Mobile Content Firms Once Accused of Fraud to Merge

VeriSign has unloaded M-Qube, the mobile content platform it shelled out $250 million for in 2006, for a fraction of what it paid. The buyer is Delaware-based Mobile Messenger, another big mobile content company and M-Qube’s biggest client before the transaction.

M-Qube specializes in premium and standard-rate SMS content — think mobile horoscopes and ringtones — facilitated through carrier billing relationships. Mobile Messenger focused on the distribution of that content.

Both companies are historically large supporters of online advertising — and not always in a good way. Going back to at least 2007, Mobile Messenger and M-Qube helped support widespread unsavory display ad practices on MySpace and other sites. In online ads targeted mainly to young people — ads that were later called illegal by the Florida Attorney General — Mobile Messenger and its affiliates marketed expensive mobile content plans containing astrology readings, flirting tips, and other content.

And they bought a ton of online ads. During October 2007, Mobile Messenger was the top online advertiser in the U.S. in terms of raw sponsored link impressions through its affiliates, according to Nielsen Online figures for October.

The Florida AG went after both companies. It accused M-Qube of supporting fraudulent online advertising through its billing system. It hit Mobile Messenger with a similar legal challenge related to its mobile content infrastructure. It eventually settled with both and secured promises the companies would modify their practices. M-Qube settled for $500,000; Mobile Messenger for $1 million.

Since then Mobile Messenger has modified its business practices, instituting a “no questions asked” refund policy for dissatisfied consumers, according to recently hired CEO Michael Iaccarino. He said the company is serious about enforcement.

“We spend a lot of time with our clients making sure all their campaigns are compliant,” he said. Compliance means the campaigns must conform to Mobile Marketing Association policies as well as carrier guidelines.

In addition to the premium messaging content that originally got it into trouble, Mobile Messenger has expanded into standard messaging.

As the former CEO of consumer data giant Epsilon, Mobile Messenger CEO Michael Iaccarino said he sees the standard rate content area as an opportunity. “That typically gets you into CRM and marketing solutions,” he said.

Mobile Messenger paid $1.8 million in cash for M-Qube, plus approximately $17.5 million for assets minus liabilities. The total value of the deal is approximately $19.3 million.

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