Kgb launches premium mobile search service

There’s a new player on the wide-open mobile search playground. And it’s bigger than you think.
Kgb, a New York-based firm with roots in fixed-line directory assistance, launched service earlier this month with a premium service that uses human “special agents” – a wry nod to the intelligence agency for the former Soviet Union, naturally – to deliver answers via text at 50 cents a pop. The company was founded in 1992 under the INFONXX name – it rebranded as kgb earlier this year – and racked up an impressive $650 million in revenues last year.
“The company answers about a billion questions a year and serves more than 100 million customers across the U.S. and Europe,” said CEO Bruce Stewart, who joined kgb in October after playing a key role in Yahoo’s mobile search business. “We understand scale.”
Kgb last month acquired Texperts, a British text-based mobile search firm, for an undisclosed sum. Textperts has gained substantial traction in the United Kingdom, Stewart said, with a text-ad business brand. And kgb isn’t lumbering onto the field quietly: unlike nearly all its competitors, the company is backing its entry with impressive marketing muscle, buying time on high-profile TV networks such as ESPN and through banner ads on the fixed-line and wireless Web.
While kgb’s entry to the U.S. market may seem tardy, mobile search is still a wide-open space where – despite Google’s apparent domination – the winners and losers are far from being determined. Juniper Research last year predicted annual revenues from mobile search services are expected to reach $4.8 billion by 2013, with nearly 1.3 billion subscribers accessing such offerings by then.
And investors are paying attention – even in these dreary economic times. Jumptap Inc. hauled in $26 million in venture capital last August, and 4INFO – which has found success combining a text-information service with traditional media brands and advertising – in January generated $20 million in funding in a round led by Peacock Equity, a joint venture between NBC Universal and GE Commercial Finance. Those deals came amid news that Microsoft Corp. will provide search and advertising services for Verizon Wireless in a five-year deal worth a rumored $500 million.
The space is crowded with a host of other players, too, from Internet titans (Google and Yahoo) to smaller, mobile-centric startups (Medio Systems, Mobile Content Networks and Taptu, among many others). But while most services use algorithms to deliver information specifically suited to on-the-go users – the address of the nearest post office, for instance, or the phone number of a favorite restaurant – kgb hopes to find an audience by delivering answers to more sophisticated queries.
Whether U.S. consumers are willing to pay half a buck each to get answers on their phone, though, is uncertain, considering that at least two similar services are already on the market for free. Mosio, a San Francisco-based startup that launched in August, provides a similar service, and encourages members to help provide answers to queries. And Indiana’s ChaCha showed impressive growth following its launch a year ago, ranking No. 4 among U.S. SMS search providers in a September report from Nielsen Mobile.
ChaCha is backed by $19 million from private investors, and the company claims its early foray into text advertisements have resonated with consumers. But ChaCha pays its 35,000 guides 10 cents to 20 cents per answer, leaving onlookers to question whether ad revenues alone are enough to support its business.
“A full, free model is one we’ve chosen not to pursue,” kgb’s Stewart said flatly. “People have shown an appetite, when you provide a valuable service, to pay for that service. It also allows you a certain amount of freedom from advertising. We still believe there’s an opportunity for ads, but nicely targeted ads that are relevant and that complement the answer.”
Kgb also delivers answers via the Internet to both handsets and PCs, although those channels are not as developed as its text-based service. But the company claims its real differentiator is a platform that pools questions and answers, allowing agents to quickly retrieve relevant results based on past searches instead of starting from scratch with every query.
“The inauguration was cool,” Stewart said, pointing to the few moments between Joe Biden taking the oath of office for president and Barack Obama’s swearing in. “You had people asking, ‘Is Biden president now?’ ‘Is Bush still president and Biden’s vice president?’
“It’s a big world,” he continued. “I believe the appetite for people will only grow. We’re happy with the volume we’re getting so far.”