Tuesday, July 24, 2007

The death of Amp'd mobile and the MVNO business model


Amp'd was a mobile virtual network operator (MVNO) that resold airtime on Verizon's network -- Amp'd is in bankruptcy and will soon be shuttering its doors.  There's been a lot of speculation around the sustainability of MVNOs like Amp'd, and some of the figures reported by Fresh Inc. are disturbing:

As a part of a bankruptcy filing, Amp'd recently announced that it had
some 80,000 non-paying customers . . . this comes from a
company that, by the end of the first quarter of 2007, had just about
200,000 subscribers.

Ok, so doing the quick math, approximately 40% of Amp'd subscribers were delinquent -- I certainly wouldn't try to start a business with a delinquency rate that high.  Fresh Inc. points out that Amp'd targeted a demographic segment that is traditionally pretty challenging and the vast majority of its contracts were pre-pay: essentially Amp'd went after a demographic with a pricing model that the big carriers weren't willing to cater to, and, no having the data from Amp'd, probably are not likely to target with this business model in the future.

I wonder what would have happened if Amp'd would have fired the 40% of its customers that weren't paying and focused on making the experience more remarkable for the customers that were not delinquent. 

Link -- Fresh Inc. 

1 comment:

James said...

As someone who works closely with the mobile industry, my opinion is that AMPd's business model focusing on consumable content is the major factor they went under. Sure, having such a high delinquency rate kills any business (especially if they have high operation costs by leasing network access from a 3rd party). But their pre-paid model targeting the youth market was supposed to build a base of users hungry for incremental downloads. Problem is....there is just no real money to be made in mobile content. The margins are razon thin, and the tracking data shows that sales are flatlining, even dropping. Interesting to see how Boost and Helio can hold up.

Its the age old lesson...put yourself in the end users shoes: Why buy a ringtone (:20 snip of a song) for $3 or $4 that is only good for 4 months when you can buy the entire song for $0.99 and then sideload it? Next on the chopping block....most mobile video subscription services. Sure, there's a big audience out there for sports, news, and YouTube clips. But I'm not investing any money on wall street who is telling me consumers are willing to sit and watch a 30 minute television show streamed to their mobile device for another $20 per month. Doesn't work. In the future, Mobile Content will be offered free to the consumer and underwritten by brand advertisers.