Amp'd, you'll recall, is the brash new mobile virtual network operator (MVNO) -- not even two years old in fact -- aiming for the yoof market with flashy TV ads promising a multitude of video and music multimedia on your handset. The firm has raised over $350 million in funding and said in April that its customer base was approaching 200,000.
This was a big problem, as it turned out. The company had claimed that its customers were spending $100 a month, almost double the industry average revenue per user.
Turns out that, in fact, many in its 18-35 demographic weren't paying at all. In its filings, the company said it had about 80,000 non-paying customers. That's around $8 million a month in lost revenue if you believe the company's average revenue per user figures.
The filing also revealed that the company’s subscribers downloaded more than 4 million videos, songs, and mobile games in the first quarter of 2007. "As a result of our rapid growth, our back-end infrastructure was unable to keep up with customer demand," the company said in a statement.
In other words, even if many of Amp'd customers weren't fly-by-night in the first place, it may have struggled to charge them for all the content consumed anyway.
Eventually, Amp'd network operator Verizon Wireless demanded a $4.5 million payment and followed up by terminating the company’s wholesale agreement and threatening to kick Amp’d subscribers off its airwaves. Amp’d responded by filing for Chapter 11 this week.
There are a couple of lessons here:
One, holy hell, there's actually revenue to be made in flashy mobile content, but only if you have the backroom muscle in place to bill and collect.
Two, a lot of the mobile content revolution is supposed to happen because teens or twenty-somethings will pay more for music, video, and more on their phones. But what if they can't or won't pay? After all, we're getting more free content than ever before. Can carriers -- and others -- break the free content cycle?
Obviously, this is just one example of a high-profile flameout and can't be applied to an entire industry. It even appears that Amp'd may be back soon enough.
Still, no one could argue it's a good omen for the future of mobile content. It will be interesting to see how Helio Inc. , the closest rival to Amp'd in the MVNO space, fares when parent company EarthLink Inc. (Nasdaq: ELNK) next reports on its status.
— Dan Jones, Site Editor, Unstrung