Interview with Jonathan Schreiber, CEO of Xingtones

We develop expertise in delivering media files to mobile phones without the need to go through the typical carrier infrastructure. We monetize this in a number of different ways. We sell directly to consumers, which allow people to take content off their desktop and send it to their mobile phones. It is currently focused on ring tones, but we plan to launch with complete songs, videos, etc.

We are currently selling software that enables this type of service, but we will soon be launching in Germany, UK and Ireland on a per transmission basis. In September we will be launching a subscription service through a private label partner.

This is the model that I am most excited about. It is really a Yahoo Shops for mobile phones and we have named it mStore. An independent content owner can self publish, set pricing, create a store, and be in business.

The exciting part is both based on enabling many different partners to grow the business as well as philosophical is the democratizing effect, from podcasting, to social networks, to blogging. It is really the industry admitting that they don’t know what the market wants. They may provide the tools, but they don’t know how people will use them. We don’t know what?s cool or what they want to do, we just know that they want to do stuff.

We currently have 15 employees.

There are two sides in working with customers. One is to listen to them and to make sure you deliver against what they need. The other one is to not listen too much, especially when you are dealing with bleeding edge stuff. This is simply because they don’t know what they need. The music industry felt that they didn’t need to do anything with digital music, because they weren’t listening to their customers. On the flip side, Napster came about out of nowhere. Customers weren’t clamoring for a file sharing service before it came along…

You have to sometimes lead the customers. To that end, we aren’t so far ahead of our customers that we are out of touch. We don’t want to provide more tools and services than they could hope to expect. We are going to do things poorly in grand scheme of things, and with consumer feedback we will continue to make it better moving forward.

That is a great analogy. One of their flaws was in saying that there was a need for mobile technology, with a product that cost $900 per unit, a difficult interface, and many other issues. We are coming at it from a much more remedial standpoint. We know there is blogging, podcasting, and social networking so there is a market for this type of interactivity. Ringtones are big and continually growing, so we gone about creating tools that enable consumers to play with the big boys.

We offer a turn key solution. There are a number of businesses and environments that require a turn key solution. They may only require one aspect of the business. We have just published our internal API to a few partners, who are then able to sell to end consumers by having us complete the service side of the transaction.

Personalization is interesting. There are a couple of very powerful elements that are working in mobile that have never been there before. We are now carrying computers in our pockets. When you have something with you at all times, it becomes much more a part of your life, hence the need to personalize. It has become very pop culture, like the Crazy Frog phenomenon in the UK there is the initial mass interest, but there is also the backlash as well. People are aware of the possibilities, now they simply want to make it their own.

A million people with an MnM ringtone is the exact opposite of personalization. That type of service is more of a customization. Personalization is having whatever the end users wants on their phone. It could be a friend or loved one’s voice, a bird watchers favorite bird, whatever the wish. Even to the point of being the exact piece of the song that means something to them. There is a very powerful aspect of having ownership over something so simple, and yet prevalent in consumer’s lives.

To be completely honest, we don’t know exactly why it resonates so well with consumers. This goes back to our strategy of providing a flexible service that consumers can use as they see fit. We can’t predict everything that they will use it for, but we can provide an innumerable ways in which to use the service.

There is no silver bullet for capturing feedback and usage patterns. I do believe that it comes down to relationships. I am always listening to our customers, and when they start telling me what they want I insist that they conceptually tell me what they want. If I were selling a computer I wouldn’t sell the capabilities. I would first try to understand how a potential customer plans to use it, how they are going to integrate it within their lives, how they would extract value from it, etc. This would give me a very good understanding of how I should build it to meet these needs. Through that, we can understand their expectations for the service, how it should work, and what they should get out of it.

It is really a trial and error. You have a hypothesis; you build against it, and receive feedback in both structured and unstructured environments. Understanding what customer?s true goals and intentions are is when you have developed a relationship with these customers.

Our customers (corporate) don’t care what technologies we support, which file formats, which systems, etc. They care whether it works or not, for a wide percentage of their market and it is easy. Some clients will ask me the technical questions relating to the service, and I politely sidestep them simply because they are irrelevant. They should be asking me how many of their subscribers can use our service and how many can use it easily.

Based upon basic demographics and growth in technology, I see this market growing to 100%. My father will never change his ringtone, but every kid is doing so. If not, they will be. Our demographic is 14 to 25 and is an evenly distributed bell curve. We hit all the same people who play Xbox. In 5 to 10 years, you are looking at 100% of users wanting to do something; whether changing their ringtone to viewing ESPN video, we simply don’t know.

The market is broken because the carrier’s and the major’s limited shelf space restricts growth. The democratization that we provide can expand this whole market considerably. There is limited shelf space on the phone. I would be doing exactly what they are doing. They simply can’t carry an entire record label within the phone. It is the same way Wal-Mart cannot compete with Amazon.com. That is simply due to the law of limited resources. What is required is for more people to be rewarded within the value chain, not less.

If we can empower retailers and our partners to make money in the mobile market. At the end of the day everyone will make more money. It may not be in the way they initially thought, but the reality is it never is.

We are the only ones who earn any money off a sale. In theory this is good for me, but because no one else earned any revenue other than us, no one was willing to put the resources forward to deal with us. Now with our distribution through retailers, the retailer gets paid, the distributor gets paid, and we get paid. Now I have a value chain that wants Xingtones to succeed, because they get paid.

This is where I see the mobile market. Right now, only a few companies earn any money on a ring tone. There are many other organizations that would love to get paid as well, such as iTunes, Yahoo, MSN, AOL, MusicNet, etc. This would reward them for driving this market forward.

When people call me with deals at 5% of sales, I simply do not get excited. I am not going to waste my time training my sales reps on additional products and services, if all I am going to get is 5%. It is necessary that people within the value chain be rewarded for putting the effort forward to growing this space.

Relationships are the most important thing. The key is to develop a rapport. Not because you want something, but because you want to understand that person better, and they may help you out or you may help them out in the future. I think of things very much in the long term. It is important not to always be closing a deal, but to instead get to know someone and determine if there is an opportunity for business to be done at some point or another.

There is a limitless amount of work and you have to be committed to doing it. Being an entrepreneur requires a severe amount of work. You cannot be an entrepreneur if you aren’t committed to working all the time non-stop. The reality is you simply need to have that type of constitution. If you get tired and take a break, you will fail.

You need to be able to select a vision, knowing you might be wrong and realizing that you probably are wrong but are willing to fight for it. Every meeting you go to, someone is always going to disagree with you. If you feel you have to go back to the drawing board after each positive and negative criticism then you simply don’t have the ability to maintain your focus and commit to it. You have to believe in yourself more than anyone else possibly could because it is all you got.

I am actually not very good at hiring people. I trust people implicitly and when someone says something I tend to believe them. This is not always beneficial in terms of hiring, as people will exaggerate and people will convey certain things that may not be the truth. What has worked for me is to hire people with passion and that I can trust. I don’t require experience within our industry. Two individuals on my executive staff had zero experience within the mobile market and are very successful.

I know what I am good at and I need people who have other experiences and are great at what they do. They need to be able push me beyond the scope of my experiences and can keep me grounded. There is something that I can learn from virtually everyone.

That is exactly right. There have been a number of times when I look to my board for advice and assistance. You have to have people who are better than you in some areas and more importantly don’t look down on you when you ask them for help. I surround myself with people who know they don’t understand everything.