Monday, July 30, 2007

What Does $350 mil Buy These Days?

A lot of porno DVDs, appeared to be the general answer; four pages worth on the asset listing to be more exact. However, a day later it turns out not to be porn at all, just suggestively titled material the company, Amp'd Mobile, was selling to their subscribers.

A few days ago, Amp'd Mobile threw in the towel after chewing up $350m of VC money since December 2005. Amp'd was one of a slew of MVNOs (mobile virtual network operators) who buy cheap minutes from existing carriers and resell them along with premium or niche content, marketing to consumers as a different flavour of phone service. Virgin Mobile has been successful in this in the UK and in the US; Amp'd has clearly not. (Though to be fair, Disney crashed and burned in this market too, so they aren't alone in flaming out.)

Amp'd was targeting the 18 to 30 crowd, promising additional content like game shows, music videos, etc. The story above hints at part of the problem: they relaxed the normal credit ratings applied as part of the qualification process resulting in - surprise, surprise - large numbers of defaulters. Elsewhere, it's also mooted that anyway they didn't have adequate billing systems in place, an even bigger problem if true.

Firms here in the Valley took a real bath on this one, with some well respected names amongst the list of losers, including Redpoint and Highland it would seem. Indeed, not only did they burn through $350m of raised capital but it also seems the closed with $100m worth of debts. Not bad going for an 18 month ride. Boy, I'd love to see the original Power Point slides used to pitch this deal and then set them against what actually happened to Amp'd: now there's a case study worth doing!

Given their target audience, combined with the well-know fact that the porn industry is a mega-bucks business here in the US, you'd have to conclude that perhaps their biggest mistake might have been to underestimate the potential value of sending real porn to their subscribers. Had they tried then they might still be in business, albeit a seedy one. Making money is still the one sin that forgivith all others here in Silicon Valley.

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