Virgin Mobile USA Sues Ultramercial Over Failing To Hand Over Mobile Advertising Revenues

Virgin Mobile USA's Sugar Mama

Virgin Mobile USA (NYSE: VM) has sued Ultramercial over its Sugar Mama service, which allowed users to earn free voice minutes by watching commercials. Two weeks ago, we reported that a lawsuit was likely, but further details were unavailable at the time. The next day, Sprint announced it would buy the prepaid operator.

Based on documents filed in the state of New York, we now know why the Sugar Mama service was shut down July 16.

Virgin Mobile is claiming that Ultramercial, which ran the service on carrier’s behalf, had failed to pay Virgin at least $814,543 in payments for advertisements placed on the Sugar Mama site. In the suit, Virgin claims: “Ultramerical over the past several months has failed to remit payments, thereby converting hundreds of thousands of revenue dollars rightfully belonging to Virgin Mobile.” Before the lawsuit was filed, an Ultramercial spokeswoman declined to comment on why the Sugar Mama service was shutdown, adding that it “honors the confidentiality agreements between ourselves and our clients.” Since then, the spokeswoman has not replied to requests for comment.

The closure of the service marks the end of what was one of the only mobile advertising services that subsidized the cost of cell phone service directly. Clearly, if Ultramercial owes Virgin Mobile $814,543 for a period of several months, it was never a big money-maker. A Virgin Mobile spokeswoman confirmed that it never was a huge source of revenue, but it was popular among customers. Sugar Mama officially launched May 2006, and as of the end of 2008, had about 900,000 registered customers, according to the suit.

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