Can Snipp solve “The Facebook Conundrum”?

Snipp Chairman Sabharwal: “Facebook has a huge conundrum – how to monetize their non-paying members through advertising. Snipp has an answer: we turn already paying advertisers using regular advertising into revenue generating, high growth mobile advertising in the most efficient and economic way.”

2012 was the year social media took center stage.

The sector’s biggest star arrived to the public markets a little late, a little cranky, and ultimately played to mixed reviews from an audience expecting a tour de force performance. Facebook’s IPO, considered in some circles a failure because the stock fell from its offering price on day one and has yet to claw its way back, obscured the fact that, even at current levels, the company commands a mammoth $65-billion market cap.

Still, questions about Facebook’s long-term financial viability persist. Slate’s Will Oremus, in a piece penned before the IPO entitled “The Facebook conundrum” pointed out that Facebook’s $100-per-user valuation (at the IPO price) falls far short of the $4.84 in revenue the company actually collects from each of us. So how does Facebook, which is now faced with the impatient eye of quarterly financial statements, grow this number without destroying the user experience? More ads? Risky. A paywall? Out of the question. Whatever the solution, it will clearly have to address the increasing importance of mobile, which CEO Mark Zuckerberg recently described as Facebook’s “biggest challenge”.

Upstart Snipp Interactive (TSXV:SPN) thinks it has, at least in part, solved the Facebook conundrum. Snipp’s Mobilize Me platform uses text messaging, QR codes, and image recognition tags to turn mobile ads into rich media experiences that can instantly connect brands to users, before the users lose interest or forget to Google the product when they get to their desktop. This ability to “drill down” or hyperlink a normally static advertisement is something the company believes it perfected in the offline environment with packaging and magazine ads.

Cantech Letter talked to Snipp co-founder and Chairman, Atul Sabharwal, about the company’s plans.

Atul, can you tell us about the origins of Snipp?

Snipp was born in 2007. Ritesh Bhavnani and I saw a huge need we thought we could fill. Basically we wanted to be to physical advertising what Google is to Internet advertising. The idea came from the frustration we all have when we’re interested in something from a magazine, a billboard, radio or TV, but have no easy way to learn more or buy it. That’s what advertisers want us to do: act on impulse. But you can’t. If you somehow remember to Google it later you end up not finding what you’re looking for. That’s a lost sale for the advertiser. After exploring the problem we realized that there was a huge opportunity as advertisers were spending seven times the amount in real world media advertising (TV, Print, OOH, Direct Mail, Radio, Events) only to lose people to Google. In effect, all these billions of dollars spent advertising in traditional media was ultimately driving Google searches and therefore Google revenue! We realized we could use the cell phone, a device that you have on you at all times, to give consumers the ability get more information or buy a product/see a video/participate in a contest/get an instantaneous coupon/share their thoughts through their social network etc right from their couch/store/car/evening walk without having to go near the computer. See a pair of earrings you like in ad? Buy them instantly before you forget. Advertisers loved it, as they could connect directly with their customers without having to go through Google and moreover get similar metrics as they do online. We offer “Pay Per Snipp” models similarly to Google’s Pay Per Click models and our platform for the first time ever is giving advertisers equivalent online metrics for their real world spend.

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It seems like you are kind of providing a way to hyperlink traditional print media. Is that a fair assessment?

We’re doing more than that. We also help make traditional print media interactive. Hyperlinking is one piece of the technology platform but its power lies in what you can actually do with that hyperlink and the amazing data on real world behaviour that we generate and that is readily actionable by advertisers. Since our platform was built for the cloud (before it became a buzzword!) we can expand globally in a heartbeat.

Can you tell us about some of the deals you have done to date?

We represent four of the top five publishers worldwide; Time Inc., Conde Nast, Meredith, and Hearst – ESPN. We have undertaken thousands of campaigns with Fortune 500 brands. Our platform is live in Canada and the U.S. and we recently launched in Mexico and the Midde East. In Mexico our partner is VirKet , a marketing agency that provides services to some of the Grupo Carso, which is Carlos Slim’s group of companies. And we recently launched in the Middle East and completed our first paid campaign.

What’s the market opportunity for Snipp?

Our technology is built and is commercial. Our revenues are growing very quickly. Advertisers still spend more money on traditional media (print, radio, tv) than on digital media but are looking for ways to monetize print ad spending and better understanding their return on investment on print ad spending. Every newspaper, magazine, billboard, radio and television ad can potentially use Snipp technology. How many millions of these ads are released each week around the world – that is the market opportunity. We want to be to physical advertising what Google is to Internet advertising. But it goes beyond marketing. We can stimulate demand for our service.

How do you do that?

Take our recent deal with James Hardie Industries. That deal highlights one of many opportunities for our technology. James Hardie basically sells drywall – over $1 billion worth annually and is a New York Stock Exchange listed company. They do not spend on mobile marketing. However we were able to convert their packaging into a tool that their customers and potential customers could initiate using their cell phone to increase brand loyalty and potential sales. Combining packaging with mobile creates not just a new marketing channel, but especially for brands like James Hardie that have a considerable B2B business, also a platform to deliver better customer service and logistics. Snipp offers an end-to-end mobile solution that can be used around the world in many industries – it allows better interaction with customers and potential customers and gives the advertiser a better idea of how effective their ad spend is because of our rich analytics. Mobile advertising is the fastest growing segment in advertising. Advertisers want to spend on mobile marketing but are still trying to figure out the best mobile solution. Mobile is where Facebook, Apple and Google state that the most growth and opportunity is. Facebook has a huge conundrum – how to monetize their non-paying members through advertising. Snipp has an answer: we turn already paying advertisers using regular advertising into revenue generating, high growth mobile advertising in the most efficient and economic way.

What about your financials? Do you have enough cash to execute your plan?

Year over year we have been growing revenue approx. 60%. We have $1.4 million in cash and no debt. We are using the funds to build a sales model to prove we can scale the business.

Can you tell us about your deal with iSign?

We signed an LOI with iSign to cross-market each other’s products. They have a unique technology which is part of mobile advertising. Although our technologies do not compete in any way, some of our clients may be interested in using their technology and vice-versa. We added the ability to offer iSign products to our customers to ensure we have every solution mobile marketing has to offer.

What do you hope to accomplish in the next 12-18 months?

We want to build direct brand and ad agency relationships, build out our international presence in a focused way, including Mexico and the Middle East while expanding opportunistically in other regions like Europe, Latin American and India. We also want to participate proactively in the structural changes in the mobile marketing industry, by e.g., acquiring selective businesses to expand geographically and into niche industries. We then want to spin off one or two consumer facing products that leverage the Snipp platform as a solution to generate revenue where other companies like Instagram (now owned by Facebook) are working on. Last, but not least, we want to give our investors an amazing return.

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