Mercury News Interview: Daren Tsui, co-founder, CEO of mSpot

Peter Delevett
San Jose Mercury News

Tsui spoke with this newspaper about his vision for mobile entertainment.

Daren Tsui has great ideas -- and questionable timing.

In 1999, he and chum Ed Ho founded SkyGo, which aimed to put online ads in front of mobile phone users. Unfortunately for Tsui and Ho, they got into the business before most folks had the kind of smartphones that make mobile marketing really work; three years after they sold SkyGo for spare parts in 2003, AdMob launched and became one of Silicon Valley's hottest companies.

The duo now run a Palo Alto startup called mSpot, which lets users stream movies to their phones and store music in the online cloud. And recently, Apple (AAPL) and Google (GOOG) announced plans to do the same.
How does Tsui hope his 7-year-old company can compete with such behemoths? By staying lean -- no sock puppets here -- and teaming with mobile carriers to offer their customers premium services.

Tsui spoke with this newspaper about his vision for mobile entertainment. Here's an edited transcript.

Q This is your third startup with Ed Ho. How'd you meet?
A Back in 1997, we worked at a company called Zip2, which offered one of the first door-to-door mapping and direction services. It was one of Elon Musk's very first startups. I'd started a company in Seattle that was purchased by Zip2, and that's how I ended up in the Bay Area.
Then Zip2 was bought in 1999 by AltaVista, and Ed and I got back together later that year and started SkyGo. We'd seen an early WAP (Wireless Application Protocol) concept phone from Nokia; WAP was one of the very early versions of the mobile Web, and seeing that phone was the catalyst to say, "Hey, there's really something to this."
It was the middle of the dot-com bubble, where you had companies like DoubleClick selling banner ads on the Net, and we thought we could do the same for mobile phones. We were just too early.

Q And that led to mSpot?
A We first launched a streaming radio service, mSpot Radio, in 2005. 3G had just gotten going, and the service speeds weren't great, and audio doesn't take up as much bandwidth as video. We were programming our own commercial-free music stations for mobile phones.
We launched the very first video-on-demand service for mobile in 2006, years before Netflix (NFLX) started doing it. Back then folks were saying, "Mobile will always be for short-form videos, people won't be able to stomach more than 10-minute clips." Then Sprint came to us and wanted to try some long-form content. The idea was, you can rent and watch an entire movie on your mobile.
It took us a year to get deals with the studios. Disney was the first to sign up, then Universal. We white-labeled this as Sprint Movies, and it's now one of the key pieces of their marketing.

Q When did you start selling directly to consumers?
A In 2008. It was hard before the iPhone to have any sort of direct access to customers because carriers had this whole verification process before you could offer applications. The iPhone was able to circumvent that. Fall 2009 was our first try at direct movie offers to consumers.
But we were just lost in all the noise of the different apps. It wasn't in our DNA to spend millions of marketing dollars and do a big ad campaign.
So we thought, "Maybe we should go back and make Sprint-like deals with the other carriers." Our movie service is now also available on the Verizon store, and in about two months, we'll be announcing another major carrier.
Q Last summer you also revamped your music service, right?
A Right, with mSpot Music. For a while we were the top dog in a small pond, but now the online music locker space is getting incredibly crowded. Amazon's getting in, and of course, Apple just announced. We feel very confident we can match up with those guys in terms of features. What I don't have, though, is the brand to get to the users.
So our strategy is to partner with the carriers and the handset makers. Everybody's trying to win mind-share, especially where these cloud services are concerned, and the manufacturers are looking for ways to differentiate.
We, for example, will show you the lyrics of songs you're listening to. We just launched a service where as you're listening to your own music in the cloud, we can recommend streaming radio stations you're likely to like. You'll hear us announcing some deals with equipment makers in the next couple months. (A South Korean newspaper recently reported that Samsung may invest $5 million in mSpot to strengthen its cloud-entertainment business, but Tsui wouldn't comment, calling it speculation.)
Q Mobile content's hot now; why not land some venture capital so you can launch one of those big consumer ad campaigns?
A When we started SkyGo, we raised $12 million, burned through it fairly quickly, and the bubble burst. We had about 45 employees when we had to shut it down. It was a horrible experience. We want to be able to grow organically, so we never have to fire a bunch of people again.
We've only raised a single venture round, and we became profitable in 2006 -- which makes us fairly unique among mobile content startups. I just don't see the need to raise a big round right now and risk losing control.
But gosh, if some company wants to buy us for a huge amount of cash, I'd have no problem with that.

Daren Tsui
Position: Co-founder and CEO, mSpot
Born: Taipei, Taiwan
Lives: San Carlos

Age: 44
Education: Bachelor's degree in industrial engineering, University of Washington
Family: Married, two children

5 facts about Daren Tsui
1. One of the pioneers of mobile advertising with SkyGo, which he co-founded and grew internationally before selling to Enpocket in 2003.

2. Previously worked with several key members of the mSpot Team at SkyGo -- including Ed Ho, who was co-founder and chief technology officer for both companies.

3. The business idea that got mSpot funded was streaming radio for mobile; the business idea that didn't fly was becoming "the HBO of mobile."

4. Moved to U.S. at age 11 and grew up in Eugene, Ore.

5. First concert: Oregon Jam '83 featuring Loverboy, Triumph and Joan Jett.

June 11th, 2011