also staffs a 24-hour customer-service team in San Francisco that will cut refund checks if someone didn't mean to make the purchase.

Twitter Isn't Making Money

But the real gem of the business is SendMe's approach to tracking data such as customer usage patterns to improve how it attracts new users and how it markets new services to existing subscribers. Klein won't delve into the details, but says the company has "found a series of very interesting correlations between profitability of a (group of customers), vs. customer usage and engagement at very specific points in their tenure as a paying customer."

One notable investor is Bijan Sabet of Spark Capital. He's also on the board of Twitter. (Heard of it?) Twitter is, in some ways, also a mobile app that pulls its strength from an ability to run on any phone. But the two couldn't be more different. Twitter is a huge fad that even celebrities fawn over that's so far making no money; SendMeMobile is something only your 12-year-old would know, and boasts one of the better revenue streams among a startup.

I'd bet that Twitter will become the bigger company, not to mention continue to be the bigger brand. But with nine-figure revenues after just three years, profitability, and no need to raise more capital ever again, SendMeMobile is for now looking like the no-brainer investment.

Lacy has been a business reporter for 10 years, most recently coverhas been a business reporter for 10 years and is currently writing a book on global entrepreneurship. Her first book, Once You're Lucky, Twice You're Good: The Rebirth of Silicon Valley and the Rise of Web 2.0, was published by Gotham Books in May 2008. She also blogs for TechCrunch.

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