SmartReply Buys mSnap, Signaling New Consolidation
By Emily Steel - Wall Street Journal (WSJ.com)In a sign the recession is reigniting consolidation in the mobile-advertising industry, SmartReply, which designs telephone and email marketing programs for retailers, is acquiring mobile-ad firm mSnap.
Under terms of the deal, which people familiar with the matter expect to be announced Monday, mSnap's shareholders, which include Partech International and First Round Capital, will get a minority stake in SmartReply, based in Irvine, Calif.
MSnap is one of scores of small companies that have sprung up in recent years on the assumption that advertisers would be eager to reach consumers on their mobile phones. They have entered the fray with a variety of business models, from building Web sites designed specifically to be visited via mobile devices to creating technologies that deliver ads in text messages. Since January 2006, about 80 such companies have raised more than $1.2 billion in venture funding, according to media and marketing investment bank Petsky Prunier.
But advertisers have been slow to shift their spending to mobile, and now a scarcity of funding has many mobile-ad shops laying off employees, closing offices and trying to sell themselves before they are forced to close...
...Founded in 2006, mSnap planned to create a network for advertising and other content on mobile phones. It tried to secure a niche by striking deals with hundreds of local media companies, largely radio stations. Through the agreements, mSnap provides technology for the stations to send and receive text message alerts, which also could contain a small ad.
The next step was to start selling ads on its own. But the company, which has raised a total of $6 million in funding and has 12 employees, never hired an ad-sales team. As the economy started to sour, mSnap, which wasn't yet profitable, had to decide how it was going to stay afloat. The choice was between trying to raise money in a tough environment and seeking out a suitor.
Chief Executive Tim Favia says the decision was obvious: find a larger company that already had relationships with marketers and could easily add mobile advertising to its repertoire. "You're an island as mobile," says Mr. Favia, who will step down from his post and join the board of SmartReply.
Meanwhile, eight-year-old SmartReply was looking to develop mobile capabilities, says its president, Eric Holmen.
Mobile-ad spending remains a sliver of the advertising pie, and growth, while still fast by traditional standards, is expected to take a major hit as marketers slash budgets. Research firm eMarketer estimates that U.S. mobile-ad spending this year will reach $760 million, down from the $2.8 billion for 2009 it predicted last March. That contraction puts companies under all the more scrutiny as they attempt to raise funds.
But funding hasn't dried up completely. Earlier this month, Quattro Wireless raised $10 million, and 4INFO raised $20 million in December. Investors say they still believe in the long-term prospects for the mobile-ad market -- as the recession weeds out the weaklings. Write to Emily Steel at:
emily.steel@wsj.comAbout SmartReplySmartReply's voice and mobile messaging solutions have created breakthrough-marketing results for leading retailers throughout the United States and Canada. As the only voice and mobile messaging company dedicated to meeting the unique marketing challenges and objectives of retail executives, SmartReply's clients now have the proven ability to increase store traffic, lower marketing cost and strengthen brand affinity. Because of this, SmartReply is the provider of choice for more than 80 major regional and national retailers. Headquartered in Irvine, California, more information for partners and clients can be found at
www.SmartReply.com or by calling (800)-785-6769.