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Mobile Phone as Virtual Billboard: Locket's Ads for the Small Screen

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A generation ago, stadiums were named for their cities and locations. Three Rivers Stadium in Pittsburgh, Candlestick Park in San Francisco, and Meadowlands Stadium in, well, the Meadowlands of North Jersey, are just some examples.

Today, all of that has changed. The new venues come with brand names licensed for millions of dollars to Fortune 500 companies drawing a new revenue stream that wasn't tapped before. Pittsburgh has Heinz Stadium, while the Jets and Giants now play at Met Life Stadium. In 2014, the 49ers will move into Levi Stadium in Santa Clara, CA.

For the mobile space that model just caught on. What new way with existing virtual real estate on the small screen of smartphones can advertising be delivered to mobile users? Can it be done without annoying people, like the banner ads from the Dot Com era?

While tech giants in Google and Facebook have rebranded themselves as "mobile first" companies -- they are not -- it's the app developers who are changing the ways to reach consumers. One New York startup has aimed its sights on the static space of a mobile phone's "locked" screen to deliver advertising.

"The average mobile phone user swipes their screen 150 times a day and with all the devices out there that's 10.7 billion glances at the phone, which has huge potential," Yunha Kim, CEO and cofounder of Locket, told the audience at the Entrepreneurs Roundtable held at Microsoft's office in New York last week. I attended that event, met with her afterward. A couple of days later in a phone interview she repeated those numbers.

"Why hasn't anyone thought of this before?" she told me a partner at Great Oaks Venture Capital asked during her pitch to raise capital last March.

To his amazement, and those at the firm, no one had done so until her young startup Locket came across the problem of low mobile ad click through rates and the opportunity to deliver a new layer for Madison Avenue to place ads with its clients' brands, products, and services.

Locket's Category-First Ad Model
It all began at Yunha Kim's investment bank she used to work for in a moment of idle reflection that turned into a spark of insight. The irony is in working at the Wall Street financial firm where she, like her fellow employees, were walled off in cubicles, siloed -- oh, that's so legacy of banks -- cut off from the workflow, she might never have stumbled upon the insight in an open source, shared space environment now used by most tech firms and co-working offices in Silicon Alley.

But for the Locket app to truly work, they needed to offer a benefit to the user, an incentive, not just add value. You see, many mobile users like myself live with the dandelions screen on my Samsung Galaxy III right out of the box as background. No advertisement. Other people use personal photos as wallpaper on their screens. So what could Locket offer the people who download their app?

One penny for each swipe.

Doesn't sound like much. But it will add up for many users. And for those who get paid per swipe it could add up to earning a buck-fifty a day, which in turn could pay for the monthly phone bill, buying coffee, or the purchase of an eBook or a song download. Not bad. That's incentive.

More importantly for Locket will be its ability to grow. They need to secure more advertisers -- they have ten clients so far -- who want to reach the growing "50,000 app users and 4 million impressions" they have achieved so far since the app's release in mid July.

Yunha Kim confided to me in her soft, shy-at-first voice that since her company was setup in March, Locket has "six full time employees, a couple of bunk beds, three dogs, one hamster, all managed out of two apartments."

After securing $500,000 in seed money in only three days after her pitch--without a working app or end users--from Great Oaks and Warby Parker, the eyewear company, Locket is still operating lean. The CEO told me, "We'll still work out of the apartments for now. It saves us time and money not to commute, allowing us to focus on development."

2013-08-05-Locket1.jpg

Locket CEO Yunha Kim (c) and Team

Although the Locket team didn't have to pivot like so many other startups that hit dead ends with cool, but unmarketable products, they did have to change one major habit: their diet. Since sushi was too expensive to buy on an ongoing basis, they ended up cooking hot dogs and eating pizza daily and would work until sleep deprivation set in like Navy SEALs during Hell Week training. So raising capital helped changed the diet and improved their health.

Today, they order in; there's no time to cook when you need to code, secure more big advertisers, and get the word out about your mobile app. By eating healthier foods that would make Mayor Bloomberg proud, they no longer get sick, as the team did this spring when their immune systems crashed due to poor sleep and worse eating habits.

Click Through Rate is the Key Metric
Besides the "rev-share" model with the app users, another key for Locket's long-term success will be the click through rates (CTR) for mobile advertising. By surpassing the industry standard of 0.4% and Flipboard's 3-4% CTR, according to Flipboard, with Locket more than doubling that rate for a "Hollywood film with 9.5% CTR and 17.8% for another one of our clients," Ms. Kim said, it appears her startup is on to something... big.

Flipboard just went live with a web version of their online editor tool to "transform how people discover, share and view content..." Even though Locket has beaten Flipboard in ad click through rates, Flipboard develops and sells other products that Locket won't offer any time soon. So the comparison of pure CTR might be a reach, as they have different demographics for different types of users.

The real test for Locket will come not in its ability to scale with users and advertisers, but whether other, bigger tech companies, like Google and Facebook again, copy their model and develop screen-ad apps for their mobile platforms.

"We're coming out with Android version first, which was released in Google Play store in July. Then we'll focus on Apple's iPad and iPhone next," Kim said, and explained, "We see advertising benefiting the end user. It will bring those glossy magazine print ads to your locked screen. Those ads are pretty, visual, and interesting. That's the beauty of print ads." Perhaps more importantly, when you answer an incoming call the ads don't pop up.

By displaying adds on the first screen, "when you wake up, after you take a break, when you go to the bathroom," she said, "that's first-glance advertising 150 times a day." By swiping the locked screen awake, "the ads hit the users the first time. It's a huge and new category."

With a new category and opportunity comes the competition. And that's what drives innovation. For Locket to succeed they will need to build its brand.

Disclosure: I have not downloaded Locket's app, nor do I plan to since my time is more valuable than money.