Mobivity Holdings Corp

Q4 2022 Earnings Conference Call

3/30/2023

spk06: Greetings and welcome to Mobility's fiscal year 2022 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Brett Maas of Hayden IR. Please go ahead, sir.
spk01: Thank you, operator. I'd like to welcome everyone to Mobivity's fourth quarter and fiscal year end 2022 earnings call. Hosting the call today are Dennis Becker, founder and chairman, chief executive officer, and Lisa Brennan, chief financial officer, and Kim Carlson, chief revenue officer. Before I turn the call over to management, I'd like to call everyone's attention to the company's safe harbor policy. Please note that certain statements made on this call will be forward-looking statements, which are subject to considerable risks and uncertainties. We caution you that such statements reflect that management's best judgment based on factors currently known and that the actual results or events will differ materially. Please refer to the documents filed by the company from time to time with the SEC, and in particular, its most recently filed annual report on Form 10-K. These documents contain and identify important risk factors and other information that may cause actual results to differ from those contained in the forward-looking statement. Any forward-looking statements made during this call are being made as of today, March 30, 2023. If this call is replayed or reviewed after today, the information presented during this call may not contain current or accurate information. Except as required by law, the company assumes no obligation to update these forward-looking statements publicly or to update the reasons actual results could differ materially from those anticipated in the forward-looking statements, even if the new information becomes available in the future. Today's call may include non-GAAP financial measures, which require reconciliation to the most directly comparable financial measures, which are calculated and presented in accordance with GAAP and can be found in today's press release, along with our recent corporate presentation, which is also available at Mobivity.com. With all that said, I'd like to turn the call over to Dennis Becker. Dennis, the call is yours.
spk04: Thank you, Brett. And I appreciate everyone joining us today for our 2022 fiscal year earnings call. We are excited to share our achievements and progress over the past year, as well as our vision for the future. Last year, we began to transform our business to focus on Connected Rewards, a platform that brings brands and digital businesses together to cross-promote services with everyday incentives that deliver instant gratification to consumers and drive higher retention and spend. In particular, We focused on the mobile gaming industry where Connected Rewards has proven to create a unique win-win-win between game publishers, popular restaurant and convenience store brands, and consumers seeking relief from rising food and fuel costs. According to industry reports, mobile ad spend is projected to be $362 billion in 2023 and consumer spending on mobile games is projected to reach $270 billion. Based on those numbers, the results from trials last year, and the growing momentum we're seeing in early 2023, our goal is to grow Connected Rewards beyond our legacy SMS marketing business by the end of this year, and we see a massive opportunity in front of us. The Connected Rewards platform is a new channel for mobile user acquisition, both for mobile gaming publishers and for brands to build their digital audiences. Coupled with the delight that our programs bring to consumers, We create a win-win-win scenario for all parties involved and we see tremendous upside to this business. Game publishers are able to offer a higher value user acquisition and advertising experience for their players versus intrusive pop-up ads advertising competitors' games. Restaurant and convenience store brands can leverage Connected Rewards to drive sales through valuable incentives reaching a highly engaged and attentive audience spanning millions of players. Importantly, Consumers have responded incredibly positively to the model, enjoying a less disruptive ad experience while saving money on everyday items like food and fuel. We've seen results to date that give us confidence that the Connected Rewards platform is a material competitive advantage and will be the driver of significant growth in the future. As a result of our trials throughout last year, the number of game publishers we work with has quadrupled, and the number of games we've executed Connected Rewards promotions has more than doubled in recent months. In terms of brand partnerships, such as restaurants and convenience stores, we have grown from four to 14 brands, with the number of Connected Rewards cross-promotion impressions soaring to just under 2 million to more than 5 million. We qualify an impression as a transaction where a brand offers an incentive to promote another digital business's service, such as a mobile game. to incentivize their consumer to install an app or a game in exchange for a brand reward, say 20 cents off fuel or a free burger. Monetization of those impressions is a key component of our revenue model going forward. Recall that our former SMS marketing business resulted in transaction fees in the sub-10 range. Our early results from Connected Rewards have shown transaction fees ranging from $2.50 to as high as $15. While it's still somewhat early in our business model, we're very encouraged by the increasing demand from game publishers who see tremendous value in rewarding their players with high-frequency, instant gratification rewards. As we've shifted to focus on connected rewards in the multi-billion-dollar gaming industry, we've added to our team to ensure we are positioned for success. Late last year, we welcomed Kim Carlson as our Chief Revenue Officer, who brings a wealth of experience in growing game publisher and brand customer bases. We're excited to share that in addition to Kim, we've also successfully attracted other seasoned professionals from the gaming industry, including product analytics and growth professionals that will continue to expand our business and deliver outstanding results for our game publishers. This new talent will be instrumental in helping us drive growth and capitalize on the vast opportunities that come with connected rewards. Finally, I'd like to draw attention to the continued strong performance of our legacy business. which has provided a solid platform for revenue and customer reach. We saw year-over-year quarterly revenues that were much higher than our fourth quarter of 2021, reflecting a more typical run rate for our SMS marketing business. While we remain committed to our legacy business, our focus is on building and growing connected rewards. As I mentioned earlier, our goal is to expand connected rewards beyond our SMS marketing business by the end of 2023, making it the primary driver of our business growth in the future. We believe that Connective Rewards represents a significant opportunity for us to capitalize on the vast potential of the mobile gaming industry and create value for our shareholders over the long term. I will now turn the call over to Lisa for a more detailed view of our financial results, and then I will come back for a few summary comments. Lisa?
spk00: Thanks, Dennis. I'll start with our cash position. We ended 2022 with approximately $427,000 in cash. And we recently completed a Warren conversion offering in March of this year that added an additional $3.5 million to the balance sheet. As we assess the performance of our business for the fourth quarter of 2022, we are pleased to report a total revenue of $1.75 million, which represents a year-over-year increase of 185% over fourth quarter 2021. It is important to note that a significant portion of this increase can be attributed to the termination of the contract for our legacy smart receipt product, which resulted in a write-down last year. However, we are encouraged by the revenue generated from our new connected reward solution in the latter half of 2022, and we anticipate overall growth in our top line in the coming quarters, as the momentum of this new revenue stream continues to accelerate. Gross margin for the fourth quarter grew to 34% of revenue from negative gross margins during the same period of 2021. Again, the improvement is primarily due to the smart receipt breakdown we took in the fourth quarter of 2021. Excluding this cost, gross margin was relatively comparable. As connected rewards grows into a higher proportion of overall revenue, we expect significant improvements in our gross margin. as early trials have shown connected rewards programs yielding gross margins as high as 80%. Total operating expenses for 2022 decreased by 13% to $11 million compared to $12 million in 2021. Reduction in operating expenses is a result of leveraging our legacy product and technology investments to power our new connected rewards solutions. This strategic move has enabled us to transform our business around our new connected reward solution while simultaneously reducing our operating expenses. By leveraging our existing assets and resources, we have created a leaner, more efficient organization focused on delivering the best possible value to our customers. We'll now turn the call back over to Dennis for his closing remarks. Dennis?
spk04: Thanks, Lisa. In conclusion, I would like to express my gratitude to our shareholders, customers, and employees for their continued support and dedication to our company. This year, we made significant progress in our transformation to focus on Connected Rewards, a platform that has shown great potential for growth, particularly in the multi-billion dollar gaming industry. This platform brings brands and digital businesses together uniquely to cross-promote services with everyday incentives. creating a win-win-win scenario for game publishers, popular restaurant and convenience store brands, and consumers. We have quadrupled our partnerships with game publishers and have grown from four to 14 brands with a soaring number of Connected Rewards cross-promotion impressions. Our new team members, including our Chief Revenue Officer, Kim Carlson, bring a wealth of experience from the gaming industry, and we are confident that Connected Rewards will drive our business growth in the future. While we remain committed to our legacy business, We believe that Connected Rewards represents a significant opportunity to capitalize on the vast potential of the mobile gaming industry and create long-term value for our shareholders. Thank you all for joining us today, and we look forward to your continued support in the years to come. We will now open up the call for Q&A.
spk07: Thank you.
spk06: We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
spk08: Please hold while we collect your questions. Our first question comes from Jeff Porter, private investor.
spk03: Hey Dennis, I got a couple questions. Can you depict for me what a connected rewards contract and transactions look like? What's the revenue stream and why are the margins going to be so much higher from that revenue?
spk04: Hey Jeff, yeah, so So typically, a connected rewards contract looks like, so it's an agreement where a game publisher basically allocates a committed budget to Mobivity for a connected rewards promotion. You know, that can be anywhere from, call it $50,000 to a couple hundred thousand dollars, where the game publisher says, via what we call an insertion order, they say, We would want to pay a certain amount up to a maximum budget for Connected Rewards to promote a certain mobile game for a certain timeline, say the month of April or for a couple of months. And then we work with our brand customers to use their media, typically that's their SMS database or their loyalty database, to then promote that mobile game where the game publisher pays a transaction fee every time a consumer successfully installs the game through that brand promotion. So a promotion might be, you know, a convenience store brand saying, you know, download this game, install and play this game, and you'll get a voucher for 30 cents off each gallon of gas after you've installed the game. Every time that the brand, when we run the campaign, successfully transacts an install, then the game publisher pays us a success fee. So in the past, in our legacy business model, we would promote brand SMS discounts that would, say, give you a dollar off a drink or a sandwich or something like that. And we were really just able to charge the brand a sub-penny transmission fee for that text message. We weren't able to really participate in the upside that came about from those promotions. So with Connected Rewards, we're able to bring both retail, restaurant, convenience brands together with game publishers and obviously drive a much higher transaction fee because we're part of that vested interest in success of the program, matching good games, good brand, then leveraging our technology, which makes all that happen. In other words, we can transmit the brand owned promotion through their SMS channel or the loyalty program. We have built the plumbing into the game publishers to then track the download coming from a certain brand to the game publisher, which then gives the credit towards the successful transactions, which sets up for a performance network. So, you know, in summary, The marketing budgets are much larger when game publishers allocate marketing to acquire more players than what we've seen in the past for brands just leveraging the channel as a part of one of their many marketing channels. And then the margins are much higher because the transaction fees being in the dollars versus cents is obviously a much higher transaction fee, but our cost of transacting those campaigns is the same as it were with standard text messaging promotion.
spk03: Do we only get one bite at that revenue at the time of the customer acquisition, or is there any ongoing revenue stream as that customer plays the games and cashes in rewards?
spk04: Yeah, that's the roadmap for Connected Rewards is that not only can we drive value in finding players for games. But obviously we would know that if a player chose to play a game because of a certain incentive, say it's a burger or discounts on fuel at certain brands, that's creating a data pipeline for us too, where then, you know, in fact, one of the unique and interesting aspects of the gaming industry is that The retention rates are pretty low for mobile casual games. They can be as low as 5%. You know, 95% of players try a game and discontinue playing it after the first 30 days of installing a game. But we're starting to set up, you know, set ourselves up into a position where by playing matchmaker and bringing consumers from brands to these mobile games, of course, we're kind of the origination point where these consumers discovered and tried these games, and that allows for a kind of a follow-on relationship, for example, where maybe we gave a consumer 20 cents off for trying a game. They then stopped playing the game, and we can go back and give that consumer another 20 cents, or maybe we have to up the ante to entice them to play the game a little bit further and maybe build a longer term relationship with that game publisher. So we can absolutely build a recurring situation. And in traditional digital advertising, they call this retargeting where, you know, formerly with mobile phone publishers like Apple and Google's Android, there was a lot of infrastructure there that allowed the persistent identity of these game players. You knew who was playing what games and you could retarget them with, with promotions and advertisements. And a lot of that's gone away because a lot of that wasn't very permissions-based. And now with Connected Rewards, these are consumers that have consented to give their permission. They're going in eyes wide open, and they're saying, yeah, I'm open to playing a game and trying something out in exchange for value from a brand that I already have a relationship with. And so we believe that that's going to set up for a future where we can keep coming back and helping building a longer-term relationship between the games and the consumers.
spk03: Okay, last one. So in Q1 that we're just finishing now, you've been rolling out these Connected Reward programs. Have they all been successful? And sort of how do you judge the success of a program and or develop some sort of return on investment for your mobile gaming publisher to show them that this is really economic for them?
spk04: Right. So we're really starting to scale the program, which is going to give us, I think, more reliable information in terms of how the return on, and again, the return on spend is right now, it's the game publisher paying us to bring them game players from brands. And what we're seeing in the early data is that on the brand side, when the brand markets games, the consumers are very responsive. And in many cases, the consumers that are responding to those game promotions were consumers that weren't even responding to the brand's offers. So it's still early, but we see very positive results from the campaigns you've run so far. suggesting that the brands promoting games is hitting a chord with these consumers because that's their preferred form of entertainment in many cases. And the brands are going to measure that in the form of, you know, do the consumers when they receive these promotions stay in the brand's loyalty program? Do they stay in the SMS program? And if they do and they're giving an incentive to try out a game, Are they redeeming those incentives, et cetera? That's all looking very positive. On the game publisher side, there's a lot of different ways that game publishers monetize their games, and there's a lot of different genres of games as well. There's role-playing games. There's puzzle games. So far, we have been getting reorders, which means we're out there running cross promotions. The game publishers are getting players, and they want to keep investing in this channel. The economics are still early. How much are the game publishers willing to pay in order to make sure that, you know, they're paying X amount of dollars to us to bring them a player? Is that a positive return for them? All the early indicators suggest that it is. But we're still just at the beginning because, like, you know, to your earlier question, it's not just about getting the player to play the game. It's getting them to continue to play the game, to drive retention, to drive activity. And we think that these brand offers and promotions are an effective currency to build value there. So thus far, you know, the way I would answer that question is it's early, but so far we're seeing really positive results on both sides because the brands and the game publishers we're working with are continuing their programs and expanding them.
spk08: Okay, thanks. Thanks, Jeff.
spk07: Thank you. Our next question comes from Bob Berlacher with 45th Parallel Capital.
spk02: Hi, Dennis. I think this is probably a question for Kim, but I'm just trying to get an idea of how not only the current customers for Connected Rewards, but those that are prospects are really reacting to the offering itself. I know or believe you guys usually start out with trials or pilots or whatever it is, and I'd like to get an idea of how they react to those, and are those turning into then longer-term contracts, or are you still at pilot stages? That's kind of all one question, and I have a couple more follow-up, but go ahead. If Kim can answer that, that'd be great.
spk09: Sure, absolutely. Thanks. So as we indicated last quarter, with all of the disruption imposed with all the privacy protections, particularly by Apple in the mobile advertising industry, game publishers are really aggressively seeking new ways to acquire new users as well as monetize their big audiences of mobile game players. So far the response has been that our solution, Mobivity's Connect Rewards, provides a very unique ability to help them find unique and net new audiences for their games, as well as serve these real-world instant gratification rewards in-game that drives higher retention and in-game spend, which is what they would call their monetization. Our early results are suggesting that our solution is addressing these main points for mobile game marketing, and therefore we're seeing accelerated demand by game publishers to leverage our connected rewards. We did just attend GDC last week, which is called Game Developer Conference in the Bay Area. And a consistent response we keep hearing is that new acquisition and monetization strategies are desperately needed. Again, going back to what is going on with the privacy restrictions on device IDs, really, and the ability to target. So we are hearing... a resounding yes from developers who want to find net new audiences. I'll also touch on what Dennis mentioned a minute ago. We are getting rebuys from game developers, which means, this addresses your question, typically what a game developer will do with a new channel is they'll give us a test budget and on a negotiated price and budget, they'll evaluate how we're performing for them. And the performance is usually on two things. retention rate, so how the players that we deliver to them are retaining in the game, as well as purchase value, so how many purchases are being made in the game. And the early results are that they're seeing their KPIs on those two metrics being hit to the point where they're rebuying and giving us more budget, and frankly, they're giving us more budget month over month. So we're seeing an acceleration of budget commitment from these game developers because we're hitting their defined KPIs on the two things I mentioned, which is retention rate and in-app purchase value. So we're definitely seeing that momentum, and I will just add that what we also hear is that finding iPhone users or iOS users is dramatically more problematic than Android right now because of those this privacy issue we've talked about now for two quarters. So I've been in the mobile space and gaming marketing for 10 years, and I'm happy to say that our solution is definitely an attractive one right now where the ecosystem sits.
spk02: Are we uniquely positioned in some way that there isn't a lot of competition for what we're doing or what is it that makes us unique if if we are unique in that regard and what's the size I guess also of the market if you can quantify that right we are unique I have yet to hear of the opinion of one right now but I have yet to hear of any other
spk09: solution out there that's leveraging brand media, which is this SMS we're talking about. We're also doing things with on-premise signage for brands to drive downloads for gaming. Traditionally, gaming is usually game-in-game ads. So if you're playing a game, you typically see an ad for another game. That is a predominantly vast majority of all marketing spend. So we are a very unique solution where we're again, as I mentioned earlier, providing a net unique new audience for game marketers that's not out there anywhere else by leveraging these large brands. As far as the total addressable market, I know Dennis mentioned it earlier, it's in the several hundred billion dollars of spend on game marketing. What that means is game marketers live and die driving new users to their game. They're typically doing that traditionally through Facebook, TikTok, mobile ad networks, and mobile programmatic players. We are a new solution. So we're a new unique audience for them to reach. So the addressable market is very, very large. Going back to what Dennis said, though, we're in the early game here. We have definitely got rebuys from developers. We've quadrupled our number of game developers. It's typically a publisher, and they will have a handful of games. So we have a very nice month-over-month growth rate on the number of games that are participating in our connected rewards.
spk02: And I understand the size of the market being hundreds of billions of dollars or billions of dollars, but, I mean, for Mobivity's purposes, how do you view your market opportunity is really kind of what I mean. I don't think you maybe do. I hope you do, I guess. I don't know that you believe Mobivity's opportunity in the next two or three years is billions of dollars. I'm trying to just get an order of magnitude that we might be able to expect if things track the way you guys would like to. And I'm not looking for a revenue forecast. I'm just trying to get some kind of a ballpark figure of what Kim views as her opportunity for, or market opportunity that she's going after. If I made myself kind of clear, maybe.
spk09: Yeah, yeah, that makes sense. I appreciate the question. So total addressable market is always a good number. I understand that. I think in our release we mentioned that it doesn't really, yeah, it doesn't, doesn't answer the quantitative questions. We mentioned in the press release that we do expect our connected reports to usurp our legacy business this year. So on a short term, we believe that we can meet and exceed our legacy run rate at the end of the year. I think that... Okay, but with... Go ahead, I'm sorry. Yeah, I think... Go ahead, I'm sorry. Looking at, yeah, one to two to three years... you know, I see us as a formidable competitor to mobile ad networks, as well as mobile DSPs, which is programmatic. So if you look at the scope of spend, vast majority still goes to Facebook. We're not going to debate that of that total addressable market. But we see ourselves competing with a mobile ad network or a mobile programmatic player. And we'd have to come back to you with those specific numbers of where we think we'll be one, two, three years from now. But the short term, we do believe that our connected rewards will, like I said, surpass the legacy revenue business that Mobivity has had for the last couple of years.
spk02: Then that would go, I guess, to the question, I don't know if this is a Dennis or Lisa or you question, but we have no idea at this point, the fourth question, We know you started in the third quarter, tail end, fourth quarter, more, I would assume, first quarter, even greater. Fourth quarter, number of 1,750,000. I have no concept of whether the connected rewards was 10% of that, 20% of it. I understand that ultimately it's going to be 60 plus percent or more of your total revenues, but I have no basis for it. I'm just trying to get an idea. You announced a $3 million quarter in March. I'm making it up. We're still not going to know how much is legacy and how much is connected rewards. And as a long-term investor, I'd like to have somebody give us some kind of an idea of what we can expect going forward great by the end of the year legacy is going to be less than half of what connected rewards is i get that but for me i right now i have no idea if the legacy business last quarter was a million a million five or a million seven yeah go ahead dennis
spk04: I'll tackle that real quick. I know in Lisa's comments, I think actually in my comments earlier in the call, I mentioned that the revenue from the fourth quarter compared to the fourth quarter of last year reflected a more kind of normal run rate for the legacy business. So I think from there, you could assume that, you know, the second half of 2022 was, you know, I kind of call it our proof phase for the Connected Rewards business model. We Had select partners experimenting, a couple of game publishers, not a material proportion at all of the revenue run rate. I think the way we described more recent progress in the first quarter without being ready to report first quarter numbers, you know, now we're really in the commercial phase. Kim just joined us at the very, very end of the third quarter and really got going in the fourth quarter, building out our gaming business development operations here to go expand on that proving ground from all of the success we saw from the trials in the second half of the year. So I think that's the way I would think about it. The legacy business, as per the comments of the fourth quarter, really being the the vast majority of the 2022 run rate. So incrementally growing from there in this year is how you could take without us explicitly parsing out the connected rewards revenue, which we do expect to be able to do here as the year progresses. And as those revenues become more material, larger proportion, but that's kind of the way I would think about it. If that helps.
spk02: Okay. No, that does. That's helpful. And then one last question, I think, for Kim, and that is do you, is there any seasonality to these, either the brands or the gaming, brands we kind of know, but the gaming companies and their desire to advertise or reach out to new players? I mean, is there any quarter seasonality at all to their kind of advertising budgets?
spk09: Yeah, really there's not. Historically, the only little blip we would see would be a very small window post-holiday, specifically when users get new phones around the holiday time. There has been a slight bump in spend from game marketers in the, I'll say, after Christmas to mid-January timeframe, just to take advantage of people who bought their new phones and they want to make sure they're reaching them with game advertising. But other than that, it's a pretty flat marketing year for game developers.
spk02: Okay. Thank you all very much. I appreciate your answering my questions.
spk08: Thanks, Bob. Thank you.
spk06: Thank you. Ladies and gentlemen, as a reminder, if you wish to ask a question, please press star 1. Please hold while we collect new questions. Our next question comes from Jeff Porter, private investor.
spk03: Yeah, hi, guys. You alluded to a press release, and I just wanted to let you know that your press release just hit 30 seconds ago and wasn't on the company website. So in the future, it would be really great if you could get the press release out on a timely basis so that we could read it before the conference call. You've always done that in the past, and I have no idea why the press release just hit right now. So you should let your IR people know. I don't really have any other questions.
spk04: No, I appreciate the feedback, Jeff. Apologies. I know we hit a snag here getting it to the wire as we were approaching the call, but noted. And again, apologies for the delay.
spk03: Okay. Well, congratulations. Let's keep growing.
spk08: Thank you. Our next question comes from Bob Tragg with DCG. Hi, Dennis. Bob Tragg here.
spk05: How are you? And Kim?
spk04: Doing good, Bob. Good to hear from you. Good.
spk05: Yeah, you guys are making great progress. So a couple of maybe elementary questions just to once again wrap my arms around. the connective rewards. I get what's in it for the gaming company. It's all about customer acquisition. I get what's in it for Mobivity because they get a bounty on everyone that will download and play the game. I get that. Remind me, what's in it for the brand?
spk04: A couple of things. So first and foremost, the brands are are looking for reasons to engage their consumers, particularly in the quick-serve restaurant, the general restaurant, and the convenience store industries to drive traffic. Those areas of the industry which are vast, these are multi-billion dollar industries with a large swath of the US population consuming from them, but they're high value, so they rely on traffic and volume. So anything that's going to put a promotion or an offer on the consumer's hand to incentivize the consumer to visit the store more often is certainly something that's valuable to those businesses. The problem becomes what is the budget that those businesses can bear in discounting their services? And I think it's an important feature to note about Connected Rewards is it creates an opportunity for the restaurant or the convenience or fuel brand to get subsidized subsidization of those discounts because of the the bounties that the game publishers are willing to pay so that in other words there's enough there for kind of this win-win-win consumer gets free food or discounted gas and an introduction to a potentially entertaining game game publisher gets a player they can monetize from The brand, the restaurant or the fuel brand, et cetera, they get a sale because of the voucher the consumer is getting as an incentive that's going to send the consumer back to their business. And the economics from it allow for us to reimburse in some cases, not in every case, but in some cases, some or all of that discount back to the brand. So they get this discount without discounting benefits.
spk05: Got it. Okay. So that makes a lot of sense. So there's enough coming from the gaming companies where you're basically partnering with the brand and you're going to split potentially to some degree the bounty, as I called it, that you're getting from the gaming company. So the brand is, in most cases, it sounds like it ends up to be little to no cost to participate in Connective Rewards. Right.
spk04: Yep, and then there's another side to this marketplace where, and this is the next phase of our evolution, where the gaming companies, and we've run tests that are showing this has got a lot of upside, where the gaming companies can introduce branded incentives, you know, discounts, free food, et cetera, into the gameplay, which in turn creates a stickier market and higher frequent game player for the game publisher to monetize in other ways. Again, the game publisher willing to subsidize some of the costs of that discount, but also the brand paying for distribution of their rewards and promotions into these games to drive traffic back to the brand. All of this, by the way, in the current backdrop of inflation and everything, and particularly the squeeze on These retail brands, labor costs up, supply chain costs up, those are squeezing marketing budgets. So this is creating a potentially far more efficient way for brands to tap the gaming audience to drive a really efficient media transaction to drive traffic and spend. And I think it's important to note, too, that the audience for just mobile games now is is I think beyond two thirds of the US population. So the reach of that industry now is comparable to TV, movies, social media, et cetera.
spk05: So are you, so I'm sure you do this, but in your data collection and analysis, are you finding which, which not necessarily brands, but which type of companies, brands or brands offerings, whether it's a convenience store, whether it's a burger, whether it's gasoline, are you finding which one of those rewards tends to have the highest success?
spk04: Absolutely.
spk05: And which is it?
spk04: Well, you know, there's a lot of dimensions to that. You know, I think the quick answer to that is it's early. we'll get more clarity as we scale. But it's also – it kind of ebbs and flows. I mean, when gas prices were $5 in July and August, fuel offers were very attractive to the consumers. But it really just – you know, there's different dimensions to that. The game publishers have different initiatives in terms of how aggressive they want to be. The brands might be – you know, introducing a new product line or something, and therefore they're much more aggressive in what they're, you know, the depth of the discount, whether it's a freebie, things like that. But I think that that's part of the value of the data that we're building and kind of, you know, in the technology world with AI and a lot of stuff that's going on there, this data that we're building around all of this and also contrasting the fact that, A lot of the third-party data is being shut down because of privacy protections. We're building this, you know, call it this first-party data, permission-based data. In other words, the consumer said, yes, Subway or whoever the brand is, I'm willing to have a relationship with you, and I'm willing to have you give me targeted things based on my interests and my history. That's all building, I think, an asset of its own in terms of value to Connected Rewards.
spk05: Okay, so on the brand side, I want to stick there. I just got one or two more questions. I know it's a little bit of a lengthy call, but maybe it's a good thing. On the brand side, are you working almost exclusively with your prior SMS brand clients in this program at this point?
spk04: No. No, we have new brands that we brought aboard as well, just exclusively.
spk05: specifically on the value of connected rewards not that's okay marketing yeah that's what i was thinking i you know as i asked about which which of these offerings is is most successful it would seem to me that and i i'm probably stating the obvious that if it turns out that offering 35 cents or 50 cents off a gallon is having enormous success that one you guys could go to every major oil company convenience store on the planet and show them that data. And everyone would be thrilled with that. Again, win, win, win. And you'd have a higher hit rate. So, so you are going outside of your legacy brand clients to, to pull in more brand offerings.
spk04: Absolutely.
spk05: All right. Last question. And you haven't got to spend much time on this, but just, on an elementary basis, just describe again what happened on the privacy front, rules, regulations, that has made these gaming companies have to find a different avenue for customer acquisition relative to what they were doing before, whatever these privacy issue changes were, and how does all this relate to customer acquisition costs?
spk04: Kim, I think you're, yeah, I think you're best suited to answer that.
spk09: Yeah, right. About 18 months ago, Apple put forth a privacy restriction on apps that basically went from opting out to opting in to tracking. So when you access an app on your phone, you now have a choice to make when you open that app for the first time to say, do I want to be tracked or do I not want to be tracked? So the institution of that privacy hindered most ad networks, Facebook, mobile programmatic partners in their ability to really take a look at your ID or what we call IDFA of your phone. So prior to that, we had pretty much 80% of the time access to an individual's phone to identify what types of apps they had on their phone. That kind of got turned upside down, where now it went from 80% availability to maybe 25% to 30% of the time does Facebook or other channels like a network have the ability to look at your device. Facebook, mobile ad networks, and programmatic partners relied on that data in order to target the right iOS user to serve the right ad to the right person. So when you dig into Facebook's earnings, you'll understand that the decline is mostly tied to the obfuscation of that IDFA. So most of our clients have specifically, and I think I mentioned earlier, our ability to help them find quality iOS users with this, what then is called permission-based opportunity with SMS, for example, solves that pain point. So again, in summary, the highest level to think about it is really, and it's no secret, Apple basically took away the identifier. So that these massive ad networks that are participating in this multi-hundred billion dollar marketing opportunity have really been throttled in their ability to find the right user. So along comes Mobivity, which says, hey, we've got a permission-based network. We don't have to We don't even actually look at an IDFA. We're just sending a message to someone who's opted in to a brand media channel.
spk05: So it all comes down to customer. It all boils down to customer acquisition costs, that once this privacy ruling went into effect, rather than, if I'm a gaming company, rather than take a rifle approach, which I was able to do in targeting certain players or certain folks, I now would have to take more of a shotgun approach and consequently my customer acquisition cost is going to go up and we're giving them a different avenue to bring that customer acquisition cost into a more attractive ratio. Is that somewhat correct?
spk09: Precisely.
spk05: Got it. Okay, great.
spk09: You guys have done a great job.
spk05: So that's really what we're doing, right? We're lowering we're giving them a more attractive avenue for customer acquisition costs in a modality.
spk09: Correct.
spk05: Okay. You guys have done a great job. It's an exciting story. So continued success.
spk04: Thanks, Bob. Appreciate it. Thank you.
spk07: Thank you. Our next question comes from Bob Berlacher with 45th Parallel Capital.
spk08: No, I'm sorry. I don't have a follow-on question. My apologies. No problem. Okay.
spk06: Since we have no questions, this concludes our question and answer session, and this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Disclaimer

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