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Know When to Fold ’Em: Omar Hamoui

Omar Hamoui’s story: If he hadn’t decided to throw in the towel on a small startup called FotoChatter, Omar Hamoui would never have launched AdMob, lured venture capitalists to put up “somewhere around $4 million” and quit grad school to move to Silicon Valley as a big-time entrepreneur.

It helped that he was in the first year of an MBA program at The Wharton School of the University of Pennsylvania, being exposed to ideas behind entrepreneurship, when he quit one venture for another startup. He simply applied everything he was learning to the situation at hand and it became crystal-clear that his former involvement with FotoChatter – now someone else’s company – wasn’t going to cut it for him.

Folding a Bad Hand

Two weeks before Hamoui dived fully into developing AdMob, he had attended a business school class devoted to the idea that “some of the largest business opportunities come from market inefficiencies.” That’s what happened to him.

About six months before beginning the MBA program at Wharton, Hamoui, 29, started work on FotoChatter, a mobile social network operated by cell phone camera users. But getting the word out to a focused audience of potential users wasn’t easy.

“I tried a lot of marketing methods – key words on Google, advertising different ways,” he says. Add up all the time and money invested in those efforts and Hamoui figured it cost him roughly $30 to attract each customer.

Then he found a mobile Web site with “a decent amount of traffic” and decided to run an ad there. The principal charged Hamoui a penny per click, which resulted in grabbing good customers for just 10 cents a user. It took so much digging to get to the right marketing scheme that he figured others would appreciate cutting to the chase and saving money in the process.

Something Clicked

“There were lots of companies who would want to be able to reach out to mobile users specifically, rather than have to reach out to all end-users and then figure out which ones cared about mobile data,” he says. AdMob targets the search. It’s a middle-man operation, bringing together advertisers and cell phone publishers in a marriage made online.

Hamoui spent nights and weekends working on his startup; his days were devoted to grad school. The site launched in January 2006 with an almost instant response. After a couple of weeks, big companies and venture capitalists came calling. “That’s when I knew there was something to this particular idea,” he says.

But nothing would have happened if he hadn’t dropped FotoChatter.

“I don’t really know how you know” when to give up and when to keep going, Hamoui says. “There’s definitely something to be said for sticking it out. In my case, I wanted to be running a company.” AdMob is Hamoui’s fifth venture and the most successful one to date.

“My thinking evolved in terms of what makes a large opportunity, something that could take off quickly, that I could do successfully by myself without a significant amount of money,” he explains. And it helped to learn in MBA classes about what works and what doesn’t in the business world. All of that made it clear to Hamoui that FotoChatter would never be as big as he wanted it to be.

At last count, AdMob had 22 employees and a reach of 550 million mobile page users a month across its 800 publisher partners. And it happened because Hamoui folded a bad hand, and drew a winner.

Omar Hamoui’s Bonus Insight

Look at market size, he advises. “Even if social networks in mobile do really, really well, ultimately how large is the market? Versus advertising, which has an immense potential.

“A lot has to do with what you want to build. Take a blue-sky assumption. How much opportunity, really, is that? I’m stuck to the whole starting things up.”