How is your portfolio looking today?
I suppose I understand as well as anyone at a macro level what is driving the global financial meltdown. I also understand what a lack of cash means to banks and what a lack of credit availability means to businesses and individuals. Perhaps most importantly, (to my business and our industry, anyway) I understand what all of these macro trends means to the typical mobile consumer: Nothing.
When it comes to the microeconomics of managing our business, I am keenly aware of even the slightest fluctuation in our daily stats. I can tell you when a carrier has done a promotion, put us in a “featured” category, changed a category, altered a naming convention, changed marketing language, had a problem with their storefront vendor, launched a new handset or, put simply, changed anything in any way whatsoever. This is because demand is constant for mobile content and communication, and it is other variables that affect consumption. I just looked at our daily new user stats, and yesterday we had more than 50% more new users than we did exactly 30 days ago. The global financial crisis evidently has little impact on purchasing behavior for products below the $5 mark.
Notice the line at Starbucks is as long as ever. Your triple grande latte is a low-price luxury good, and at the margin, cutting out your $3/day habit does not materially impact your ability to pay the rent. The perceived value of that latte is higher than the cost, because dammit, with the world crumbling around you, you deserve it. So it is with your $1.49 to access MySpace Mobile. (In fact, your barista will tell you that there is a statistically significant increase in demand for whip cream over the past month.)
There are few substitutions for mobile communication, and over the years, our industry has found the market-clearing price for most forms of mobile content. But price is not the most important variable because demand for mobile content and communication is inelastic: The percentage change in demand is smaller than the percentage change in price. This is why carriers increase the price of SMS even as volume increases – they know that increasing the price increases revenue at a higher rate than whatever drop off in demand the increased price might produce. Despite LNP, it is still a perceived high-cost proposition for consumers to switch carriers, even to a lower-cost alternative.
The greatest function of demand for content and 3rd-party communication services in the mobile space is not price – it is discoverability. If a carrier put a big red button on the home screen of every one of their phones tomorrow with a label that said “Press to pay $10,” and that was all the big red button did but it was the only thing on the home screen of everyone’s phone, they would have at least 50% of all subscribers push the big red button.
Preloading is a form of big red button: Where our interface is preloaded rather than offered as a downloadable app from a carrier’s deck, we see a minimum 20x increase in new users who have that handset vs. a comparable device in market. That is a significant multiple, and it has nothing to do with price – it is all about discoverability.
We have tested consumer price points from $10 to Free, and we have learned that all other variables being equal, Free does not increase adoption, and to some measurable extent, it increases churn because the consumer has made no investment in the experience. This is as true amid a global financial crisis as it was in more generally prosperous times. The most effective consumer offers for communication services are “finite day pass” and MRC.
The world is full of bad news, but at least one can take solace in the fact that the mobile consumer displays an attitude that rewards utility not just with usage, but with money. 