Exposing some flaws in MVNO strategy

MVNOs, at least enough that RCR Wireless News interviewed him about it. Allie Winter has the piece, which is by all means a good read. Hold really nails it with some quotes, hitting on some serious flaws in the strategies employed by MVNOs. I’d like to go over a few of these points.

“They all think youth is a great target, but they forgot that it’s a market that the major carriers go after as well,” Hold said.

This is something we discussed in the first Prepaid Podcast. Boost and Virgin really locked down the youth market early on. A number of competitors tried to come in and take over the territory, sometimes trying something new (Helio, Amp’d), and sometimes just mimicking everyone else (XE Mobile). In the end, though, if the youth is a marketable demographic, and we know it’s a populous demographic, well, you know major carriers are going to target it.

“Carriers used MVNOs as incubators,” Hold said. “They kept an eye on them [MVNOs] and if they did something good, carriers jumped on the band wagon.”

Amp’d tried to reach people with a rich multimedia experience. Now look what the carriers are banking their revenue on. Don’t get me wrong; Amp’d didn’t invent the marketing strategy towards multimedia. But they did target such a large market that it was inevitable that major carriers would cannibalize their sales. The author of the piece uses Disney Mobile’s child tracker feature as a further example, noting that Verizon was quick to launch their own. Most major carriers now have a similar program in place. However, there’s one area where I’m not sure Hold nails it:

“People don’t buy on the Web,” Hold said. “You have to have a real store in a real shopping mall.”

I wonder if Hold has ever heard of Amazon.com. People buy on the Web plenty, and even major carriers are trying to get their customers to perform more of their transactions on the Internet. I’m willing to bet that any trend information would show sales creeping towards online, though the Web will likely never permanently replace a physical retail outlet. However, for MVNOs, it’s clearly the best solution. Then again, for MVNOs targeting lower income families, having an Internet-only presence might be a burden. If this is what Hold meant, then he’s onto something. But to say people don’t buy on the Web is simply preposterous. Unfortunately, it’s unlikely we see many, if any, new MVNOs in the next few years to fill the space left by the dead. It might be three years, five years down the road before the MVNO model is able to take off in the U.S.]]>