50% * $0 = $0
For more than a few years now, I’ve been fuming at the fact that US mobile carriers (Verizon, AT&T, Sprint, etc.) charge exorbitant fees to deliver mobile goods. Carriers take up to 50% of the purchase prices for ringtones, wallpapers, and other virtual goods that can be downloaded directly to your cellphone. (In fact, up until a couple of years ago, carriers insisted on taking 50% of the value of any donations made through a cellphone to a charity.)
This is madness.
A bevy of new mobile commerce startups are percolating up right now, but they all face the same problem: they must either build their own payment processing and transfer capabilities (essentially, become a bank), or utilize the carriers’ ability to charge purchases to customers’ cell phone bills.
Verizon’s CEO Ivan Seidenberg was on Charlie Rose last night, explaining how - now that they had built the bestest, fastest, whiz-bangiest network in the world - they wanted to reap the benefits by deploying more applications on their network that weren’t so “capital intensive.”
Translation: we own the pipe, and we’d like to take a piece of transaction that flows down it.
There are two impediments to this strategy:
- There are lots of other pipes which are just as fast and just as good
- You might like charging on a pay-per-use model, but no one likes paying that way.
Verizon (and most other carriers) would like mobile payment providers to keep forking over 1/2 of the value of all goods and services delivered on their network. And why not? It’s effectively free for Verizon to deliver 1MB of content, so why not take $1 for it? Why settle for $.25?
There are two reasons why a quarter makes a better business plan: first, the volume of goods and services that vendors and processors can afford to sell on a mobile platform explodes when the transaction costs approach zero. Second, given two delivery mechanisms that provide the same benefit (buy anything from anyone who has a mobile phone, anywhere), users will choose the easiest option.
That means a platform where I can text someone else a dollar amount from my mobile phone is going to get taken up more quickly than an app I need to download, install, and ensure that the recipient already has. (Nearly everyone can text. Amazingly, not everyone has an iPhone.)
If memory serves, there were something like $2 Billion in ringtones sold in the U.S. last year. GDP for the U.S. was about $14 Trillion. Which looks like the better target to you?
2 years ago • Notes