Business News – Bigredwire’s Revenue Model Questioned
Posted: 09/2000
Bigredwire’s Revenue Model Questioned
By Chris Garifo
Santa Barbara, Calif.-based bigredwire.com Pty. Ltd.
(www.bigredwire.com) has launched free interstate and international circuit-switched phone-to-phone long-distance service in the United States, but the jury’s out on whether its revenue model will work.
The company allows customers to trade time they spend looking at web advertising for long-distance calling time. Customers earn credits–called “volts”–while looking at ads. Those volts can be used to eliminate–or “zap”–their interstate and overseas calls.
Frank Jiang, bigredwire’s general manager, says consumer response has been excellent. “We’re already breaking even.”
But observers question how viable bigredwire’s revenue model will be.
“I think that’s certainly attractive to some segments of the consumers that are more price sensitive–that are willing to sit through advertising in lieu of fees,” says Meredith Rosenberg, director of consumer market convergence at The Yankee Group
(www.yankeegroup.com). “For the company, I’m not sure how sustainable the advertising model is. It’s still somewhat unproven.”
Rosenberg also suggests that, while an offer of free service “certainly has a better value proposition,” consumers for the most part “aren’t passionate about their long-distance services.”
AT&T spokesman Mark Siegel also questions whether a significant number of customers will be lured to advertising by the prospect of free long-distance calling.
“You can certainly get free long-distance service, but it requires a fair amount of effort to do so, and if you’re really the kind of person who spends time to save money–and you do have to spend a fair amount of time to get the advantages of this
service–then it can be valuable,” Siegel says. “I think that consumers fall into two broad categories. There are people who will spend money to save time, and I think that is most people; and there are people who will spend time to save money, and I think the services that [bigredwire] offers probably will appeal to that kind of consumer.”
A major question is what happens when long-distance prices bottom out or become free everywhere.
“We might start seeing more creative bundling from these providers where they offer voice as an add-on to, let’s say, the higher-revenue data services, maybe in addition to other products, such as wireless,” Rosenberg suggests, adding, “I would look more not at long distance becoming free, but more to what it will be coupled with in the future.”
While bigredwire offers free long distance now, its launch was rocky as its website was unavailable for more than three hours. Jiang says the problem was with the company’s ISP.
Because of the problems bigredwire incurred during its launch, Jiang says he changed ISPs.
