TextPlus has a similar business model, and its revenue is supplemented through ad sales on its free app. Neither FreedomPop nor TextPlus disclosed revenue.
Both companies are hoping that the freemium model, with limited free services underwritten by paying users, will work for FreedomPlus as well, with users opting for the higher priced plans.
Elizabeth Fife, associate director of the Institute for Communications Technology Management at USC’s Marshall School of Business, thinks the bigger problem for the cheap cell phone service could be convincing people to abandon current plans.
“Once people are locked into a cell phone contract it takes a lot of work for them to consider other possibilities,” Fife said. “The typical subscription model is still pretty solid because many people would rather go with the flow.”
Even though FreedomPop and TextPlus have been trying to change that mentality, executives admit not everyone is going to abandon their mobile plans at the first opportunity.
And the service they’re providing doesn’t necessarily mean the cell companies will be losing customers. Many people who use FreedomPlus on a tablet or iPod touch may also be cell phone customers.
What this service does allow, however, is for people to offload some of the texting and calling they would do on a cell phone onto another device and perhaps downgrade to a cheaper plan on their mobile carrier.
“A lot of our core users are iPad and iPod users,” Stokols said. “This gives them a viable voice option without paying the $40 a month.”