More consumers own smartphones and tablets than ever before with people increasingly storing valuable information on these devices. While PC users are all-too-familiar with viruses and malware, less people are aware of the threats facing mobile as opportunistic hackers adapt to different devices. Lookout aims to help smartphone and tablet owners combat threats to their devices, while also helping protect their information in the event of loss or theft. Here, Lookout's product management VP, Christopher Jones, talks about the startup's prospects in what could become a crowded market.

¤ What differentiates Lookout from online security firms?
Lookout is a mobile security company. We build apps for smartphones, and those apps help people protect their overall smartphone experience. That ranges from protecting them against malware and spyware, phishing attacks, and various digital threats, as well as protecting the data on the device, with online backup of data to the cloud. And finally, protecting the device itself against loss or theft. There are lots of tools and functionality to help you recover or locate a lost or stolen phone. Currently, we are 100% consumer, that's been our focus to date. In the future, the enterprise will become more and more part of the roadmap, but right now it's an entirely consumer offering.

We have 20m users, and we're adding about 1m a month. Growth is coming from a lot of places, first and foremost because smartphone usage is growing. But more than that, people are doing more with their smartphones, and they're thinking more about the protection. So if they do more browsing, or they do more app downloading, payments etc, security is becoming more and more top of mind, so that's also driving growth.

¤ What is your business model?
Right now we are a freemium app, so the strategy there is to get as broad a distribution as possible, with core free functionality, and then take some percentage of our user base that is interested in more advanced security features and convert them into an annual or monthly premium subscription. The product has three basic elements of protection. There is the digital threat side, the data side and the loss or theft side, and there is premium functionality within all three of those modules.

¤ Who are your main competitors?
Pretty much every legacy PC anti-virus software provider is moving into this space in one way or another. It's pretty impossible to ignore mobile as part of the strategy. We see the usual suspects there: Norton and McAfee are probably two of the biggest in the US. There are a couple of European premium providers such as AVG and Avast. But really, without singling anybody out, I'd say the entire legacy PC category are trying to enter the space.

¤ What's the biggest challenge you currently face?
Our biggest challenge really has to do with hiring and scaling the company in order to take advantage of demand. It's a tough environment in which to get good people to help you scale out, especially as we're operating internationally, it's making it that much more difficult. We look at the competition, we watch them very closely, but I'd be far more worried if there was no competition because it would say that there isn't a real need here.

¤ What do you think is the hottest trend in digital media?
The trend that we're really interested in is the advent of ‘big data', and how much technology and techniques are being used to enhance applications. You really do see it in mobile; it's very much a trend that our product is on. It's fundamental to how we do security; the way we are spotting security threats is by making it a big data problem. We harvest tremendous amounts of data from various places in the market, including our customer base. So Lookout is playing big there, but there are a number of other companies that are on the whole big data thing.

VERDICT
As Lookout concedes, a raft of competitors are beginning to flood the smartphone security market, with legacy PC protection firms like Norton and McAfee the biggest threat to Lookout's business. This is only going to intensify as smartphone adoption continues to grow. Mobile operating systems are also likely to include more bolt-on security offerings, again lessening the need for a service like Lookout's.

Despite this, Lookout's relatively early move in the mobile security space has helped it rack up 20m members to date. If it can continue to build out this user base in the face of increased competition it could well become an acquisition target for one of the legacy PC firms looking to bolster its mobile security offerings.

With increasing users in mind, Lookout needs to extend into the enterprise market sooner, rather than later. Although again this will take serious marketing and customer acquisition spend with IT departments more likely to sign contracts with the PC security vendors they already enjoy relationships with. There is some crossover potential with the consumer market as IT departments wrestle with the growing number of employees bringing their own devices to work. A recent study by Absolute Software claims that nearly two-thirds of IT managers believe it is too risky for employees to integrate personal devices into their company, illustrating a need for protection both in and out of the office.

Conversion to premium is of course the key to Lookout's success. While the conversion rate is not disclosed, the natural risk for the company is consumers becoming content with the free services and failing to upgrade. Increased functionality will no doubt attract some more security-conscious users, but as startups employing a freemium business model are finding, regardless of sector, the notion of upgrading free users to paying users is fine in theory, but less successful than many would like in practice.

AT A GLANCE
CEO: John Hering
HQ: San Francisco, CA
Founded: 2007
Commercial Launch: November 2007
Employees: 100
Funding to date: USD76.5m
Investors: Khosla Ventures, Accel Partners, Andreessen Horowitz, Index Ventures

COMPETITORS
McAfee
Norton
AVG
Avast

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