PixSense - Go-to-Market Strategy PDF

For the exclusive use of L. Fernandez, 2019.
B5685
Date: August 1, 2012
NAEEM Z AFAR
PixSense: Go-to-Market Strategy
After Faraz Hoodbhoy’s first daughter was born in 2005, his mentor, Anurag Mendhekar, the founder
of Online Anywhere which became Yahoo! Mobile, responded to Hoodbhoy’s email birth
announcement with the business idea of finding a solution to get pictures from a digital camera onto a
computer. Hoodbhoy brought his longtime friend and colleague, Adnan Agboatwalla to the meeting,
starting a three-month discussion on how to best manage media created from digital cameras. While
discussing this idea, Hoodbhoy and Agboatwalla opted to focus their efforts on solving the problem of
getting pictures off of mobile handsets, what they deemed to be a bigger opportunity than single
purpose digital cameras.
At the time, cameras on cell phones were VGA cameras or very rudimentary cameras that had no flash
capabilities and that took grainy pictures. In order for people to get pictures off of cell phones, users
had to disassemble the phone by removing the memory card from the phone and attaching the card to
a PC. Hoodbhoy said: “It was silly because cell phones were ubiquitous, and 80 percent of all cell
phones sold had cameras in them, had data connections on them, and the images were already digital.
We felt it was a big problem that no one else seemed to be solving, so we decided to focus on that.”
The result was the birth of Santa Clara, Californa startup, PixSense.
When PixSense was founded, two billion people used mobile phones, according to Morgan Stanley
Research, and the Photo Marketing Association International (PMAI) estimated that the number of
camera phones shipped would rise from 350 million in 2005 to a billion by 2009.1 And according to
Hoodbhoy: “Over 100 billion photos and video are captured with mobile phones, but less than five
percent find their way off of the device. The remaining 95 percent stay on the handset and end up
getting deleted.”2
At an investor presentation, Hoodbhoy elaborated on the rationale for launching PixSense: “The
technologies that are used today to transfer media off of the cell phone include MMS, which is a
multimedia messaging service, and mobile email, but both of those technologies are messaging
1
http://www.demo.com/alumni/demo2006fall/79912.html.
2
Ibid.
Professor Naeem Zafar prepared this case study with Case Writer Victoria Chang as the basis for class discussion rather than to illustrate either
effective or ineffective handling of an administrative situation.
Copyright © 2012 by The Regents of the University of California. All rights reserved. No part of this publication may be reproduced, stored,
or transmitted in any form or by any means without the express written permission of the Berkeley-Haas Case Series.
This document is authorized for use only by Luis Fernandez in Entrepreneurship MEng Bootcamp Sp 2020 taught by NAEEM ZAFAR, University of California - Berkeley from Nov 2019 to May
2020.
PIXS ENSE: GO TO MARKET STRATEGY 2
technologies, not designed to manage, share, distribute, or preserve the memories we capture with our
handsets. We thought there was a better way that with zero clicks, all a user does is to capture media
and everything else is handled in the background.” 3
By the end of 2010, Hoodbhoy and his team had raised approximately $20 million dollars in several
rounds of funding that included a seed round, as well as additional funding from ATA Ventures,
Innovacom (France Telecom’s venture arm), and Qualcomm Ventures. PixSense’s revenues had
reached roughly $2 to $3 million per year and the company had grown to over 100 people in the
United States and Pakistan, the ethnic background of the founders. As Hoodbhoy and his team were
close to marking PixSense’s fifth anniversary, they reflected on the company’s go-to-market strategy,
wondering if all of their early decisions were the optimal ones.
Background and Funding

After deciding on the idea, between February and June 2005, Hoodbhoy, Agboatwalla, and another
friend, Dr. Anurag Mendhekar met at Mountain View, California’s Castro Street Starbucks for two
hours each day, working out the details of their new startup. The team laid out the problem, the
opportunity, and possible solutions. They created an entire product and developed the user
experience. Hoodbhoy called these early thought processes “simulations in text.”
“Faraz [Hoodbhoy] and I sat in his study and sketched on a tiny white board what the product would
look like,” said Agboatwalla. “Then we put it on paper and put it in a flow diagram and sent it to our
developers in Pakistan. We also hired a part-time graphics HTML person to build a website where
peoples’ photos would be downloaded to. In 2005, the phones didn’t have big fancy screens so we
had to design for a very small screen.”
The team built prototypes around their solution and was able to hire a few developers in Pakistan to
develop the application with $50,000 that they had personally invested in the company. They
outsourced development to Pakistan because the mobile labor market in Silicon Valley was
particularly tight and the labor cost differential between Pakistan and Silicon Valley was 1 to 12.
Hoodbhoy said: “You couldn’t really scale labor in Silicon Valley in the mobile space because there
was no concept of people having mobile experience. And if you did, the cost of scaling labor in
Silicon Valley to 100 engineers to support 80 percent of the handsets in the market would have been
prohibitively expensive.” Initially, Agboatwala ran the development team out of Pakistan, while
Hoodbhoy managed marketing and global strategy out of the United States. By November 2005, the
company had a working service for some models of mobile phones such as the Nokia 6600.
In 2006, a year after the founding of PixSense, the team raised its first seed round of funding, a friends
and family round of $350,000. After raising the initial seed round, at the end of 2006, they focused on
their Series A round. Hoodbhoy and his team conducted 82 first-round meetings with venture
capitalists before they received their first term sheet from ATA Ventures. Hoodbhoy admitted that he
“didn’t know anyone” in the venture capital community and that was one driver for the number of
meetings. He reflected: “Most venture capitalists had been burnt in the past by the
telecommunications operating world. On top of that, we were also working in the international space
and those were two things that scared a lot of Silicon Valley VCs. Finally I found someone who
understood the size of the potential opportunity.”
ATA Ventures provided an extension of PixSense’s initial seed round or a bridge investment of
$350,000 to help the company close with a second venture capital firm. A few months later, in
January of 2007, Hoodbhoy was able to get Innovacom (France Telecom’s venture arm) on board too.
3
Ibid.
2020.
The entire series A with ATA Ventures and Innovacom was $5.5 million. Five months later,
Qualcomm Ventures, the investment arm of Qualcomm, invested $2 million in a series B round.
PixSense also had two internal rounds where all existing investors invested additional money in 2008
and 2009.
Product
Initially, PixSense’s product, in its simplest form, was a downloadable application or a piece of
software placed on a mobile phone that would automatically upload photos for sharing and managing.
Hoodbhoy emphasized that there was something about the word “app” that made their product seem
smaller. “Our nominal notion was to make the captured photos or video ubiquitous on a phone, PC,
Facebook (after Facebook launched), television, etc.,” he said. “That’s beyond just an app. We were
not limiting it to the context of the access device. We thought about it as, ‘What is the right way for
people to share media?’”
How the PixSense team first began thinking about the product was to start with “user-experience
documents”. Hoodbhoy said: “The idea was to capture the ideal user experience, without technology
limitations. We started creating scenarios such as, two moms are taking photos at a birthday party on
their phones and the technology automatically detects that they are friends since their contacts match
in their address books so their photos automatically get tagged with the event and location and get sent
into a common album where their photos can be shared with each other.” The team came up with
many scenarios without consideration as to whether the technology was ready for these user
experiences or not. They then prioritized their user experiences based on available technology and
began shaping their product.
According to the company: “PixSense transforms camera phone users’ photography experience to
where they now focus on just one thing: taking pictures. PixSense takes a holistic approach towards
managing the entire lifecycle of each digital media. Our patent-pending technology bridges the
technology barriers between camera phones, carrier networks, and personal computers. The PixSense
solution involves native camera phone client software and server-side software that work seamlessly
together to give users all the functionality they want, in exactly one click.”4
In terms of the product name, Hoodbhoy said: “We didn’t know a lot about marketing, but we heard
that we shouldn’t create a lot of different brands so our brand was simply ‘PixSense’ and we planned
to have variations of the brand name in our various products,” said Hoodbhoy.
More practically, after a user installed the PixSense application, in one click, they could upload and
archive their photos on PixSense’s website. When users took photos on their phones, the PixSense
technology automatically categorized the content on the handset—since users tended to take photos in
bursts, the PixSense technology could detect the dynamic stop points between photo bursts and
categorized the content for the user. Users could then view the content that was captured in the media
gallery on the phone and on PixSense’s website, comment on the photo, or share the photo(s) via
email or SMS5, or directly through the handset. The files were automatically erased from the phone,
preserving the memory in the phone.
Bio-Compression Technology
Although PixSense’s technology was seemingly simple in concept, the team ran into an unexpected
technology limitation in the early years, which ended up being shaped into its competitive advantage.
4
http://www.freebase.com/view/en/pixsense.
5
Short message service or a system that enables cellular phone users to send and receive text messages.
2020.
The mobile networks were incapable of handling large data loads of people uploading photos and
other media. Mobile networks are asymmetric in nature, meaning that it is easier for people to
download media onto their phones than vice versa due to bandwidth issues. Hoodbhoy explained: “If
everyone is at a ball game and starts uploading photos and videos, they could actually cause a cell
tower to go out. An inherent cost for these telecommunications operators if they offered our
application, was possible failure to other parts of their business—something we hadn’t anticipated
when we started our company.”
Even though bandwidth would generally improve over time, the payload or amount of data being
transmitted would also increase because as the megapixels increased on phones, the memory
associated with each photo also geometrically grew. “You almost never get to the point where the
available bandwidth is greater than the required bandwidth to get photos or media off of a phone,”
said Hoodbhoy.
After closing the company’s seed round, Hoodbhoy reached out to a friend, Dr. Asad Islam, who was
the head of imaging at Nokia’s imaging labs, which Hoodbhoy had heard was closing up shop. Islam
had a Ph.D. in electrical engineering and was a worldwide expert in the field of imaging and video
processing. Islam was the first employee that PixSense paid since at that point, the founders had not
yet taken salaries.
Islam was able to reduce the payload without sacrificing quality by coming up with a way to compress
photos on the mobile device, compressing JPEG images to 1/10 of their original size without loss of
quality. This changed the nature of PixSense’s viability, according to Hoodbhoy: “To this day, no one
on the planet has come up with a similar solution to that. Asad gave us a technological edge and set
us apart from the other companies.” Analysts tended to agree: “At the core of the PixSense offering is
data-compression, network-sensing, and device-management technology that allows PixSense to turn
a mobile handset into your primary media device. It’s this technology basis that will give PixSense
the advantage in a highly competitive market.” 6
Customers
When the PixSense founders mapped out their product, they came up with several customer options.
One of their options was to focus on professionals who might need to upload their photos from mobile
devices such as real estate agents who could take photos of homes and then put them online. They
also assessed auto insurance claims where people might take photos of accidents and then the photos
could be uploaded. They also considered police officers who could take photos for parking ticket
purposes and then upload them instead of writing tickets and PixSense could sell their service to
government agencies and equip officers with camera phones. Finally, the PixSense team assessed
selling its product directly to consumers who used mobile phones.
However, when it came down to monetizing these consumers, whether professionals or not, the
PixSense team hit a wall. Agboatwalla said: “The key questions were, ‘how were we going to
distribute our product and service to these people’, and ‘how would people pay for it if it wasn’t free?’
Would they pay a dollar a month or ten dollars a year? Would people actually pay for it at all if we
went directly to the consumer?” Hoodbhoy added: “Back then, there was no notion of an Apple App
store or mobile apps. If you wanted to build a mobile-oriented service and distribute your software
that covered 80 percent of a given population, you had to work with the operators and with the ODMs 7
to a lesser extent, to put the billing system in place, establish distribution, as well as physically support
these different mobile operating platforms.”
6
Op. cit., http://www.demo.com/alumni/demo2006fall/79912.html.
7
Original design manufacturers or the handset manufacturers.
2020.
As a result of potential channel and distribution issues, the PixSense team opted to reach the general
mobile user through operators, discussed in detail below. After this decision was made, the team
segmented the customer by: 1) those consumers on popular platforms, versus 2) those on higher end
platforms.
Based on these choices, they focused on the mass market or popular platforms versus higher end
platforms. Hoodbhoy said: “We were working with operators in these countries where there were not
a lot of smart phones so we had to support the platforms that were actually used by people such as the
Java handsets and the Symbian handsets, not the Palm or RIM. We focused on where the market
was.” However, Hoodbhoy felt that in retrospect, that “wasn’t a very good idea. We clearly made a
mistake with segmentation,” said Hoodbhoy. “What we should have focused on was the early adopter
higher end crowd and have the technology trickle down from there, which was the established way of
doing things at the time.”
Hoodbhoy explained further: “Because you can’t introduce technology on a mass market scale and
expect everyone to start using it. That was a really important lesson. Smart phones have a much
higher rate of adoption. The lower-end phones would follow thereafter. The higher-end market was
the tail that wags the dog.” At the time, however, there were close to a billion Java-enabled handsets
versus one million iPhones. “Which would you focus on?” asked Hoodbhoy.
Because PixSense worked with operators, they did not have as much control over the customer,
including how to segment the customer. The team had to work with each particular operator and in
some sense, work backwards, focusing on the demographics associated with each particular operator.
For example, Telenor in Norway had two segments—an aging demographic and a younger one and
required PixSense to tailor technology to meet those two segments instead of the other way around.
“Our lesson learned is, don’t let a big company tell you what their demographic is because they really
don’t know,” said Hoodbhoy.
Channel: B-to-B-to-C Strategy

A B-to-B-to-C (Business-to-Business-to-Consumer) channel strategy meant working closely with
operators, using them for distribution and billing so PixSense would not have to establish its own
customer base and billing system infrastructure. And PixSense would negotiate a revenue or licensing
deal (usually revenue share deal) with the mobile operator. An operator’s phone customer would
subscribe to PixSense’s photo uploading service (that was operator-branded such as “Personal Album”
with Vodafone, “My Photo” with Telenor, and under the “Paiker”8 brand with China Mobile) for $1 a
month, for example, and that amount would show up on the customer’s cell phone bill, with no credit
card or PayPal account required. “There’s zero friction this way,” said Agboatwalla. “We thought a
lot about the direct-to-consumer route but we just thought going through the operator would be
easier.”
Working with operators was not a popular way of doing business, however. As PixSense was
receiving funding and “a bunch of other companies began going into the same space,” according to
Agboatwalla, many of these companies chose a very different strategy than PixSense, focusing
primarily on the Western market (versus PixSense’s international focus) and instituting a business-to-
consumer or B-to-C model versus PixSense’s B-to-B-to-C model.
Hoodbhoy discussed the challenges his company faced related to working with operators: “Everyone
always says to own your brand. But if you own your own brand and you work with the operators,
8
A Chinese mobile user-generated content sharing and entertainment site.
2020.
they have less motivation to promote you or your products. Worse still, because you don’t have the
operator on your side, you can’t monetize your business. We spent a lot of time figuring out how to
create the proper incentives for the operators who have huge marketing engines, but are slow and
stodgy businesses. If you can figure out how to be their friend, they have more scale than any entity
out there.”
By the time PixSense received its Series A funding, intense competitive pressure with 40+ companies
in the same space, continued to propel the company’s operator-focused strategy. Hoodbhoy said:
“You couldn’t just rely on having the best technology. You had to get a foot in the door and have a
huge installed base that would then become the engine that would move the business forward.” Some
competitors included Shozu, Cognima, Sharpcast, and Vizrea. PixSense’s point of differentiation was
its compression technology and its channel strategy. Other competitors like Shozu, founded in 2001,
went the direct route, and was dubbed the “UK’s Twitter” for the early 2000s9, but was unable to
monetize its offerings and was eventually sold at a fire sale price to Critical Path.
Business Model and Pricing

Because PixSense decided to focus on telecommunications operators, they had to figure out how to
monetize their business through the operators. Operators had been shifting away from licensing
agreements where they licensed products from companies like PixSense and paid a minimum
guarantee of sales in advance or in installments over the life of the contract. Instead, operators were
moving to revenue share models where they would give companies like PixSense a cut of revenue
generated from sales of people downloading and using PixSense’s product. This way, the operators
could minimize their initial financial risk by limiting upfront costs.
Hoodbhoy admitted that the general business model strategy was an “ad-hoc process.” Initially the
team thought licensing its product would be a possible business model. But they eventually preferred
a revenue share model. With a flat licensing deal, PixSense would need to invest significant capital
without a guarantee of revenue from the operators or true scaling potential. Hoodbhoy said: “We
knew that software is a zero cost of goods sold activity—once you build it, replicating it is pretty
trivial. Thus the revenue share model had larger potential because an operator such as China Mobile
had 400 million subscribers, and if we were able to get just a fraction of those, with each one paying
25 to 50 cents per month, that number could be big—more than we could get through any sort of
licensing deal.”
With a revenue share model, the operators wouldn’t pay PixSense any licensing payments upfront,
and PixSense needed to work with the operators to establish a contract that ironed out the marketing
dollars from the operators, pricing structures, promotional efforts, placement on phones, etc. Once
that initial structure was established, the operators would split the revenues that the service generated
over time with PixSense (generally around 50/50, although many operators often pushed for a 70/30
split, which wasn’t viable for PixSense).
In essence, PixSense had the advantage of lower cost of goods sold and the operators had the
advantage of scale. Hoodbhoy said: “If we were able to take their machinery and divert portions of
traffic to our service, they would win and we would win. Our winning would be larger in percentage
terms because we were smaller, but operators would also see a 5 to 10 percent top level gain with a 50
to 60 percent gross margin, which was huge to an operator whose gross margin was typically around 9
percent.”
9
Mike Butcher, “Shozu: The Mobile Contender that Turned into a Write-Off,” TechCruch Europe, January 5, 2010.
2020.
In general, the PixSense team priced their service as a percentage of ARPU or average revenue per
user of the operator. The company settled at the pricing model of 5 to 10 percent of a consumer’s
monthly bill, based on their financial modeling and what operators typically charged consumers for
different services and applications. Because every country had a different pricing ARPU, there was a
significant difference from country to country in terms of pricing. For example, in the U.S., the
ARPU was high, around $50 so hypothetically, an operator would charge $2.50 on each user per
month (5 percent of $50). PixSense would split the revenue with operators. On the other hand, in a
country such as Indonesia, the ARPU was much lower at $4, so the operator there might charge its
consumers between $0.20 to $0.40 per month to use PixSense’s service and PixSense would receive a
split. Complicating matters, each of the operators had a different way of charging their subscribers—
some charged a monthly subscription fee, while others made the service part of their data plan, or
charged subscribers on a per-day plan.
Other factors such as tariffs affected the business model and pricing. In the case of Indonesian
operator, Excelcomindo, for example, PixSense negotiated a dramatically reduced tariff or a zero-
rated tariff, meaning mobile consumers didn’t have added fees due to PixSense’s non-local status, and
users could browse the operator-branded site as much as they wanted and only pay two cents for the
day, and turn off the service when they wanted to. Such micropricing and pay-per-use models were
common in Southeast Asia. PixSense was one of the first companies with Excelcomindo to try the
micro-fee pay-per-day model.
Selecting Operators to Target

Initially, the PixSense team selected countries to enter based on their existing operator contacts. The
operators PixSense signed deals with early on were Telenor in Pakistan, then Vodafone Global in
Germany (2007), and China Mobile (2007).10 Vodafone had been a customer of a prior company that
the founders had worked at so it was easier to get a meeting with them. Hoodbhoy had personal
contacts in Pakistan that allowed him to establish a meeting with Telenor, and Scott Ritchie had the
China Mobile contact.
After that, the company used data and information from these initial deals to assess country-to-country
and operator viability. In terms of which operators to target, Hoodbhoy and his team “turned the
entire business model into a spreadsheet.” He said: “The spreadsheet had actual data that was being
validated through actual deployments. We were able to turn the entire model into a two-form factor
that included: 1) what was the number of subscribers that an operator has, and 2) what is the ARPU of
that subscriber base. We had a very complex spreadsheet that included all kinds of discount rates, real
data, what would the adoption look like, what would the growth cycle look like, and estimated
revenue.”
Despite the model, Hoodbhoy admitted that the process of finding operators to work with was a bit
“spray and pray” where the PixSense team tried different things and hoped that one of them would
succeed. Agboatwalla added: “We just tried to go from operator to operator, closing deals as fast as
possible.”
Geography: International Operators

PixSense focused on international operators versus U.S. operators because U.S. operators were “a lot
tougher to work with.” Hoodbhoy said: “Operators are challenging outside of the U.S., but inside the
10
Later, the company was able to sign deals with Globe in the Philippines (2008), Excelcomindo in Indonesia (2008 -2009), and Viettel in
Vietnam (2009), as just some examples.
2020.
U.S., they are horrible. U.S. operators are not visionary by any stretch of the imagination. The sales
cycles are long—it can take 18 months to get an answer to any proposal. And U.S. operators don’t
believe in revenue share types of business models. They prefer to just give you licensing money so
the scalability potential is smaller.” In Indonesia, for example, PixSense could get a decision on any
proposal within three months and operators in Southeast Asia in general were more “maverick”-like,
willing to try new things, especially if there were no upfront costs. Agboatwalla added that U.S.
operators were “still kind of lukewarm and had not done anything in the area yet”, when PixSense was
founded.
But the advantage with the U.S. operators was that the ARPUs were higher so the per subscriber
revenue could be high; however, this was often outweighed by the high costs of doing business with
U.S. operators. Paul Singh, an early advisor and CEO of PixSense from 2007 to 2009, described the
landscape: “In the U.S., there was very little mobile application work even being sold. The U.S. was
like a third world country when it came to mobile—we had the oldest phones in the world and we
didn’t even have SMS. The U.S. was totally focused on either an email device like the Blackberry or
a basic feature phone. The operators also had total control.” Singh cited the international market as
being very different where applications were being downloaded on a regular basis by consumers, with
operators such as main player, Nokia, trying to monetize the downloads.
Some downsides of working with international operators, however, were that the process required
more patience in legal matters since PixSense was working out of the U.S. and Pakistan, as well as
related to technical issues since the PixSense team had to work with the technical team of international
operators which sometimes posed challenges. Singh added: “Working with a giant international
operator when your revenue is tied to the deliverable of the end revenue is hard because you don’t
have much control. Sometimes you get lucky if the product manager on the other end is very good,
but it’s an exception to the rule.”
Another characteristic of the international consumer in developing countries was that it was a prepaid
cash market, where prepaid cell phone plans allowed users to pay for phone service or browsing
service as needed without signing a contract. In prepaid markets, the only way to bill a cell phone
user was through a mobile operator. “That was the easiest way to get the consumer’s money,” said
Agboatwalla. In Southeast Asia, for example, prepaid consumers were charged by the kilobyte and
drew down their prepaid balance as they browsed or used their phone for calls.
Operator Case Study: Indonesia

In 2008, while PixSense was in the process of entering Indonesia, social media was beginning its rapid
ascent and the PixSense team wanted to make sure to incorporate such new technologies into its
business model. Rather than build those technologies organically, PixSense acquired the technology
assets of a Seattle-based mobile social networking company called Treemo that already had a
browser-based social networking platform. PixSense coupled its own mobile client technology with
Treemo’s browser technology and in April 2008, launched a web-based mobile media sharing widget
for mobile phone users in Indonesia.
The widget allowed operators to offer their customers automatic syndication of public user-generated
mobile photos and videos onto third-party social networking sites and blogs such as MySpace,
Facebook, Orkut, Blogger, and Friendster. Customers could log onto the operator-branded online
media portal created by PixSense called XL Funbook: http://funbook.xl.co.id/ via their mobile phones,
and choose an option to publish selected photos and videos.
Once the photos and videos were onto social networks or blog pages, the PixSense application
allowed anyone to post comments to any photo or video, because the operator site was open to
onlookers (a MySpace model versus a Facebook model—Facebook required friends to be accepted by
2020.
users). In addition, once the widget was published on the desired social network or blog, it would
automatically generate HTML code for visitors, allowing other people to copy and paste the widget
onto their own pages so they could have the same functionality.
PixSense’s widget was a feature of its latest “PSP” (preserve, share, publish) platform release. XL
Funbook, for example, was built upon PixSense’s PSP platform. Hoodbhoy commented on the
changes to PixSense’s service offering: “These changes were remarkable because they altered the
entire notion of our business. We started with our same original model in Indonesia, but we had this
new notion of automatic sharing and tracking.” Within two months, 40,000 people had downloaded
the widget, but importantly, four million additional people were looking at other people’s photos and
videos and adding comments to those, chatting with people, sending messages, rating photos, etc., all
via their cell phones since the country had very low PC penetration.
XL Funbook was generating approximately 300 million page views per month in Indonesia, which
was four times more traffic than Facebook in Indonesia, Facebook’s second largest market in terms of
absolute users, according to Hoodbhoy. Within six months, XL Funbook was one of the top 50
websites in the world in terms of page-view traffic. “The amount of traffic we were generating and
the conversations were mind boggling and it took off more than we expected,” said Hoodbhoy.
As the PixSense team watched their traffic in Indonesia skyrocket, they racked their brains to figure
out how to monetize that traffic, as well as to expand their revenue beyond their initial model where
subscribers would pay operators to access PixSense’s service. By working with operators such as
Excelcomindo, PixSense had access to customer identity and billing systems. When a non-XL
Funbook user would enter the Funbook site from a mobile browser, they didn’t need to enter a user
name or password in order for the operator (and thus PixSense) to know their identity, phone number,
and amount of money they had in their mobile accounts. This allowed PixSense to present non-paying
onlooker users with an option to pay a small access fee in order to continue viewing other people’s
photos and videos for 2 cents per day. Hoodbhoy said: “We messaged all such non-paying users and
expected we would lose 60 percent of traffic, but we only lost 5 percent of traffic in the first week and
then the traffic actually started going up.”
Beyond the access fee to view subscribers’ media, PixSense also monetized the site through mobile
advertisements since its service was very sticky. Each visitor had 50 pages per visit and the average
person went to the Funbook site between 5 and 10 times per month. PixSense eventually became one
of the largest providers of display inventory for mobile ads in Indonesia. Although enough ads didn’t
exist initially, PixSense worked with ad aggregators and aggregators of aggregators, eventually
reaching 80 to 90 percent fill rates for their ad space. On Indonesia’s success, Singh reflected: “At the
time, we believed that you could really have a social network that only exists in one country, but this
was before the mass international adoption of Facebook.”
Marketing and Promotion

Most of the operators outside of the U.S. did not sell the mobile phones themselves so consumers
needed to be encouraged to download applications through marketing efforts initiated by PixSense and
the operators. As part of the deals PixSense signed with international operators, the PixSense team
typically had some input in the marketing process, but “not enough,” according to Hoodbhoy.
However, operators did leverage marketing experience that PixSense brought them from prior
experiences with other operators. “Operators tended to be very open in hearing what worked or didn’t
work with other operators,” said Hoodbhoy.
Operators usually had many channels to market through and offered SMS broadcasts, web space, and
other opportunities. Such marketing channels, like many operator marketing opportunities in
Southeast Asia were “below the line” marketing costs or low-cost to free to the operator. For
2020.
example, in prepaid markets such as Indonesia and much of Southeast Asia, consumers received 40
million “balance checks” per day on their phones telling them how much time they had left on their
prepaid cell phone, which was an opportunity for operators to place a small ad telling the consumer to
try PixSense’s photo uploading service for free, along with a link that consumers could click on. After
consumers clicked on the message, they would open the mobile browser and go through a registration
process which would identify the user’s phone number, and allow them to download the application.
Then as consumers took photos with their phones, the photos would be automatically uploaded to the
PixSense-built website (usually viewed on the phone’s mobile browser), to be managed and shared.
Such ad space could be sold for $350,000 per week to other advertisers, but PixSense could negotiate
that space for a week every other month for free, for example. Operators even placed ads under the
“missed call” notifications. Singh, however, felt that international operators only knew how to market
their own services, and didn’t know how to market applications. “They’ll always offer you an SMS
blast to their customers and that’s usually not sufficient.” Hoodbhoy provided a different perspective:
“SMS blasts were actually very effective and the most trackable in terms of conversion rate because of
lack of PC penetration and the fact that it’s in your face. However, it was the lack of coordination
within an operator organization that caused problems. Operators often didn’t coordinate a TV
commercial with an SMS blast, for example, or they would have a TV commercial and consumers
couldn’t locate anything on their phones after they saw the ad. You’d think that an operator would be
able to figure that out, but they didn’t.”
The operators would also spend their marketing dollars to promote the operator-branded websites
PixSense built for them. Hoodbhoy said: “We were able to get operators to spend their marketing
dollars because they weren’t giving us license fees. We needed them to have skin in the game and
they didn’t want to give us cash through licensing so instead, they used money towards marketing
which would benefit them anyway because it was their brand. If your partner doesn’t feel like they’re
getting a better deal than you, then it doesn’t work.”
In other cases such as Telenor Group in Norway, Hoodbhoy negotiated all the phones to be preloaded
with PixSense software which translated into 80 percent of all handsets sold in Norway due to
Telenor’s dominance in that market. This was something that Hoodbhoy negotiated with Telenor.
But this still didn’t solve the problem of customer conversion and needed to be followed up with SMS
blasts and other marketing efforts so that the preloaded software could be discovered by consumers.
In the case of Telenor, the operator delivered a press release when Online Album was launched, as
well as many other marketing efforts.
In the case of Indonesia, part of XL Funbook’s success was the fact that the local Indonesian operator,
Excelcomindo, had run a large marketing campaign around the launch of Funbook, as well as other
apps such as games or blogs that the operator was offering simultaneously. The operator had also
hired the country’s most famous supermodel as its spokesperson, and had a famous local band write a
theme song. The marketing launch was estimated to cost the equivalent of a $13 million U.S.
campaign launched by U.S. operators, of which XL funded. “This was our most successful launch
with an operator,” said Hoodbhoy.
Sales Process
Because PixSense launched in a world where the operators were changing their business models
toward third party vendors, the company’s sales team was also in flux. A classic operator sales person
would sell equipment or licenses to operators and the operators would pay money up front. However,
operators began to limit their upfront capital expenditure spending as third party vendors made their
hardware free and shifted to revenue share deals. This model extended to software deals as well.
“Thus a sales guy is no longer a sales guy; he is a product manager as well who also has to be
responsible for the performance of the service. And it ends up taking a long time for sales guys to get
2020.
paid. We had trouble with this and lost some of our initial operator sales guys,” said Hoodbhoy.
“Eventually, our product managers stepped up and started selling new business and then managing
performance of the deals. It became a different class of a sales person that emerged.”
PixSense had an experienced worldwide head of sales, Lloyd Oki who had a team of people under
him. In addition, the company had sales representatives who were located in various countries and
compensated on a performance basis. At the launch of the company, Hoodbhoy and all the founding
team handled most of the sales, and eventually the sales team grew to a peak of six employees.
The PixSense team “had very strong tracking metrics for our sales,” according to Hoodbhoy. The
spreadsheet model that the team developed to determine which operators to target was populated with
real data from existing operator relationships that was regularly updated with new data.
Deployment managers who were responsible for specific countries monitored what was working and
not working on an operator and country basis daily and the information would be reviewed in the
regular weekly executive calls. Hoodbhoy admitted: “We had all the raw data, but we didn’t have as
much reporting data. Figuring out how to get reporting and analytics out of our data was a lot more
complicated than we would have liked.”
Alliances
In terms of alliances, “We signed a lot of deals with all kinds of companies,” said Hoodbhoy. For
example, the company signed a deal with Qualcomm where PixSense software was built into the
firmware11 of Brew MP12, which was Qualcomm’s next generation platform, giving PixSense
preloading rights on 750 million handsets. Hoodbhoy acknowledged: “But since PixSense’s business
model required operator involvement for billing and collection, the operator had to want that service
to turn it on, but it still was a gateway for distribution.”
PixSense did several deals with Acision or the company that built the SMS and MMS gateways, trying
to align their sales forces together around the globe. Acision had relationships with the mobile
operators and so the agreement allowed PixSense and Acision to jointly offer PixSense’s technology
to mobile operators. Acision signed the deal to extend its leadership in mobile messaging to the
mobile user-generated content space. “We worked with Acision to get some accounts in Indonesia,”
said Agboatwalla.
In 2007, PixSense built the first mobile application that used the company’s bio-compression
technology for Facebook. The deal also included Verizon. Consumers could take photos on their
mobile handsets and the photos would automatically be uploaded onto their Facebook accounts. The
PixSense team had signed on ODMs and many handsets such as the LG Chocolate, Motorola Razr,
etc. would have PixSense’s application pre-loaded. Verizon had planned a $13 million advertising
campaign and the three partners had signed a three-way revenue share agreement. However, at the
last minute, Facebook decided they wanted the service to be a free service, but Verizon did not want
to give it away for free. The deal fell apart in the end. “Facebook is notoriously bad with partners,”
said Hoodbhoy. “We were in the middle between Facebook and Verizon and had 15 of our people
working 6 months on the project. To this day, I am not a big Facebook us er myself because I feel like
they really screwed us over.”
Reflections
11
Firmware refers to the programs and/or data structures that internally control electronic devices such as mobile phones.
12
Brew MP stood for Binary Runtime Environment for Wireless, or an application development platform created by Qualcomm featuring third
party applications such as mobile games. It was offered in some feature phones but not in smart phones.
2020.
By 2009, Hoodbhoy and the PixSense team had gained quite a bit of momentum with international
operators around the world. A new CEO, Paul Singh had served from 2007 to 2009 and stayed only
for two years due to some challenges related to his relationship with the board, and Hoodbhoy was
once again the CEO in 2009.
By then, PixSense had successfully raised several rounds of funding and built a robust team of 100
engineers in Pakistan and a small base of 15 business people in Silicon Valley. Although the
company continued to focus on the international market, by that time, the PixSense team had also
approached most of the U.S. operators such as Sprint, AT&T, Verizon, Cincinnati Bell Wireless,
Metro PCS, and many others, none of whom had been interested in building a relationship with the
startup in the same way PixSense had built relationships with international operators. As the company
continued to focus on international operators and to grow their B-to-B-to-C model, much around them
was changing. Nearing their fifth anniversary, they reflected on the company’s rich history and its
initial go-to-market strategy.
2020.
Exhibit 1 Executive Bios
Faraz Hoodbhoy, Founder and CEO of PixSense
Faraz Hoodbhoy Founded PixSense, Inc. and has been Senior Vice President of Business
Development and Alliances since August 2010. Mr. Hoodbhoy served as CEO until August 2010.
Hoodbhoy served as the Chief Technology Officer of PixSense, Inc. since June 2007. Hoodbhoy
served as the CEO, Inc. and served as its Executive Vice President since June 2007.
Prior to this, he served as Vice President of Business Development at NextBrick Solutions, Ltd., and
was responsible for its Enterprise Search practice. Prior to that, he served as Director of Technical
Sales at Clickmarks, Inc. Prior to that, he was the Director Global Solutions at Unisys Corporation.
At Cap-Gemini Ernst and Young, Hoodbhoy was part of the Center for Business Innovation.
Hoodbhoy started his career at Microsoft on the team responsible for building the XML 1.0 standard.
He is co-author of the book, Applied XML—A Toolkit for Programmers and holds a BS in Industrial
and Management Engineering from Rensselaer.
Adnan Agboatwalla, Founder and Vice President of Sales at PixSense
Adnan Agboatwalla co-founded PixSense Inc. and serves as its Vice President of Sales. Agboatwalla
served as the Chief Operating Officer, Vice President of Mobile Solutions and General Manager of
Offshore Operations for PixSense. Agboatwalla served as Director Operations of NextBrick
Solutions. He also served as Managing Director of Clickmarks, where, he built and ran its offshore
development team of 30 people. He also served as Vice President Products of Clickmarks and was
responsible for designing Clickmarks' mobile application development platform. While at
Clickmarks, he spent several years working with Telcos in Japan, North and South America.
Agboatwalla started his career in General Electric's Technical Leadership Program. Agboatwalla
holds a B.S. in Electrical Engineering from Case Western Reserve University.
Mike Hodges, Board of Directors
Mike Hodges joined ATA Ventures in 2006 as a Venture Partner, after having built a reputation as a
successful CEO and interim CEO. Hodges is credited with several successful turn-around efforts,
including Tellium, a Telecom Networking company that began as a technology spinout from Bellcore
in 1997 (Tellium completed a public offering of $1.5B in 2001). Furthermore, Hodges filled CEO or
iCEO roles at a variety of venture-backed technology start-ups, including Cygnet Systems, Biometric
Imaging, SkyStream, NanoGram, Bandwidth9, Onetta, Silvan Networks, and MEMX. Prior to that,
Hodges served as division president at Spectra-Physics. He graduated from U.C. Berkeley, receiving
BSEE and MSEE degrees.
Anurag Mendhekar, Board of Directors
Mendhekar serves as Chairman and founder of PixSense. He co-founded Online Anywhere which
created the market category of content transformation tools for Mobile and non-PC devices. It was
acquired by Yahoo! for $80M in 1998. Later, Mendhekar served as a key executive of Yahoo!
Everywhere. Mendhekar started his career at Xerox’s Palo Alto Research Center (PARC).
Mendhekar has published several scientific papers, and holds six patents. Mendhekar holds Ph.D. and
MS degrees in Computer Science from Indiana University, a MS in Engineering from the Indian
Institute of Science, and a BE in Computer Engineering from Bombay University.
Source: Paraphrased and excerpted from http://investing.businessweek.com/research/stocks/private/snapshot.asp?privcapId=30348959.
2020.
Exhibit 2 Key Employees by 2006
Person Title
 Scott Ritchie  Co-Founder and Vice President of Business Development
 Adnan Agboatwalla  Founder, COO and GM - Offshore Relations
 Asad Islam  Chief Scientist
 Lloyd Oki  Vice President of Worldwide Sales
 Faraz Hoodbhoy  Founder, EVP, & CTO
 R. Paul Singh  President and CEO
Source: http://www.freebase.com/view/en/pixsense.
2020.
Exhibit 3 Early PixSense Beta Website
Source: PixSense.
2020.
Exhibit 4 Nokia 6630 Mobile Handset
Source: PixSense.
2020.
Exhibit 5 Indonesia XL Funbook Website
Source: PixSense.
2020.
Exhibit 6 Indonesia Excelcomindo Press Release, Excerpted
Excelcomindo Introduces “XL funbook”

Wednesday, June 10, 2009
“XL announced yesterday the launch of its new mobile social networking application, 'XL funbook.'
Built upon PixSense Inc.’s award winning PSP platform, XL funbook enables its mobile users to
preserve, share, and publish their camera-phone videos and photos in a single click.
XL funbook allows users to effortlessly share content with a variety of third party social networking &
Web destination sites including Facebook, Friendster, Photobucket and many others directly from their
mobile handsets or through XL funbook’s Web site. Additionally users can share their media from their
handsets with friends or simply archive them securely online. XL funbook enables users to personally
customize individual profiles, allowing them to connect and socialize with other users, building a
community amongst users with similar social and content interests….
The XL funbook mobile client supports numerous cellular operating systems including J2ME,
Symbian, and Windows Mobile and currently supports over 500 phone models from leading
manufacturers including Nokia, SonyEriscsson, HTC, and Samsung.”
Source: http://www.indoplaces.biz/mod.php?mod=publisher&op=viewarticle&cid=5&artid=780.
2020.
Exhibit 7 Telenor Norway Press Release, Excerpted
Press Release: 18 February 2009

Telenor launches Online Album in Norway
“Telenor launches Online Album in Norway, a service that makes it easy to store photos taken on your
mobile phone. At the same time, it is easy to share photos with family, friends and online social
networks….
Online Album offers simple and safe backup in one place, and costs NOK 19 per month for unlimited
uploads and 1GB of storage.
Users of Online Album can back up their photos as soon as they have been taken and thereby ensure
their photos do not simply stay on their mobile phone. Users can be sure that content will not be lost
and that their photos cannot be accessed by unauthorised persons….
With Online Album on your mobile phone you can easily upload photos directly to the Internet
without using cables or Bluetooth. You can share photos directly with your contacts using either a
WAP or web-based album and your contacts receive a message by SMS or e-mail. You can also share
them on social networking sites, such as Facebook or Youtube…. Users choose whether photos are
uploaded automatically or via a confirmation message that appears after a new photo is taken….
The service is being launched in collaboration with PixSense….
With Online Album from Telenor you can:
 Store and share

 Share directly with your contacts
 Share via social media such as Facebook, Youtube and Flickr
 Easily and safely store your photos in one place.
 Easy to use via your mobile phone and PC
 Automatic or one-click storage and sharing of photos directly from your mobile: no cables or
Bluetooth
 Pre-installed client on your mobile.”
Source: Excerpted from http://www.telenor.com/en/news-and-media/press-releases/2009/telenor-launches-online-album-norway.
2020.

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PixSense: Go-to-Market Strategy

Background and Funding

Channel: B-to-B-to-C Strategy

Business Model and Pricing

Selecting Operators to Target

Geography: International Operators

Operator Case Study: Indonesia

Marketing and Promotion

Exhibit 1 Executive Bios

Faraz Hoodbhoy, Founder and CEO of PixSense

Adnan Agboatwalla, Founder and Vice President of Sales at PixSense

Mike Hodges, Board of Directors

Anurag Mendhekar, Board of Directors

Source: Paraphrased and excerpted from http://investing.businessweek.com/research/stocks/private/snapshot.asp?privcapId=30348959.

Exhibit 2 Key Employees by 2006

 Scott Ritchie  Co-Founder and Vice President of Business Development

 Adnan Agboatwalla  Founder, COO and GM - Offshore Relations

 Asad Islam  Chief Scientist

 Lloyd Oki  Vice President of Worldwide Sales

 Faraz Hoodbhoy  Founder, EVP, & CTO

 R. Paul Singh  President and CEO

Exhibit 3 Early PixSense Beta Website

Exhibit 4 Nokia 6630 Mobile Handset

Exhibit 5 Indonesia XL Funbook Website

Exhibit 6 Indonesia Excelcomindo Press Release, Excerpted

Excelcomindo Introduces “XL funbook”

Exhibit 7 Telenor Norway Press Release, Excerpted

Press Release: 18 February 2009

The service is being launched in collaboration with PixSense….

With Online Album from Telenor you can:

 Store and share

Source: Excerpted from http://www.telenor.com/en/news-and-media/press-releases/2009/telenor-launches-online-album-norway.

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