One the enduring myths about the mobile value chain is that users are delighted to pay for goods and services via their mobile, that they’ve long accepted as free via their computers. I’m not even sure where the logic of this begins and ends, but maybe it’s something to do with the fact that mobile content market is already claimed to be 5 times the size of the PC market. Or it could be that users have accepted that they need to pay for the nose, at least until there’s a free alternative.
A good example of this was provided by Mark Curtis of Flirtomatic at last week’s Informa‚Äôs Mobile Communities & User Generated Content conference in London. Mark outlines that the first iteration of the business model was to charge subscriptions at a very reasonable ¬£1.50 ($3) per day or ¬£9.50 ($19) a month. Don’t forget that for most people, that’s in addition to usage-related mobile web data fees.
However, when they moved to a free, ad-supported model, the business really exploded and today they make 10 times the revenues via advertising than they earned via subscriptions. Actually, the average Flirtomatic user views 2,500 pages a month on the service.
So (surprise, surprise) people seem to prefer free models over paid-for models and it will ever be thus.
I believe that the next phase of mobile content will see a a surge in ad-subsidised content – which is not necessarily ad-funded. In other words, ad-funded implies free, with ad-subsidised being reduced cost to the user.
Some services – like Flirtomatic – can be ad-funded. But for many more, ad-subsidised is the best that could be achieved. As an example, if you sell a ringtone today for ¬£3, it’s very unlikely that you’ll be able to generate similar revenues from an ad model, as the numbers just don’t stack up. But you probably could find a way of reducing the cost to the user, while maintaining similar margins.
But in terms of business model, it’s always going to be more attractive in the long term to have a Flirtomatic type model where content is free or user generated and advertising revenues don’t need to be dished out to a number of different players in the value chain.
Full disclosure: Flirtomatic are also partner of AdMob, as well as speaking at the conference.
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