BW Online | May 30, 2001 | Star-Spotting Goes Wireless

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MAY 30, 2001

COMPANY CLOSEUP
By Rachel Lehmann-Haupt

Star-Spotting Goes Wireless
Startup Upoc thinks it can turn cell-phone services like its New York Celebrity Sightings into a real business

STORY TOOLS

Ever wonder where Sarah Jessica Parker shops for lingerie or the exact street Johnny Depp is walking on in SoHo?

Look no further. New York Celebrity Sightings is a wireless message service that keeps real-time tabs on stars. Delivered by Upoc (Universal Point of Presence), a year-old, New York-based wireless startup, it lets anyone with a text-message-enabled cell phone to play paparazzi. In the past few weeks, Upoc has published such titillating reports as Linda Fiorentino walking on 26th Street, "eating ice cream, looking spent," and David Duchovny "in SoHo buying kiddie seat with wife."

New York Celebrity Sightings is Upoc's main draw. But the company offers more than 4,000 wireless affinity message groups, ranging from artist fan clubs to concert ticket alerts. This latest electronic version of star-spotting has raised eyebrows about privacy invasion and the absurdity of celebrity obsession. But it also holds the possibility of creating a new kind of peer-to-peer wireless marketing business. "We're providing a bridge between entertainment company's, sponsors and wireless carriers," says Gordon Gould, the company's 31 year-old CEO.

Gould and his investors are betting they can transform Upoc's innovative technology, early market lead, sizable bank account, and growing user base into a real business. He's aiming to turn a profit by September, 2002. The basic Upoc service is free. But the company makes money by building wireless distribution services for corporate clients.

"NO STANDARD." So far, Upoc has signed deals with two dozen media companies, ranging from teen portal Alloy Online to media giants like Sony. These companies pay Upoc a monthly fee from $2,000 to $15,000. Still, analysts are still skeptical that this popular and edgy service can become profitable. "There is no standard or proven revenue model right now so that could cause a big hold up for profitability," says Knox Bricken, a wireless analyst with the Yankee Group.

No question, the short-message-service (SMS) market is for real. SMS now has 7 million users in the U.S., with that figure predicted to rise to 11 million in 2002 and 15 million by 2004, according to Yankee Group's 2001Youth Segment Report. Eighty-five percent of all SMS messages were used by adults in 2000, while the under-18 category accounted for 15%. But the youth market is expected to account for 50% of total SMS usage by 2005.

Investors certainly believe there's a business in SMS. All told, Upoc has raised $21.4 million. In January, 2000, the company closed its first round of venture capital for $3.4 million from Allen & Co., Arts Alliance, and private investors such as Warren Adams, the head of Amazon.com's mobile Internet Group, and Sandy Robertson, the co-founder of the investment bank Robertson Stephens. In January, 2001, Patricof & Co. Ventures, Advent International, Tribune Ventures, and 550 Digital Media Ventures, a Sony Group company, invested $18 million. "SMS messaging is a quick and efficient form of communication, and the viral nature of forwarding messages to many different people means it will grow exponentially," says Ted Schell, General Partner at Patricof.

KILLER APP? The quick-fire growth of SMS is why Gould decided to bet on Upoc with $500,000 of his own money. The former president of Silicon Alley Reporter magazine, Gould saw the way SMS caught on in Europe. He was also swayed by the success of NTT DoCoMo in Japan, which found that 52% of its revenue from its I-mode wireless content service is driven by mobile entertainment, according to Yankee Group.

Gould realized that helping content go mobile in the U.S. might be the new killer app. In November, 1999, he launched Upoc with help from Ericsson's startup mobility program, a business incubator that provided engineering talent and advice from executives. By June of the following year, Upoc released an early version of its service.

Media companies were the first to see value in Upoc's service. Sony's Columbia Group is using the Upoc platform to send personalized e-mails and voice mails directly to Upoc's affinity groups for the band Little Bow Wow. "If you have all these artists speaking directly to their most devoted fans, it's breaking emotional ground because you're removing a layer of access," says Mark Ghuneim, senior vice-president of Columbia Group.

TAPPING TELECOMS. Upoc also provides a way to offer sales discounts to consumers. "We send out teasers to cell phones offering deals that try to get people to come back to the Web site," says Samantha Skey, vice-president for sales and marketing at Alloy Online, a portal that serves youths aged 10-24. Skey is also trying to drum up interest from advertisers. "Coke could deliver a message through Upoc wrapped in Alloy content which could be anything from news to games," she says.

Gould himself is also trying to cook up new revenue sources for Upoc. One option: getting money from the phone companies. Gould believes that since phone companies are charging to transmit SMS, carriers should consider sharing their SMS revenues. But Adam Gavin, a senior manager for business development for AT&T Wireless, thinks that's unlikely. "Specifically tracking what minutes Upoc brings in is really hard to measure," he says. "Even if Upoc says that on average they increase usage by 10 minutes, it might not show up in incremental billed revenue."

With carriers and content providers all looking for a piece of the SMS revenue pie, Upoc definitely faces an uphill battle. The good news is that it's still the most popular SMS service in the U.S. Plus, without Upoc's technology, users can't message between different phone carriers. By standing in the middle of all these different parties, Gould has put the company in a good position to make money once the business model for wireless services is figured out.