Regardless of their size, carriers are actively looking for new ways to monetize – selling text-and-talk plans alone isn’t cutting it anymore.Mega telcos are clearly cooking up plans for incremental ad-related revenue, as evidenced by Verizon’s multibillion-dollar acquisitions of AOL and Yahoo. But small, specialized telcos like Life Wireless are also turning to advertising to bump up the bottom line.
“Our customers want to be engaged, but oftentimes they’re the hardest-to-reach demographic for advertisers,” said William Curry, president and founder of Life Wireless, which focuses on the low-income prepaid phone market.
More than 60% of Americans own a smartphone, according to Pew. But 23% of smartphone owners have canceled their service because they couldn’t afford it.
Since April, Life Wireless has worked with a sponsored data platform called Airfox to try to do better than that.
Airfox, founded by several ex-Googlers, emerged from beta on Tuesday. The Boston-based startup aims to help US carriers tap into new revenue streams and reduce the cost of services to their subscribers through ads served on the lock screen and brand-sponsored data plans. It also offers a Free Basics-esque zero-rating option that allows advertisers to sponsor unlimited access to particular apps.
Users opt in to all of these services – Android only – and get rewarded for their efforts with deals, free data or discounts.
“The concept of apps that don’t consume bandwidth is especially compelling to these users,” said Sara Choi, COO and co-founder of Airfox and a former Google partner product marketing manager.
There are a number of other startups out there with a similar approach.
Jana, for example, provides free connectivity in emerging markets such as Indonesia, India and Brazil by incentivizing users with free data for trialing apps. Another company called Unlockd partners with Boost Mobile, Tesco and other telcos to reward subscribers for opting in to see ads and sponsored content on their phone’s lock screen.
Regardless of questions about what sponsored data plans might mean for net neutrality, some telcos themselves are also getting into the game. T-Mobile’s Binge-On program allows users to watch unlimited video without impinging on their data. And in July, Verizon launched an enhanced version of its mobile data rewards program, FreeBee Perks, that allows advertisers to reward loyal users (who also happen to be Verizon customers) with zero-rated mobile data.
“Mobile operators are struggling right now and they’re looking for new revenue streams,” Choi said.
And those streams don’t necessarily have to flow from a source of affluent consumers.
“Speaking in broad categories, we tend to do well with CPG brands and apps, goods that aren’t necessarily tied to income,” Choi said. “People buy CPG products and use apps regardless of who they are and how much discretionary income they have.”
Life Wireless provides its roughly 1 million subscribers with a free Android device when they sign up.
“Our target demographic doesn’t always have access to traditional means of media, like cable TV, which can make it difficult to advertisers to reach them,” Curry said. “But when they enroll with us, they get a truly connected device, not just a qwerty keyboard or a flip phone. It’s a conduit for engagement.”
A conduit advertisers are looking to take advantage of – but not at the cost of eating into data plans, especially the prepaid data plans of users who are acutely aware of how many megabytes they’re sacrificing to ads.
Life Wireless has seen about a 10% engagement rate with Airfox units on the lock screen. Airfox CEO and co-founder Victor Santos partially attributes that to users not worrying about the ads burdening their data plan.
“Ads should not be consuming data on a user’s phone,” said Santos, another former Google product marketing manager. “People don’t like their megabytes being consumed by things happening in the background of their device.”
Airfox also announced $1.1 million in seed funding on Tuesday led by Project 11 Ventures, with support from Launch Capital, NXT Ventures, TechStars and a number of angel investors, including Adelphic co-founder Jennifer Lum and Google VR group product manager Jason Toff.
In addition to Life Wireless, Airfox is working with another unnamed operator in the US.
