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Summary:

Now that the average cell phone user is coming to terms with text messaging (last I checked around 36% have texted in the U.S.) startups and carriers are hoping that more people will start using mobile email and mobile IM. We’re not talking about you, Silicon […]

Now that the average cell phone user is coming to terms with text messaging (last I checked around 36% have texted in the U.S.) startups and carriers are hoping that more people will start using mobile email and mobile IM. We’re not talking about you, Silicon Valley Blackberry addicts, but people using low-end, even free phones that don’t have unlimited data plans.

Berggi, a startup based in Houston, is one of these that are trying to “make dumb phones smart,” as they put it, and is announcing their service today, which they plan to have up and running on Thanksgiving.

The company raised $3 million from investors like Adara Venture Partners, and offers a downloadable application that bundles email, IM and texting capabilties, which costs $9.99 per month. Your phone needs to be data-enabled, to use the service, and the regular data fees from your carrier (per usage or on a plan) apply. At present Berggi doesn’t work over Verizon or Nextel networks.

I tried to test out the service last night and this morning, but there were connection problems, so I can’t verify if the service is easy to use or designed well. We’ll try it out later and let you know what we think.

A business based on offering mobile IM and mobile email on average phones is riding a significant trend, and services like Flurry, Renzoo, and Oz Communications offer various solutions. But we’re not sure Berggi’s current business model is the right approach. How many in their target market of average phone users will be willing to download a little-known application on their phone and then pay $10 a month for this service? We’re talking about the users who are getting a free phone and probably aren’t willing to pay for an unlimited data plan.

Other companies like OZ Communications are selling phone and server software to the carriers to offer mobile messaging on phones. This is an easier market to make money in. OZ’s CEO Skuli Mogensen says “the major thing about mobile IM and email is discover-ability and usability. The majority of our solutions are pre-loaded/embedded on the device. . . Consumers do not want to read manuals, they want to be able to click and go, and many find downloading services difficult.”

Like Berggi, Flurry also offers a direct-to-consumer mobile messaging service, but its mobile email service is free — free might not always be good for the bottom line, but good for bringing in users. All of these direct-to-consumer services will need a lot of marketing money for anyone to discover the application. But if these services are actually significantly better and cheaper than what the carrier offers, then they might have a chance to spread virally.

Next year Berggi says they will white label their service through well-known brands — that is actually a pretty good idea. If you’re bored on Thanksgiving, download the app and tell us what you think.

  1. You summed up their fate with this combination:

    “We’re not talking about you, Silicon Valley Blackberry addicts, but people using low-end, even free phones that don’t have unlimited data plans.”

    plus

    “offers a downloadable application that bundles email, IM and texting capabilties, which costs $9.99 per month. Your phone needs to be data-enabled, to use the service, and the regular data fees from your carrier (per usage or on a plan) apply.”

    This is a non-starter. The VC’s (or the company_ should have checked with Om (or even me) and we could have told them that even in the haute coteur de mobile of Silicon Valley people aren’t comfortable downloading much beyond ring tones and wallpapers to their phones.

    Case in point: last week at the Under the Radar Mobility Conference I queried the room as to how many people in an audience of 300 had downloaded anything besides a ringtone or wallpaper to their mobile.

    How many do you think had? 50%? 30%? 10%?

    In the rarified air of a room filled with people that had just PAID to come see mobile application companies present their services less than 15 people (not even 5%) had downloaded an application to their handsets.

    Now add in the $9.99 month, the usage charges, requirement to have a data plan and the cultural gap (“what is that thar thing that man has attached to his head, Mabel?”) and you have a recipe for a failure that save for the number of zeros looks about like ESPN’s failed MVNO.

    More on MobileCrunch.com

    Thanks,

    Oliver Starr

  2. Katie Fehrenbacher Tuesday, November 21, 2006

    Agreed. Thanks for the add. That’s also why I said in the post

    we’re not sure Berggi’s current business model is the right approach. How many in their target market of average phone users will be willing to download a little-known application on their phone and then pay $10 a month for this service? We’re talking about the users who are getting a free phone and probably aren’t willing to pay for an unlimited data plan.

  3. Here’s the problem: maybe people are willing to pay $10/month for a service and maybe they are willing to pay per usage data fees, but almost nobody wants to pay both. This is what is holding 3G back vs. landline broadband. If you wnat people paying for airtime, you need free applications and vice versa. So, if you are a service developer you need to sell to carriers (who can hide the fees through bundling) and not consumers or you need to hope that unlimited data plans start to get down to $30/month or less.

  4. Berggi states their unique proposition is that they work with low and med end mobile phones. This is something that http://www.movamail.com has been doing for over a year (and a company featured by GigaOm in February of this year http://gigaom.com/2006/02/06/turn-old-phone-into-a-smart-phone/ So they are about a year behind with this value proposition.

    Having a direct D2C channel is fine but nothing new (also offered by Movamail, Flurry, Seven and others). But the D2C channel is more expensive to promote and support. The reason other pursue the mobile operator is to increase discoverability with the mass market; and being associated with the mobile carrier provides credibility and trust with the mobile carriers customers.

    Charging $9.95 per month plus data is a stretch though. Movamail is only $2.95 (often free through their carrier partners) and Flurry is free (though they have to make their money somewhere and it seems they have yet to decide on their model).

    The mobile email application itself appeals to mainstream users. However, those consumers that can afford and pay for a service are most likely to seek such a service from their Mobile Operator or perhaps from their current trusted email provider(Yahoo Mobile, Gmail Mobile etc). Being free, Flurry is attracting users from countries that can not afford to pay (most users are India and Bangladesh). Unfortunately, these are also in the markets that few US advertisers are willing to target at this point with mobile advertising (if that is their end game).

    Obviously Berggi will either prove that the UE market is willing to pay $9.95 a month plus data (which may be possible… people in many parts of the EU pay outrageous prices for all other communications services) or they will soon be adjusting the model after being educated about their market (at the expense of their investors).

  5. Giovanni Rodriguez Tuesday, November 21, 2006

    As I commented on Oliver’s blog — I suggest we wait and see what consumers think. Berggi already has close to 100,000 registered users, and that’s the result of one deal. Bundling the service is a big part of the business model, and that model is already working.

  6. Ok, so I know the service doesn’t launch until Thanksgiving but then why is there a shortcode on the site to get it?

    “Sign in now! Just text score to 33139″

    I did just that from my Cingular phone and received a text message back that says the following:

    “To confirm you’d like 2 get Berggi info and real time Sports Aleerts from Score Shack, rply sending the letter Y to 33139″

    Scoreshack.com is apparently an offering by Blinko.com, which is in turn an offering from Buongiorno. Blinko is a ringtone site, and not a very impressive one at that.

    If this is pre-launch they should have put up a “coming soon” response at least. Are these guys for real? I’m curious what these 100,000 users do today?

    -Todd

  7. Having sold a business to a mobile email company, I’ve seen firsthand how tough the mobile email market is.

    Forget about business email. RIM owns that market. Not even Good was able to remain independent, having sold to Motorola.

    Consumer mobile email… On paper there are several hundred million users. There are several problems here:

    1. Many high-end phones, the ones heavy email users are likely to buy, already have POP/IMAP clients built in (as well as on-deck apps for popular web mail services). This trend is likely to continue to a point where you’ll buy a phone, enter your login credentials when you use it the first time, and you’re done. I have a prototype Nokia phone, the built in email client works fine.

    2. Push email is not really valuable to consumers. If they get messages within a few minutes, that’s fine. Consumers, and especially those under 30, use SMS for “push” messaging. Therefore, don’t expect many people to pay for a service that doesn’t add much value to what’s already on the phone.

    3. There is a big shift underway in the use of email. Email used to be a form of almost instant messaging, but now that IM and SMS have made it possible to send short messages instantly to almost any device, people are shifting back to using email for correspondence that does not demand an instant reply.

    This isn’t to say that there is no market for mobile email, there is, but it’s a very tough market to get into.

    Brian

  8. I have heard from a good source that Berggi does not have 100,000 users who have downloaded software. They don’t have hardly any software users yet. Apparently it is a sham delivered to us as market hype.

    Berggi recently did a bundled deal with Blinko where Berggi paid a big part of the cost to advertise a bundle of ringtones & screensavers. For a monthly fee, subscribers received a package of tones & screensavers each month. Because Berggi paid for the advertising, each subscriber got an INVITATION to download Berggi’s software to their mobile. From what I am hear, none of those Blinko subscribers downloaded Berggi email software to their phones.

    Berggi had a sharing arrangement with Blinko on the monthly subscriber fees and this is where Berggi’s income came from. We can safely conclude that Berggi does NOT have 100,000 mobile software users and the income Berggi claims to have is not coming from their mobile software. I was also told that a top Berggi executive is also involved with Blinko and the Blinko/Berggi bundle deal came about due to that personal connection. A good relationship to take advantage of and pretty creative. But to deceive us into thinking these supposed 100,000 subscribers are paying 9.95 for mobile email software is bad business.

    Berggi won’t ever get close to 100,000 users at 9.95 when so many free options are out there and many of these are as good or better than Berggi. If I was a VC investor in this company I would be asking management some tough questions or just forget the questions altogether and get new management from the top on down before the money runs out if it hasn’t already.

  9. Berggi isThe best email 4 phones

  10. That might be true, Lindie. But it assumes you know nothing about any of Berggi’s competitors.

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