From the moment visitors step into Vibes’ Chicago headquarters, it is obvious they are not in an average office. Once the office of renowned Chicago architects John Augur Holabird and John Wellborn Root, whose father was partner to Daniel Hudson Burnham during the famed 1893 Chicago World’s Fair, the space has a neon-lit glass bridge as an entryway, an outdoor area complete with hammocks and a game room. A sliding iron door guards the boardroom where the architects used to bounce around ideas for their next great structure. After hearing Vibes’ story, it is clear the office’s current tenants are just as innovative as its past occupants. Jack Philbin and Alex Campbell founded Vibes 18 years ago with the vision that wireless and marketing would one day intersect – before text messaging was even available in the United States. Since day one, the company has pushed ideas that are years ahead of mobile trends, and what began as a pager business has evolved into the leading U.S. company for helping the world’s largest brands succeed in the mobile marketing arena. Brown Brothers Harriman recently sat down with Mr. Philbin, Vibes’ CEO, to discuss founding and building Vibes, streamlining mobile marketing across channels, innovating in a fast-paced industry and the company’s new partnership, among other topics.
Brown Brothers Harriman: Tell us about how you started Vibes.
Jack Philbin: Alex and I began writing our business plans in college and started the company after graduation. We had the thesis that wireless was going to intersect with marketing, and that’s the crux of what we do.
Wireless, as a term, has turned into mobile, and it’s the center of everybody’s life. Every marketer needs to have a presence there. It’s not about advertising; it’s about how you engage someone in the most intimate, powerful way, and that’s by weaving personalized experiences into a consumer’s everyday life.
BBH: In the 1990s, when you founded Vibes, most people had pagers, not mobile phones. What gave you the foresight to think wireless and marketing were going to intersect?
JP: We went to college when the dot-com trend was gaining momentum and the internet was taking off. We started thinking, “What’s after this?” To us, wireless was the obvious answer. We had watched mobile phones and pagers become smaller and gain technical capabilities, so it was obvious that the area would evolve.
We started researching and learned that Japan was far ahead of the U.S. and already had successful data services. We got into the industry the only way we could – through pagers. We knew they were on the way out because as soon as you could send a text message on a phone, paging would become a cell phone feature. We had a strong desire to start a company in a space where, if you missed the first wave, you knew there were more coming. There was ample opportunity on the horizon.
BBH: After you wrote the business plan and graduated, what was next?
JP: We raised a small amount of money from family and friends. We didn’t have high costs: We were two guys with two computers in a rented apartment in Wrigleyville. We bought pagers from Korea, and I was distributing them to retail outlets in Chicago.
We were also attempting to reconstruct America’s telecom billing infrastructure. Back then, you would call a pager for free, and the pager owner would pay a monthly subscriber fee. We wanted to make it so that the calling party paid. Ameritech, the regional Bell, had a calling-party-pays billing capability, through which people were charged 25 cents when calling a pager; Ameritech would give us an 8-cent cut for pagers on our service.
That was our entry point. Carriers didn’t really start marketing text messaging until 2001 or 2002. By then we had built software that allowed people to send or receive messages and create a two-way dialogue – a powerful concept for marketing. It was a new realm of engagement and conversation compared with TV, radio, print and outdoor – all one-way broadcast mediums.
BBH: How did you build the business during that time?
JP: We were always pushing the limits of marketing and new ideas. We would tell the carriers that their customers wanted to communicate via text message and that this was a business – every time somebody sends or receives a text, carriers make money. Once you teach people how to text, it becomes part of their behavior. We had years where we taught carriers’ subscribers how to use their phones for more than voice, and the carriers were our largest customers at the time.
Pushing new ideas to our customers drove revenues from them, which in turn funded the business. We often debated whether we were going to hire another person or build more technology. It was always a tradeoff to balance the business.
We’re a classic bootstrap case. We didn’t raise any institutional capital for 10 years – a fact I’m proud of. We built a real business with revenues from customers instead of taking on a lot of venture capital to test our ideas and get market validation.
BBH: How and when did you transition from carriers to brands?
JP: It’s been more of a progression. The big carriers are still customers, so we haven’t stopped working with them. We just have more verticals and higher growth areas.
We built a sizable media and entertainment business in concerts, radio, TV and print. Even a decade ago, it was clear that connecting directly with consumers was critical. Around 2003, we took our technology, which we call “text the screen,” to all of the huge music tours where concertgoers could send messages that would show up on a screen on stage. For radio, we had an application where deejays could see text messages coming in from listeners. Our platform enables deejays to conduct instant polls and listener engagement, and in either case respond to participants automatically. We wound up getting a patent for this technology and now serve all the major radio broadcast groups in all the major markets. Then we started working with TV – for example, text message voting for competition shows like “American Idol” and scrolling on-screen text messages for sports games. For print, if your ad has a call to action, someone interested can text in a keyword, and you’re still engaged via mobile after the hard copy goes in the trash. Mobile provides a way to stay connected with customers.
Generally, we went from pagers, to telecommunications, to media, entertainment and broadcast properties, and now to retail. We’ve worked with brands directly for more than 10 years along the way. However, in a world where marketing has fragmented and email open rates have declined, the desire for marketers to interact with someone via mobile has become paramount. If you have 2 million people in your mobile database, you have to curate that relationship. It’s not about blasting messages; it’s about giving specific segments of customers something useful. We help big brands develop strategic communications to manage, build and maintain mobile relationships with their customers.
As adoption of our media and entertainment business matured, we knew we needed to shift our efforts to grow. Retail was an obvious vertical focus given the need for driving store visits and loyalty as Amazon eats up many verticals. We started getting many retail customers around 2010 or 2011; loyalty programs were becoming more dependent on mobile, couponing didn’t really exist in the mobile environment yet, and then Apple and Google launched mobile wallets. We haven’t really looked back.
BBH: What has wallet done for brands and mobile marketing?
JP: Wallet provides the attribution that mobile marketing has been waiting on for 15 years – it closes the loop. For example, a customer can click on an ad on Facebook, add an offer to his or her mobile wallet and present it at a retail store when making a purchase. Technology enables marketers to track that customer journey from start to finish. Then they can perform analysis on the people who redeemed the coupon, including building profiles of their best customers and doing lookalike modeling based on consumers who not only receive their offers but redeem them.
Our customers that utilize multiple mobile channels to engage their customers are seeing astounding results. More marketers are establishing a presence in the mobile wallet because as consumer behavior shifts toward mobile payments at the point of sale, you want your brand, your offer and your loyalty card to be there and ready for use.
BBH: How has Vibes’ role in bringing together marketing and mobile evolved over the years?
JP: The nomenclature has evolved – first we were an application service provider (ASP), then we became a platform, and now it’s all about the cloud.
Our platform, Catapult™, is cloud-based and enables marketers to create and manage engagement with consumers through text messaging, app push notifications, mobile microsites and mobile wallet. These features work together to create unique user experiences.
Many CMOs are building out their marketing suite with a marketing automation partner, an email provider and someone to manage their social presence. Mobile, however, is somewhat unclaimed. Vibes provides the ability to engage with customers on mobile across channels and automates the targeting and interaction with those customers. You need technology to orchestrate these mobile experiences at scale.
Mobile is front and center, and while CMOs know they need to do mobile, many don’t know what to do. Handing them our software platform may not be enough, so we offer a combination of technology and expertise. We give customers the guidance and the tools to help them succeed in mobile.
BBH: You have obviously been successful through innovation. What drives that?
JP: It’s always been part of who we are. If you’re presenting to customers, it has to be about something new and exciting, or else you’re going to get passed by quickly. We’ve always leveraged the old to share the new. We were out in front on texts and are far ahead now on wallet. Apple put Passbook (now Apple Wallet) on iPhones in October 2012. We had beta customers in the fourth quarter of 2012 and paying customers in the first quarter of 2013. Now we provide mobile wallet management for more than 40 retail customers.
BBH: How do you get customers to understand your platform’s value?
JP: What we’re doing now is very effective. We don’t talk about features or future functionality; we focus on business outcomes. We talk about problems we’re going to solve and outcomes we’re going to generate. I think many companies’ mobile efforts are currently pointed in the wrong direction; we help our clients think strategically about the most efficient allocation of time and money, and then share relevant success stories. We like to be held accountable for results because if we’re not generating results, we’re wasting everyone’s time. Our engineers get excited when they see the technology being used in market, and our customer success team gets excited when a program is very successful in market.
BBH: How do you stay ahead of the competition?
JP: We are always a little paranoid about competition, and I think that’s healthy.
We competed with many text companies, and a lot of them are no longer around. There are business school case studies that ask whether your business is the train or the train tracks, and one reason we have persevered is because we built a train tracks business in messaging. We’re one of four Tier 1 aggregators in the U.S., which means we route text messages through our direct infrastructure connectivity to the carriers. While hundreds of businesses got into mobile messaging, they all relied on other companies to route their messages. If something went wrong, it was difficult and more costly for players without direct binds to troubleshoot. We eliminated the middleman and built our application layer on top of our own infrastructure. It’s expensive to maintain this infrastructure, and we have to continually pass a carrier’s security audit by a wide margin, which we have done. Maintaining more of the value chain on our own has allowed us to control our own destiny and not be reliant on third parties – a huge strategic and competitive advantage.
We’re doing the same with wallet. There’s not a lot of competition right now. There will be, but we have a huge head start. We have APIs1 into the Apple and Google wallet products. So, much like our direct binds to the carriers, we are directly integrated with Apple and Google – not dependent on anybody else. It’s going to be the same with over-the-top messaging services like Facebook Messenger, WhatsApp, WeChat and so forth as they open up for more use cases.
BBH: Tell us about the recent $45 million minority investment you took and the reasons behind this.
JP: Bootstrapping the company for the first 10 years was the right decision for us, but there are times when it makes sense to bring in external capital. This is our second round of funding; the other was in 2008. The purpose is primarily for international expansion. I said that our platform runs on top of our train tracks; our investor has built those tracks to connect with carriers throughout the world and will sell our technology platform across its global footprint. So our investor is also a strategic partner; it’s a very complementary deal. Rather than trying to build those international connections from scratch, we’re rolling out our platform across its network of carrier connections.
BBH: You are competing with top technology companies for talent. How do you think about it from a recruiting and management perspective?
JP: Culture is very important at Vibes. Every employee can tell you our six core values, and that’s important because it shapes character and behavior. I tell everyone to use the core values as a decision criteria. Don’t ask for permission for everything – use common sense, and use the core values as your guide.
It’s also about providing responsibility and accountability. We have very young people who are managing large customer accounts, whereas at another company they wouldn’t have those customer relationships and responsibilities for a long time.
We have a rhythm of meetings – daily, weekly, monthly and quarterly – to ensure operational alignment across the business. We like to facilitate cross-department communication – for instance, we have a Thursday tradition called Gameball, where the company gathers, and one person receives the weekly game ball from a co-worker while being publicly acknowledged for something impressive he or she did that week. The following week, that person hands out the game ball to someone else. We’re always trying to fine-tune the organization.
BBH: Jack, thank you so much for your time and insight.
Interview conducted by Jake Turner, and article written by Kaitlin Barbour.
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1 API: application program interface.