Wireless software firms : 'Show us the money'
Published: 23 Feb 2001 15:09 GMT
Enough is enough, say executives at several wireless software companies that have been doling out free software for mobile devices. Instead of beefing up free downloads to increase brand awareness and prove that their software is effective and easy to use, companies such as Visto.com and AvantGo are re-emphasising efforts on corporations willing to pay for services.
In most cases, the software companies plan to continue targeting consumers, but primarily through more lucrative partnerships with wireless service providers.
The reason is simple: companies need to make money. And corporate clients are willing to pay for services, unlike consumers who have become accustomed to free downloads from the Web. The shift makes sense, given that a strong corporate client base is the typical way that software companies have succeeded in the past.
This wireless software niche is the latest example of a technology sector abandoning the concept of giving away software or services to individuals. Although many Internet companies in the 1990s thought they could generate revenue through advertising alone, ad revenue has dried up, and Wall Street is demanding that companies find new ways to bring in money.
From Internet access to online music to online storage, companies are pulling the plug on advertising-based models, instead charging customers for services or refocusing on corporate clients willing to pay.
"It has served its purpose in proving that there is a demand for this technology, and we're not investing any additional resources on it," said Brian Bogosian, chief executive of Visto, whose software lets people check their email, address book and company data from their mobile devices.
The biggest players in the wireless and mobile software market include Oracle, Sybase, IBM and Microsoft, but the smaller companies, like Visto, are the ones that rely on wireless software sales for the majority or, in some cases, all of their revenue.
Analysts say a shift away from free mobile software is not unexpected.
"Why should we as consumers ever have gotten it free? This is good stuff. It's very useful, legitimate stuff," said Dave Chamberlain, research director of wireless Internet service with Probe Research. "These companies need to find those people to whom [their product] is more than a toy. It's really becoming important to show some genuine revenue."
But analysts and executives are worried that abandoning the consumer market could dry up the well of innovation for free wireless software, which now lets consumers check their email on the go, find a restaurant nearby, and surf the Internet. They also worry that consumers will simply walk away from anything they have to pay for -- even popular services that they are now downloading in droves.
Still, mobile software developers see few options other than the subscription or corporate client revenue model.
Bogosian is blunt about his Mountain View, California-based company's shift toward corporations. Despite a customer base of 2.5 million for its free software, the company has not yet made a profit, he said. Investors are demanding that it reach profitability this year.
"I think at some point the free service will end," Bogosian said.
Other companies are less absolute, saying they plan to continue their free consumer offerings. But most agree that they must spend more energy emphasising their corporate business.
AvantGo, which offers consumers free software to check their email and read news on their handheld computers, told investors during a conference call in late January that the bulk of its future efforts will be directed toward corporate customers, which bring in considerably higher revenue than customers on the consumer side.
Although about 2 million people use AvantGo's free software, this brought in only 25 percent of the company's revenue last year. The other 75 percent came from sales to corporations.
FusionOne, which makes synchronisation software for email and other files, said 80 percent of its revenue this year should come from corporate customers, while just 20 percent will be drawn from consumer software. Last year, the majority of its revenue came from advertising dollars from its consumer software.
"You're seeing everyone run from one side to the other," said Rick Onyon, chief executive of FusionOne.
The mobile software niche has rarely made money directly from its individual customers, instead relying almost entirely on advertising fees and partnerships. In the aftermath of the dot-com downturn, however, this revenue model no longer holds much viability among investors.
"I think the capital markets have dried up for this kind of a business model, making money from ads, whether they're wireless or otherwise," Onyon said.
Many wireless software companies add that once they've established a corporate customer base, there is less incentive to continue beefing up their free products. Many initially launched their free software only as a demo for paying customers -- a way to get established in the marketplace. Revenue on the free software model, if any, was an afterthought presumed to come from advertising.
Bogosian said his company's free service was a way to show corporate customers that his company was up to the task.
"We could never have gone into the enterprise market without some proof that we have a scalable and reliable platform," he said. Now, he added, the company can show how its software products work and the capacity of its servers.
Visto and other companies are confident that the corporate client model will work. With demand in the corporate wireless market exploding, they say they no longer need to prove themselves and can start selling their corporate wares for big fees.
Still, no mobile software company is interested in entirely abandoning the consumer market -- they are merely looking for a more profitable way to exploit those customers. Visto, for example, is creating a beefed-up version of its free software that it plans to sell to individuals through partnerships with wireless service providers.
Already, the company has formed an alliance to develop software for Qualcomm's BREW standard for wireless applications. Given its partnership with Qualcomm, Visto hopes to have its service offered through wireless carriers.
This move would let customers opt for Visto's services and pay an increased fee to their carrier. Bogosian estimates the fee would be about $10 per month.
"Your carrier will ask you if one of the services you want is corporate access to your email and address book and the carrier will bundle it into your regular service," Bogosian said.
FusionOne markets its product directly to carriers as a way to reach a large customer base. The company has already partnered with the European wireless carrier ONE and will announce several other partnerships this year, executives said.
Just recently, FusionOne began offering a premium version of its free service, which consumers can pay for directly. The premium service, which includes file and email synchronisation, costs $9.95 a month or $100 a year.
"We wanted to attack the consumers first, so they could use it and see the benefit of it, and then offer a better service for a fee," said Raphel Finelli, a spokesman for FusionOne.
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