Popular Teen Phone Network Switching to Pay Model
By CHRISTOPHER KEOUGH
Staff Reporter
Having snared more than 1 million teen users for its free phone network, Santa Monica-based VoiceWeb is rolling out a plan it says will help it turn a profit early next year.
Launching from its subscriber base of teen users one of the most coveted demographics in advertising VoiceWeb wants to supplement its content offerings with advertising while at the same time converting subscribers to a pay model.
The Loup, as the teen service is called, operates a dial-up network in six U.S. cities where teens leave messages for one another, join in party line chats and get information on movies and concerts.
If VoiceWeb’s president and chief executive, Robert Botch, has his way, he will convert those 1 million Loup subscribers to monthly plans priced between $3 and $7; expand the network to adults at monthly rates of $10 to $15; and sell network software and infrastructure to cell phone carriers.
That, Botch said, should help the company generate the $15 million in revenues he said it needs to turn a profit by next year.
Underlying its effort is a planned $15 million fourth round of venture capital funding later this year. That follows on the $32 million it raised in three rounds since its inception in 1999 funding led by Sevin Rosen Funds of Palo Alto and Canaan Partners of Menlo Park and Rowayton, Conn.
Survey says
The conversion of Loup subscribers to a pay model is supported by what Botch sees as increasing demand for the service. Surveys conducted by Loup just before the holidays determined that as many as 60 percent of teens who did not have cell phones had requested them for Christmas, and of that group, 90 percent wanted to have access to the Loup.
If it works, VoiceWeb may crack a wireless market for content that, while popular in Japan and other markets overseas, has yet to catch on in the United States.
Lucy Bridges, youth segment manager for Verizon Wireless, said the carrier paid VoiceWeb for placement of 15-second ads on the Loup last year and the results exceeded expectations. Though she declined to give specific sales figures, Bridges said that buying time on the Loup produced similar results as traditional advertising and retail operations at half the cost.
To make the service and ad time more attractive, Botch is in the process of lining up content providers also covetous of the target audience.
A former vice president of marketing for Sega, Botch said VoiceWeb is in negotiations with several content providers that would share information among entertainment genres. Moviefone Inc., a division of AOL/Time Warner Inc., and Ticketmaster already have cross-promotional deals with the network.
Moviefone provides movie synopses for the Loup and gets free advertising in exchange. No money changes hands in the arrangement, but Moviefone considers the teen demographic worth hitting.
“We do different in-kind sponsorships all the time with radio, television and other people, like film festivals,” JayJay Nesheim said. “Teens are an important movie-going group, so why not?”
Skewing older
By expanding its service to an adult audience, Botch is pitching to more narrowly defined segments of the market.
There could be networks for seniors or alumni groups, as well as sports and cooking enthusiasts. Subscribers could access ball scores, movie reviews or vegetarian recipes.
“If they have the ability to give us specific information like income and whether the user travels extensively, that’s extremely valuable,” said Verizon’s Bridges. But she added that wireless users would be less likely to put up with the advertising messages if they were paying for the service.
Still, Botch said he believes telephone networks wireless or otherwise are a logical extension of brands that already have gone to the Internet. He’s thinking along the lines of users calling in during the Super Bowl to vote for their favorite Super Bowl quarterbacks of all time or for kids to call in during MTV’s “Total Request Live.”
Botch said the network would work its way out of its original six markets and spread its coverage into the top 25 metropolitan markets by the end of this year.
The original VoiceWeb network concept developed from an idea to create school phone networks for students, parents and school officials to communicate lingers as well, Botch said. The ultimate business goal is to sell networks to businesses for use by administration, employees and customers.
“The technology is not limited to a use like the Loup,” Botch said. “It’s a network technology and could be used for corporate communication.”
