Cantech Letter interviews Michael Durance of Call Genie; Part Two

It sounds to me like you had to sit around and wait for phones to get a little smarter…

Well that’s an interesting comment. The bottom line is that anything that helps this ecosystem helps us. For mobile search, mobile advertising, for all these things to take off you really need a recipe of things to happen.

Sometimes people talk about things for so long that others think the implementation has already happened, when in fact, it hasn’t…

Exactly. I ran the CTI business for Nortel back when we were proud to say that (laughter). But it’s true. Back then, everyone was talking about all kinds of CTI applications. It wasn’t until all the conditions were present, however, that the recipe of things could happen. Adoption means you have to have access. The content has to be there, the price points have to be right. In terms of mobile local search and mobile advertising, yes; increasing smartphone adoption is another huge step for the ecosystem. It makes mobile search and mobile advertising that much easier to do. But that’s just one aspect. An important thing to understand about Call Genie is that we’re not a retail brand. We are a solutions provider to the industry. If there is a war going on for the mobile consumer right now we’re the arms dealer.

So you are more focused on things like OEM type deals?

Converging on the mobile consumer right now is literally a hundred billion dollars worth of industry, from carriers, directory assistance providers, yellow page providers, and all kinds of other media such as newspapers and television. There are all these traditional businesses that have broken business models. Take the yellow page industry and the slow demise of print you see happening. They’re all trying to connect their constituents to the mobile consumer, and we can deliver a complete end to end solution.

If you look at our customer list it includes the likes of Verizon, AT&T, Telus, Rogers, DEX One, which is a yellow page provider, France Telecom, Orange, Microsoft, NBC. It may at first blush look like that’s a fairly broad purview, that we are trying to address a lot of different industries. But it’s not really that we trying to address those industries as much as it is that those industries are converging on the mobile consumer though mobile local search and advertising. Our technologies are just applicable to all of them.

So this is a turnkey solutions for service providers looking to monetize their traffic?

Well we have a wide array of technologies, and we can deliver a complete end to end solution. We also can deliver just one component of the solution. For example, DEX One has an awful lot of our technologies, almost the whole suite, because they are creating their own search volume and using the ad serving capabilities. AT&T, we’re doing two way SMS for them. We have been working extremely hard on this business model for five years, winning customers. These can be long sales cycles, and it takes time to deploy the technology. But this is the reason I am so bullish on our opportunity at this time, in particular. If you are an investor you’re not looking at the brand Call Genie to try and conquer the world. You are betting on the likes of AT&T, Microsoft, DEX One, Verizon. These are companies that have the resources, the brand, the capital, and the installed base of customers to actually employ these solutions.

We have a lot of thought leadership in the space. For every customer that we have started with, in virtually all cases, those relationships are expanding. Some of these industries are under extreme pressure because their business models are broken. You can talk about 411, intercept, a mobile client application, two way SMS, an online search that sends to mobile, over time we are finding there are more and more applications for our technology. Some projects may do well, some may not do so well. But we’re not betting or any one particular modality, or applications or company or industry.

Ok, let’s talk about how you get paid.

Generally speaking our business model is this: first, we get paid to implement the technology. That’s one of the parts of our business model. We have a long cycle to integrate into a client’s network infrastructure, into their billing provisions systems, which can take some time. That’s one of the reasons it has taken so long to get to this point. Some projects we had hoped to complete in six months ended up taking two or three times as long. But we have always believed that once that relationship is there, we are securing it for the long-term because we would be very embedded, very entangled with the customer.

Ultimately, however, the real economic engine for Call Genie is usage revenue. This structure can be transaction based but it tends, more often, to be a percentage of the revenue that passes through the system. We get paid transaction fees from the service providers and from business trying to reach these consumers.

Your top-line for 2009 was $3.49 million. How would you characterize that revenue?

That revenue, for the most part, is implementation. The economic engine for Call Genie, as I see it, is just starting to kick in. The revenues that you see in 2009 and 2010 are predominantly services revenue. In 2010 that mix was about ninety per cent service, eight per cent usage. What is significant about 2011, we believe, is that we will turn the corner. This is going to be a very big year for us because many of our customers have started to deploy our solutions and go commercial. We ultimately see the bulk of our revenues coming not from services but from usage. We would expect eighty to ninety per cent of our revenue to be usage based. This entire engine was built to generate usage based billing. We kind of feel like we have been building oil wells for years and just now the oil wells are completed or are being completed. Many of our major customers are going live and commercial as of the end of last year or the first quarter of this year . For us, this means the the oil is starting to be pumped. Perhaps the implementation process has taken us a little longer than we thought, but I believe it is worth it because the prize is great.