Interview: Burton Katz, CEO, Atrinsic: Explaining The Business Model; Explaining The Name

Last September, mobile content and apps firm New Motion (OTCBB: NWMO) announced the acquisition of online marketer Traffix, a rare instance of an OTCBB-traded firm taking over a NASDAQ-traded one. That deal was completed earlier this month, bringing about two quick changes for the company: The first is that it jumped up to the big leagues and now trades on the NASDAQ. It also changed its name from New Motion to Atrinsic, which, as I suggested to CEO Burton Katz during an interview, sounds more like a name for an IT consulting firm, than a mobile content player. I met up with Katz at the Jefferies Internet Conference, which was the second stop on the company's debutante tour of investment conferences, as it tries to drum up some Wall St. awareness for itself. As seemed clear during his presentation, few in the audience seemed to grasp what Atrinsic's business model is all about, or where the company is going, which might explain why its stock has plummeted recently to 52-week lows.

-- Business model: Atrinsic is betting on the idea that mobile services will carry a premium if there's an online component to this, or, conversely, that they'll be able to make money on commodity web content, if there's a uniquely mobile side to the pitch. Katz: "To give you some examples of this… we have, for instance, a dating site that we've launched call iMatchup, and you go online and update your profile and go on others… the idea is that we send you text messages when someone's checking out your profile or wants to chat with you. We actually send you stuff to your phone. Moving forward, we'll actually provide you chat applications and such on the handset. So we basically tied the two experiences together." Another example: "The game site we've launched called GatorArcade, where basically you come online to play games, but you can also win prizes to download ringtones to download mobile games, etc." The end result, argues Katz, is that Atrinsic's business model comes to resemble the cable TV industry, making money from subscription fees and ads. "We believe very strongly in vertical value chain integration… not only do we have own our own content, not only do we own our own premium build offers, but we also own our own distribution and media."

-- Traffix acquisition: "Traffix basically had a games site… I would never have been able to create that site, but what I said is that I understand the business model: let people come in online, acquire them using the mobile, and give them a mobile service." Traffix had a dating site as well. The problem is that the company wasn't doing much with its assets, so they got sold on New Motion's mobile-enhanced vision. Furthermore, Traffix's expertise was in lead-gen and direct marketing using that content, so the purchase improves the company's chops in this area.

-- Concept gap: "Overall, it's a new concept… typically people like things that are easy to understand." He went on to cite the numerous pure mobile content vendors, whose strategies are easy to understand, but lack depth, and haven't made any money. "What we're trying to do is be at the forefront… we want to combine the media that we own with the actual mobile content, so that we not only own our own content we own our own distribution, it'd be no different than why Comcast (NSDQ: CMCSA) would want to buy Disney." When asked whether this vision is going against the trend of the loosening link between content and distribution, he argued that in the mobile environment, it's still basically a closed environment. And he noted that the big media companies are all still integrated. "The gap that we have with Wall St. is quite temporary

-- Music service: It hasn't been launched yet, but Atrinsic will be jumping into the mobile music space, with the launch of a subscription music service, a la Napster (NSDQ: NAPS). As for why the company expects to make money in this crowded area, Katz argues that the integration between the PC and mobile will prove decisive. He also alluded to a P2P component, having struck a partnership with the ghost of some well-known (but currently unspecified). How the content sharing works with a subscription music service still seems a bit vague.

-- M&A: Right now the company is in four separate content areas: games, music, dating and contests. I asked whether excelling in four separate areas was tough for a company of about 250 employees, when even one of these areas would be difficult. Katz admitted that this was a challenge, and suggested that acquisitions will be needed to scale the business. Basically, Atrinsic is looking to build a PC-to-mobile infrastructure, and future acquisitions will be about acquiring content to take advantage of this. Why not just open up the platform to third parties? The answer was margins. Katz believes there's higher margins when you own the IP than if you're just distributing it for other, but, he said, there may be opportunities for various partnerships going forward.

-- The name: "We actually gave it to our employees (to come up with something)… the only I asked for is that there be a URL that didn't cost more than $1,000."

Related

• New Motion + Traffix Change Name To Atrinsic


• Mobile Content Apps Firm New Motion Buying Online Marketing Firm Traffix For $138.9 Million