Thursday, July 24, 2008

Revenue model for Mobile VoIP and SMS apps

I was reading an article from iLocus about the revenue model of mig33. This was something I always wondered about. How do these startups that are in Mobile VoIP and SMS play make revenue giving out free beers. The issue is not only with VoIP or SMS apps; it’s the same with most of the other mobile apps that don’t have a revenue model. Thought of sharing some of my thoughts on the current and possible business model for Mobile VoIP and SMS apps.

Most of the mobile VoIP companies rely on long distance and international calling service for revenue generation. So here are some of the options for generating revenue for Mobile VoIP companies. (There are other revenue generating models based on mobile content and location, the below talks only about Mobile VoIP apps. I will write another article talking about general mobile apps and their revenue model)
• Cheap International calling service. (The annual revenue of IDT is close to 2 billion dollars). Most of the folks that started as Mobile VoIP or Click-to-Call Widgets ended up providing this kind of service. Reason being very simple. This is where the money is! Some of the popular ones are Mig33 , Mobivox, Fring, Truphone , Nimbuzz etc
• Audio based advertisement voice calling. Some of the folks like Pudding media tried this route, I have written about them earlier . Not sure how they are doing now. If anyone has information, pass it on.
• Partner with social networking sites and provide voice calling to users and make money based on the revenue that is generated using advertisements. Off course, jangle tried this route and failed. Nimbuzz has signed have signed up 10 social networks and 3 mobile operators.
• Whitelabelling- Charge subscriber with a license fee for the usage of the application

SMS revenue generating model:
• Ad based SMS messaging. Blyk and others are like jaxtr support this model
• Partner with operator and share the revenue. Getting operator to like your app is a Herculean task. However, if you are blessed by the operator then you have almost made it big.

There is another model for startups that is called buyout/acquisition :-). Just build a huge user base and hope for some big player to gobble the company. This is the model many of the startups are vying for. Unfortunately, I don’t see any kind of M&A happening in this space. The only company I can think of that has the potential to be acquired is Jajah.

So wondering what next? Where are these companies heading? Acquisition, IPO or run as an independent company till u burn the VC cash or VC’s pull the plug. Let me know what your thoughts are on this. Would love to hear your perspective.

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