Mobivity Holdings Corp. (PNK:MFON) Q4 2022 Earnings Call Transcript

Mobivity Holdings Corp. (PNK:MFON) Q4 2022 Earnings Call Transcript March 30, 2023

Operator: Greetings. And welcome to Mobivity’s Fiscal year 2022 Earnings Call. As a reminder, this conference is being recorded. I’d now like to turn the conference over to your host Brett Maas of Hayden IR. Please go ahead sir.

Brett Maas: Thank you, operator. I’d like to welcome everyone to Mobivity’s fourth quarter and fiscal yearend 2022 earnings call. Hosting the call today are Dennis Becker, Founder, Chairman and 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 the management’s best judgment based on factors currently known, and that the actual events or results could differ materially.

Please refer to the document saw by the company from time to time with the SEC, and in particular, the 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 statements. 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 the 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 a 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 floor is yours.

Dennis Becker: 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 4 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’ service, such as a mobile game, to incentivize their consumer to install an app or a game in exchange for a brand reward, say $0.20 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 penny 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 multibillion 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 are 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 Connected 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?

Lisa Brennan: Thanks, Dennis. I’ll start with our cash position. We ended 2022 with approximately $427,000 in cash, and we recently completed a warrant 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 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 SmartReceipt 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 SmartReceipt write down 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. I will now turn the call back over to Dennis for his closing remarks. Dennis?

Dennis Becker: 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 multibillion 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 4 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.

See also 16 Biggest Plumbing Companies in the World and 20 Most Advanced Countries in the World in 2023.

Q&A Session

Operator: Our first question comes from Jeff Porter, private investor.

Unidentified Analyst: Hey, Dennis, I got a couple of 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?

Dennis Becker: Hey Jeff. Yes, 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 Connected Rewards promotion that can be anywhere from call it $50 to a couple of hundred thousand dollars where the game publisher says 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 a convenience store brand saying download this game, install and play this game and you’ll get a voucher for $0.30 off each gallon of gas after you’ve installed the game. And every time that the brand when we run the campaign successfully transact and 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 $1 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 with good brands, then leveraging our technology which makes all that happen.

In other words, we can transmit the brand owned promotion through their SMS channel or their 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 in summary, the budget, 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.

Unidentified Analyst: 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?

Dennis Becker: Yes, 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, 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%, 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 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 follow on relationship.

For example, where maybe we gave a consumer $0.20 off for trying a game, they then stopped playing the game and we can go back and give that consumer another $0.20. Or maybe we have to up the ante to entice them to play the game a little bit further and maybe builds 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 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 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, yes, 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 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.

Unidentified Analyst: Okay, last one. So in Q1 that we’re just finishing now, you’ve been rolling out these Connected Rewards programs. Have they all been successful and sort of how do you judge the success of a program or develop some sort of return on investment for your mobile gaming publisher to show them that this is really economic for them?

Dennis Becker: Right. So we’re really starting to scale the programs 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 do the consumers, when they receive these promotions, stay in the brand’s loyalty program? Do they stay in the SMS program? And then 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 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 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, 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.

Operator: Our next question comes from Bob Burlaker with 45th Parallel Capital.

Unidentified Analyst: 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 I 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.

Kim Carlson : Sure, absolutely. 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 Connected 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 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 the consistent response we keep hearing is that new acquisition and monetization strategies are desperately needed. Again, going back to what is going on with 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 our 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 privacy issue we’ve talked about now for two quarters. So I’ve been in the mobile space and gaming marketing for ten years, and I’m happy to say that our solution is definitely an attractive one right now, where the ecosystem sits.

Unidentified Analyst: 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 we are unique in that regard? And what’s the size, I guess, also of the market, if you can quantify.

Kim Carlson : 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 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 several hundred billion dollars of spend on game marketing.

What that means is game marketers live and die by 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. And going back to what Dennis said, though, we’re in the early game here. We have definitely got rebuys from developers. We quadrupled our number of game developers and 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.

Unidentified Analyst: 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’m, I mean I don’t think you, maybe do 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 our market opportunity that she’s going after. If I made myself kind of clear maybe.

Kim Carlson : Yes, that makes sense. I appreciate the question. So total addressable market is always a big number. I understand that. I think in our press release we mentioned that it doesn’t answer the quantitative question. We mentioned in the press release that we do expect our Connected Rewards to usurp our legacy business this year. So on a short term, we believe that we can meet and exceed our legacy run rate by the end of the year. I think that Mobivity looking at one to two to three years, I see us as a formidable competitor to mobile ad networks as well as mobile DSPs, which is programmatic. Obviously, 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.

Unidentified Analyst: 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. 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, I have no concept of whether the Connected Rewards was 10% of that 20% of it. I understand that ultimate, it’s going to be 60 plus percent or more of your total revenues, but I have no basis for, I’m just trying to get an idea of you announce 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 like to have somebody give us some kind of an idea of what we can expect going forward grade.

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 right now, I have no idea if the legacy business last quarter was a $1 million or $1.5 or $1.7 million.

Dennis Becker: Yes, Bob. 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 the second half of 2022 was 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 describe more recent progress in the first quarter without being ready to report first quarter numbers. Now we’re really in the commercial phase.

Kim just joined us at the 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 vast majority of the 2022 run rate. So incrementally growing from there in this year is how you could peg 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 in a larger proportion. But that’s kind of the way I would think about it, if that helps.

Unidentified Analyst: Okay. No, that does. That’s helpful. And then one last question, I think, for Kim, and that is there any seasonality to 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?

Kim Carlson : Yes, actually really there’s not. And 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 time frame 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 pretty flat marketing year for game developers.

Operator: Our next question comes from Jeff Porter, private investor.

Unidentified Analyst: Yes. 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 company website. In the future it would be really great if you get the press release out on a timely basis so that we can read it before the conference call. But 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.

Dennis Becker: No, I appreciate feedback, Jeff. Apologies. I know we hit a snag here getting into the wire as we were approaching the call, but noted. And again, apologies for the delay.

Operator: Our next question comes from Bob Prag with DCG.

Robert Prag: Hi, Dennis. Prag here. How are you and Kim? Good. Yes, you guys are making great progress. So a couple of maybe elementary questions just to once again wrap my arms around the Connected Rewards. I get what’s in it for the gaming company, it’s all about customer acquisition. I get what’s in it from 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?

Dennis Becker: A couple of things. So, first and foremost, the brands 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 multibillion dollar industries with a large swath of US population consuming from them. But they’re high value, so they rely on traffic and volume and so anything that’s going to put a promotion or an offer in 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 subsidization of those discounts because of the bounties that the game publishers are willing to pay. So 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 like discount without discounting benefits.

Robert Prag: 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 branding, with the brand and you’re going to split potentially to some degree the bounty, as I call 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.

Dennis Becker: Yes. 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 upsides where the gaming companies can introduce branded incentives, discounts, free food, et cetera into the gameplay, which in turn creates a stickier and higher frequent game player for the game publisher to monetize in other ways. Again, the game publisher willing to subsidize some of the cost 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 mobile, for just mobile games now 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.

Robert Prag: So are you, so I’m sure you do this, but in your data collection and analysis, are you finding which not necessarily brands, but which type of companies, brands or brand 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?

Dennis Becker: Yes, absolutely.

Robert Prag: And which is it?

Dennis Becker: Well, there’s a lot of dimensions to that. I think the quick answer to that is it’s early, we’ll get more clarity as we scale, but it also it kind of ebbs and flows. I mean, when gas prices were $5 past in July and August, fuel offers were very attractive to the consumers. But it really just 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 introducing a new product line or something, and therefore they’re much more aggressive in what the depth of the discount, whether it’s a freebie like that. So but I think that that’s part of the value of the data that we’re building and kind of 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 with asset.

A lot of the third party data is being shut down because of privacy protections. We’re building this, 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.

Robert Prag: 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?

Dennis Becker: No, we have new brands that we brought aboard as well. Just specifically on the value of Connected Rewards, not marketing.

Robert Prag: Yes, that’s what I was thinking. As I asked about which of these offerings is most successful, it would seem to me that, and I’m probably stating the obvious that if it turns out that offering $0.35 or $0.50 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 as you’d have higher hit rate. So you are going outside of your legacy brand clients to pull in more brand offerings.

Dennis Becker: Absolutely.

Robert Prag: All right, last question. 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 cost?

Kim Carlson : Yes, 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? Do I not want to be tracked? So that, 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 it, IDFA of your phone. So and 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, the Facebook or other channels like a network have the ability to look at your device.

Facebook mobile app 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 Dennis 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 users.

So along comes Mobivity which says hey, we’ve got a permission based network. We don’t even actually look at an IDFA, we’re just sending a message to someone who has opted in to a brand media channel.

Robert Prag: So it all comes down to customer, it kind of like sounds 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 and 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?

Kim Carlson : Precisely. The cost has gone up elsewhere. Yes, costs have gone up elsewhere.

Robert Prag: Right. So that’s really what we’re doing, right? We’re lowering giving them a more attractive avenue for customer acquisition costs in a modality.

Kim Carlson : Correct.

Operator: Our next question comes from Bob Burlaker with 45th Parallel Capital.

Unidentified Analyst: No, I’m all aet. I’m sorry, I don’t have a follow on question. My apologies.

Operator: Okay. 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.