Exclusive: Guvera founder Claes Loberg, “We’re not a music app”

In this TMN exclusive, Guvera founder Claes Loberg opens up about his company’s widely debated future in the fast-moving world of digital disruption, writes Jake Challenor.

After the Australian Stock Exchange (ASX) had stompedGuvera’s proposed IPO, founder Claes Loberg asked his Twitter followers what the company could be worth, should it succeed to, “make advertising relevant in a world where people click past everything”.

Just six years after its invite-only beta launch in Australia, the Swedish-born technology entrepreneur hopes its mostly misunderstood branded entertainment model will be enough for Guvera to emerge from the ashes and prove everyone wrong.

“I was a little surprised when people made comments in the press about ’being glad it was stopped from listing’. That process hurt us and forced us to close entities and lose staff. I definitely wasn’t glad,” Loberg told TMN exclusively.

“We’re a platform for brands. We’re not a music streaming subscription business – we’re a different business model. We’ve realised that ourselves and are changing our focus completely.

“I’m a fan of supporting other entrepreneurs. I love success and people trying different things. So I do it anyway.”

Loberg presents himself as an overtly creative Dewey Finn-type character, only, this time, moonlighting not as a music school teacher in an elite private school, but a modern day Don Draper, playing the lead role as Guvera’s Director of Innovation – a badge he dons with great pride.

According to 46-year-old Loberg, Guvera should not be written off so soon, and neither should it be put in the same casket as Rdio, or its more successful, yet equally unprofitable, digital content contemporaries – Spotify and Netflix et al.

“The hardest thing has no doubt been getting people on the same page; when we have just music, everyone wants to compare us to Apple Music and alike. Everyone wants to drop us into whatever box that makes sense to them. It’s a slow process of explaining, testing and adapting,” he said.

“The simplest way to explain our difference; Guvera is a tool for advertisers to curate entertainment and engage audiences. We’re not a music app.

“We started with music; we’re now in works with video, film, games and news,” he added. “We aim to exploit our patents by becoming a new way for audiences to find free entertainment, without being disrupted with ads, and ultimately generating the revenues needed to support the 95% of people that want and expect ’free’.”

Just two days after Loberg released a monologue on YouTube in an attempt to clarify its business case, Guvera did a sharp U-turn. The platform’s Play+ freemium product received the boot, and a new paid tier was introduced; which according to App Store reviews, was a less appealing offer.

“Paid subscription has always been there; it’s a part of the deals we have had to have with rights holders. Press and consumers just focused on it because we had to change one element of our offering,” he said.

“With the sharp change in our business financials for that period, we were forced to remove our Play+ product whose monthly costs for the business were high. We are now looking at how the product works in each territory and changing the territories we will operate in and pause operations in for the short term.”

Loberg also told TMN that changes “will be very visible” in new iterations of its product and the way it re-focuses its work with brands.

Guvera’s previous claims of 14 million users in 10 territories have subsequently reduced to 10 million users in 5 territories as part of its forced restructure, TMN can reveal.

Since its failed IPO, Guvera has quietly exited North America, Mexico, Russia, Vietnam and the Philippines, with its focus now fixed on Indonesia, Saudi Arabia, United Arab Emirates, Australia and its largest market, India, where it claims 7 million subscribers in a population of over 1.25 billion.

“We are withdrawing from several territories – some I wish we could stay in – but we will focus on our bigger markets, get to a critical success point and then push out once again together with our brand partners,” he said.

“We have had to pause our speed of development. We have been injured by losing a few of our territories, but we’re on our way to getting back on track.”

What percentage of its 10 million subscribers are legitimate monthly active users (MAU) is uncertain, and both Loberg and Guvera’s spokeswoman did not confirm, with Loberg saying MAU’s is not how the success of Guvera should be measured.

“When you think of Guvera as a platform for brands, you could imagine a bank using our platform to engage their online banking audience for an extra 10 minutes with music. Then you start to understand a business that doesn’t need 100 million users to be valuable to a brand,” he said.

“We have new brands this month in India, UAE and Indonesia using our platform purely as a tool to engage their own audience. They send their audience from other media and social media to their brand channel; those audiences spend significant time on their entertainment channels, where they listen to music that fits the brand’s personality and also engage, interact and explore the brand and convert right there from audience to customer.

“Harley Davidson used rock-curated music channels in India to attract 40,000 users to follow their channels. Hasbro gave away music cards on toys for sale in the USA, so the Mums could listen to the real versions of music that also existed in midi formats on their children’s toys.

“The followers become truly engaged audiences. These aren’t advertising spots and dots; they are engaged and entertained audiences.”

The pressure is now on for Guvera to generate notable revenue in its five markets while keeping the peace with its stakeholders, as it endeavours to climb a steep mountain in slippery conditions.

At least $15 million is owed to creditors, with two Guvera Limited subsidiaries – Guvera Australia and Guvera Services – this month placed into voluntary administration in the wake of its humiliating attempt to list on the ASX.

“It’s early days for us. Even with the wild press here, we’re still proud to be Australian; we’re still proud to have come so far here. We’ll be back, but for now, we need to focus on other markets,” he said.

“When we first started in 2008, people were downloading content via file sharing sites. We built a web-based business working with brands from McDonald’s to Victoria’s Secret and Microsoft, allowing them to offer music downloads when audiences engaged with them.

“In 2010 as the market changed, we changed our focus from the web to mobile and from downloading to streaming. That seems to have changed our product to fit with how people saw us, into a more consumer-led music streaming app.”

Loberg, a London Business School alumni, knows all too well that the skill everyone needs to keep developing is the ability to adapt to change, “Quickly.”

“Recent events have forced us to look again at this positioning and our direction, and move back to our roots; a platform offering and business focus of helping brands engage with audiences,” he told TMN.

For both Loberg and Gold Coast-based CEO Darren Herft, a long and winding road to redemption is ahead, as the company’s executive team works around-the-clock to raise a further $20 million to band-aid the bleeding.

Among the possible casualties if Guvera fails to secure new investment are Australian record labels, music publishers and collection societies, to which it owes almost $13 million.

Guvera needs to convince a sceptical audience that its branded entertainment model is viable for advertisers, rightsholders, and ultimately, its investors.

“With 3,000 shareholders, we launched our prospectus as part of the process to list on the ASX in our home country of Australia and begin our journey on the public stage. Our mistake was focusing our language and presentation on how people saw us, as ’streaming music’ only. We were scrutinised by people comparing us to other streaming companies and then looking at our current users, subscribers, and revenues,” he said.

“Our bigger ambitions of tackling the $650 billion advertising industry, which is actively trying to connect with audiences that click past everything, was dwarfed by technology experts being scared off by our valuation and sales volumes as a music-only streaming company.

“That’s all said and done now. The whole process definitely hurt our business. We had to regroup, refocus on the platform element of what we are, tighten our focus of countries we push out in, reduce costs and staff count, and make sure we can stay operating to realise the vision and journey we started.”

Loberg knows he is spruiking to a tough crowd, and that the clock is ticking, but he remains optimistic about Guvera’s future.

“We have received support from our partners, but yes, this hurdle has created unplanned growing pains. We’re working through it as best as possible,” he said.

When asked what is most rewarding about his time at Guvera, Loberg told TMN that being a founder allows him to “invent”. The immediate future, however, will instead push Loberg to reinvent; a challenge he’s already embraced.