Saturday, September 22, 2007

Burning cash

With the demise of AMP'd mobile earlier this summer, the news that Helio isn't getting any more money from its partner, Earthlink and continues to loose around $350 million a year doesn't look like a good indicator for its future. That said, SK Telecom has committed another $270 million in investment for Helio.

I've been in their retail stores - and I have to say, they aren't exactly busy. Combine that with their aggressive advertising in print, etc. and its easy to see how they're burning cash at an incredible rate.

But is anyone buying?

Techcrunch reports that Helio ended August with 130k subscribers, and expects to finish the year with 200k to 250k subs. I bet they'll miss the mark. The growth charts don't make sense to their subscription acquisition claims - to hit the proposed numbers they'll need a decent increase in their sign up rates, and I just don't see the event that's going to spur that growth. Especially with the iPhone in the market.

Don't get me wrong on this - I don't blame Helio's sullen growth numbers on the iPhone. Trust me, they wre doing poorly just fine all by themselves. But with the iPhone on the market, things are even worse for Sky's company.

Lets take the iPhone out of the equation for a second and look at why Helio is headed to the deadpool in the long run.

Helio has cool handsets - really they do. Granted they just got the full keyboard smartphone this summer, but thats ok since they're target market is the XYZ generation(s), not the mobile professional who's buying crackberry's and Treo's. But they also have content, and they're playing up on the whole social aspect to your mobile (young) lifestyle. In Asia, this is huge. This is where they got their business model idea from. When Helio started, Sky was out there pushing that Asia had all these cool phones and the kids were HUGE on them, and indeed they are. There's one major difference between the US market at Asia :

People own computers here, in Asia they don't. Thus, their phones ARE they're computers and things like internet cafe's where you rent time on a computer to go online are still popular. I'm amazed that investors didn't see this glaring problem with Helio. It wasn't a business plan problem, it was an assumption and social difference problem. Let alone that folks are going to buy a phone/plan for online content. You don't see computers being sold for specific online content that you can't get anywhere else, so why would it work on a phone? Same for those premium content plans that most mobile carriers provide.

Computers, phones, handhelds like the iPod Touch are just ways to access the online world. Trying to pair them with specific content doesn't work. Period. No matter what device people buy, their online world is the same, regardless. Devices will become transparent and commodities in the long run. This is where the idea of ubiquitous computing comes into play, but that's a whole 'nother post.

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