Crazy Frog turns into a real prince

With his motorbike helmet, blue skin and maddening “da ding da ding da ding” call, the Crazy Frog has neither Presley’s voice nor Garbo’s elegance — although, like her, he was “born” in Sweden before making his fortune overseas.

However, like Presley, the Crazy Frog has shown an impressive ability to part teenagers from their money. Hundreds of thousands of young people have downloaded the frog ringtone to personalise their mobile phone.

Jamster, the American-owned company behind this heavily advertised cult, is also selling numerous Crazy Frog “wallpapers”. You can now decorate your phone with Crazy Frog as Mona Lisa, on a dollar bill, or as the star of Matrix Reloaded.

Fluff and nonsense? Maybe, but Crazy Frog has now generated £14m for Jamster — all for next to nothing in production and distribution costs.

This success is one sign of the growing profitability and maturity of the mobile-content industry. There are many others.

Last May, VeriSign, the American company that manages the .com website address system, agreed to pay $273m (£142m) to acquire Jamba! of Germany. (VeriSign has since rebranded Jamba! as Jamster.) Further international consolidation followed swiftly. iTouch, a British company backed by Tony O’Reilly of Independent Newspapers, bought Jippii Mobile Entertainment of Finland, taking it into Scandinavia, Russia and eastern Europe.

Japan’s Index Corporation bought France’s 123 Multimedia, while Britain’s Monstermob snapped up 9 Squared, a US firm that has also launched in Latin America and Asia. And on Friday, Yahoo, the internet giant, announced it was acquiring Stadeon, a games business.

“Overnight, this industry has grown up,” said Burton Katz of Buongiorno, another quoted ringtones and mobile-games business. “We had fragmented companies working in different countries. We’ve started to see big transactions happening, and companies really going global.”

Estimates of market size vary widely. According to the Mobile Youth report, young people spent $833m on ringtones last year.

But this is just a start. The widespread adoption of colour-screen phones with Java software and the deployment of high-speed 3G mobile networks will rapidly expand the scope of mobile entertainment.

Martin Higginson at Monstermob said: “The whole market is maturing quite significantly. It has moved on from being just about selling ringtones and wallpapers. It’s much more about real music. It’s going to be about video.”

Mobile games is another fast-growing area. Brian Greasley of Digital Bridges, a privately owned mobile-games firm, said he had seen a three or fourfold increase in revenues since last year and expected to do the same this year. “It has really started to hot up,” he said.

Arc Group, a wireless- industry research firm, estimates the global mobile entertainment market to be worth more than $27 billion by 2008. “We’re in the foothills,” said Katz. “People haven’t realised how big this thing is going to be.”

These companies — mostly small, most with unfamiliar names — are competing to be the leaders of a new media industry. Monstermob, in which the Barclay Brothers recently took a 7.6% stake, is explicit in its ambitions. “We intend to be the largest distributor of mobile content on the planet, and the most profitable,” said Higginson.

Doug Richard, the technology entrepreneur who recently took part in the BBC’s Dragons’ Den series, said such ambitions made sense. “What’s really clear about the mobile-content market is it’s going to be easy going global. Mobile content is the least nationally orientated deliverable in history.”

Britain ought to have an advantage because it has one of the world’s most competitive and sophisticated mobile markets. For example, iTouch sells many more polyphonic and real music ringtones here than in most of the other 24 countries where it trades.

However, Wayne Pitout, iTouch’s chief executive, is frustrated by his company’s modest rating among investors, which restricts his ability to seize acquisition opportunities.

He pointed to Jamdat, a US mobile-games company with smaller revenues but with a market valuation of about £200m. “Our numbers are much superior but they are on double our forward valuation,” said Pitout.

“We are on around 18 times (forecast profits), Jamdat is on about 35 times. For-side (a Japanese company) is closer to 50 times. I just think there’s a greater propensity in America to support growth stories.” iTouch, which has a market value of £140m, recently had talks with the smaller Monstermob. Although they foundered, Pitout makes no secret of his willingness to consider merging into another group.

“I think this is a game of scale and I want to be part of a group that propels iTouch up the ladder. If I can’t achieve that through a London listing, we will have to consider our strategic options,” he said.

Higginson, whose shares have tripled over the past three months, offered a more prosaic explanation for iTouch’s problem. “We don’t think the business has been that well run,” he said. “We are returning a 30% margin. iTouch is returning a 12% margin. We thought we could squeeze another £4m-£5m out of it.”

One way or another, there will be deals aplenty in the months ahead.