March 15, 2007

1-800-Free-411 Has 6% Market Share of U.S. Mobile 411 Market

Michael Arrington

36 comments »

Jingle Networks, operator of the 1-800-Free-411 service, just announced that they now control 6% of the U.S. market in 411 calls. This is up from 1.5% a year ago.

About 2.6 billion mobile 411 calls are made in the U.S. each year, and is a $7 billion/year market. Jingle reports that they received 17 million calls in February, and have had 170 million calls total (they just recently announced their 100 millionth call last November).

The company has raised a boatload of cash - over $60 million to date - and AT&T recently started competing with them.

Jingle makes money from short advertisements played to the caller before the requested phone number is delivered. Given their stellar growth, many consumers are obviously willing to give up 12 seconds of their life to avoid 411 fees that range up to $3 per call.

Last October I interviewed Jingle CEO George Garrick and investor Josh Kopelman. Listen to the podcast over at TalkCrunch.

On a related note, Tellme’s new mobile voice activated 411 product is also free and absolutely stunning.

[Update: Originally, this post said 1-800-FEE411 had 6 percent market share of all U.S. 411 calls. The company later clarified that figure was for mobile 411 calls. Their market share for total U.S. directory assistance calls at the time of this post was 4 percent.}

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Comments

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Morgan

March 15th, 2007 at 9:27 am

I have rare occasion to 411, but I’d listen to the ad no problem. I think my 411 calls are something like 40 cents. Not that time is worthless, but I’m totally blanked out until the number starts anyway, so I doubt I’d really notcie a difference.
egon

March 15th, 2007 at 9:39 am

Yeah I use 1800Free411 all the time. I can’t believe people still use their normal 411 service, honestly. I mean, this is free. Theirs isn’t. To me it’s not even a question.
Insider

March 15th, 2007 at 9:47 am

Mike, the dirty secret of Free 411 is that their revenues are only $0.02/call on costs of $0.12/call. Losing $0.10/call * 600,000 calls = $60,000 of losses/day.

All that VC capital is covering massive hemorrhaging. Pay-per-call and audio advertising is a very early market and is not growing fast enough to cover those losses.

Free 411 is creative but bleeding $60 million is not a business model.
Michael Arrington

March 15th, 2007 at 9:52 am

Insider - it was a helluva business model for Youtube.
Christopher Sisk

March 15th, 2007 at 10:03 am

Well, they now have some real nice numbers to present to advertisers. As long as they keep the audio ads brief… This might actually work.
Chandra Bajpai

March 15th, 2007 at 10:08 am

If they can somehow do some targeting, (e.g. user CallerID) and fata from previous requests for phone numbers that might increase the amount they could charge.

Unfortunately there is no way to measure effectiveness easily and quickly like with Adwords.
Michael Arrington

March 15th, 2007 at 10:19 am

Chandra - of course they can target. The first thing you do when you call them is tell them what you are looking for, and where it is. Ask for Dominoes, get an ad for pizza hut.
Harsh Critic

March 15th, 2007 at 10:37 am

This is a great service. I use it often.
susan

March 15th, 2007 at 10:42 am

still prefer http://411sms.com
Seth Morrison

March 15th, 2007 at 10:43 am

I asked for a pizza place and didnt get a pizza ad…I got a mortgage ad.
in the end, this great idea is the future of phone information, im afraid by the time free411 figures it out there are 50 competitors and zero entry barriers…like what happened in ISP space, Free411 gets bought for its marketing spend…
Insider

March 15th, 2007 at 11:07 am

Mike, I agree YouTube took the same approach but there are two critical differences:

1. The bandwidth to show a YouTube clip is less than $0.01, currently coverable by online advertising. A Free411 call is $0.12, more than ten times a YouTube clip, with very little audio ad advertising to cover the cost.

2. YouTube had killer viral marketing and network effects to create insurmountable defensibility. Free411 has neither (though good word-of-mouth). Even if Free411 proved the ad model, the phone carriers would eventually shift their model to offer ad-supported model through 411, a much more powerful brand.

I applaud the Free411 guys for delivering a good product but so far this is not a successful company.
Eric Anderson

March 15th, 2007 at 11:32 am

My only problem with the service is that it won’t automatically connect me. How annoying is it to write down (or try to memorize) the number. Let me hit a button and connect. It’s like putting up a reference to a web page on the web but not making it a link. Just retarded.

Plus like someone else said. The theory of targeted advertising is good but in practice I always get an ad that is not related to my query. This will just lead to advertisers not getting value for their money which will in the end drive them away.

I like the concept of the service. The execution is just sub-par.
Kean Smith

March 15th, 2007 at 11:37 am

I think this is another instance in which a start-ups breakthrough can easily be duplicated and better distributed by an established concern. Once (if) the company becomes profitable, there is no technical or business hurdle to prevent other players from offering the same service. I forsee a company like Google, leveraging their engineering talent, established customer base (both advertisers and consumers), and their data set entering this segment with a 100% automated solution.
Felipe

March 15th, 2007 at 12:21 pm

Check out Zypsy, a 411 for shopping and directions. Zypsy provides better info because actual humans do the search for you, as opposed to Free 411 services where you’re talking to a machine.

http://www.zypsy.com
KevinL.

March 15th, 2007 at 1:57 pm

To Chandra’s comment - MerchantCircle has a partnership right now with Free 411. It’s a good trade-off for a company like them or a coupon site, because they’re looking for content, whereas we’ve got a ton of content looking for places to distribute. We have over 100,000 merchants right now, but my guess is, Free 411 doesn’t always have a pizza ad for each region. That’s why they’ve got to plug in whatever ad they have available in a certain region from a ‘paying’ client.
Drama 2.0

March 15th, 2007 at 2:07 pm

Kean: exactly. There’s no apparent barrier to entry here besides capital. It has taken a significant amount of capital to get to 6% and now major players, like AT&T, can fairly easily decide to compete - and they get to leverage their existing businesses to do so.

If Insider’s insider information is correct, this is a business that will either have to find a way to make money or hope that a major player decides to buy it.

It is funny that market share is often considered by many to be a sign of success regardless of whether or not that market share is actually creating real value (i.e. profits). I’ve used this example before: an investor goes to the CEO and says “We’re losing money on every product we sell. What are we going to do?” and the CEO responds “It’s easy. We’ll make it up on volume!”

Market share != success
Chad

March 15th, 2007 at 2:30 pm

Insider?, where do you get these figures? “the dirty secret of Free 411 is that their revenues are only $0.02/call on costs of $0.12/call. Losing $0.10/call * 600,000 calls = $60,000 of losses/day. ”

My info from Oct 2006 interview with free411 CEO was revenue of $0.20 per call and costs around $0.25. Still losing $, but he says revenue will approach $0.50 per call as market matures.
Andrew

March 15th, 2007 at 2:53 pm

google is gonna buy them, just watch.
Anthony Barba

March 15th, 2007 at 3:07 pm

Interesting this come out a day after Microsoft to Acquire Tellme.
Drama 2.0

March 15th, 2007 at 3:36 pm

Chad: what does he base the “revenue will approach $0.50 per call as the market matures” statement on? I’d be interested to know, if only because so many failed businesses have been built around projections made by market analysts that never materialize (or materialize far slower than expected).
Chad

March 15th, 2007 at 4:31 pm

Who knows what their CEO is basing the $0.50 prediction on? Maybe he has good market research or maybe he is pulling it out of his a#*&. But if PPClick price increases offer any historical insight, then the current $0.20 PPCall should definately increase considering audio ads idea is currently bleeding edge idea. Of course this all assumes audio ads continue to be tolerated by the caller - it this is true the marketing budget allocation for audio ads will only increase, and thus drive prices up.

Insider: Can you offer a reference to the figures you provided?
Drama 2.0

March 15th, 2007 at 4:50 pm

Thanks for the info. I’m always amused when a CEO justifies his information by saying “Some Analysis Firm project that by 2010, the widget industry will be worth $20 billion in the United States alone, up from $100 million today.”

The comparison to PPC is interesting, but two points:

- Tracking ROI on these types of audio ads would seem to be very difficult. If your audio ad is playing before a caller is given the phone number that they’re looking up, how exactly does an advertiser track that business was gained from the audio ads? One of the great things about PPC is that you can monitor clicks and use cookies or sessions to track the conversion ratios down to a campaign-by-campaign basis. I think the rise in PPC prices might be attributable to the fact that you can accurately track ROI on this level.
- PPC, as a model, has some flaws so I wouldn’t necessarily call it, or the growth it’s seen, sustainable. Click fraud remains a major issue of debate, and I’ve heard some reports that smaller advertisers are being pushed out because the ad spends of major advertisers are driving the costs too high for the small fries.
Sunny

March 15th, 2007 at 5:03 pm

I think I called it and I got a dirty phone ad. Those ads are annoying especially when you havea girl next to you so I discontinued using them.
anthropocentric

March 15th, 2007 at 10:05 pm

I agree with other posters that Google or Yahoo or some other company will buy them out for 1) the potential for owning a new ad channel and 2) the goodwill that the company has created.

Right now, Google is leaning towards EVIL and they could use a shot in the arm like Free411 - a service that makes just about everyone smile when they learn about it.
Austin Cassidy

March 15th, 2007 at 10:26 pm

Maybe they could ad some premium services to it… like “for 10 cents we’ll connect you directly to the number.”
MGS4

March 16th, 2007 at 1:02 am

Nag - thanks, I had forgotten 1videoconference. I added them to the post. DimDim is also open source. http://www.mp4-converter.net
Colin

March 16th, 2007 at 10:53 am

This is very interesting. I stopped by Il Fornaio this morning as I often do for a scone and cappuccino and on my way out I had to do a double take. Sitting across the way were who looked like Jingle’s CEO Garrick and Tellme’s CEO McCue. They seemed to be talking emphatically. Given that TellMe has just been bought up by MS, I’m trying to figure out what’s going on with these two.
NeoTechie

March 16th, 2007 at 1:16 pm

This a great service. Free is GOOD!
Dutch

March 16th, 2007 at 4:48 pm

Their circuts are busy a lot and the voice recognition lady never understand moi
BowRiverBrown

March 21st, 2007 at 9:29 am

Insider, the fact that 1-800-FREE411 has created a new media channel that consumers are flocking to shifts the burden of reaching these consumers to advertisers. Until FREE411 came around, merchants and business owners were getting “inbound phone leads” for free from traditional 411 services. Problem is, the consumer was paying for the call and now the consumer has decided emphatically that they REFUSE to pay for 411, as seen by the phenomenal growth of 1-800-FREE411’s service and others. As the traffic on traditional 411 begins to decline, merchants and business owners who used to get all those free calls from regular 411 are now going to have to pay to be listed on the free services. Which makes perfect sense…where else do you see consumers paying to find businesses? It’s the other way around: businesses pay to find consumers.
And here’s the kicker, and one that lends major credibility to the business model. 1-800-FREE411 just announced “category search” or “yellow pages search” which means now people can call for “a dry cleaner near the Empire State Building” rather than having to ask for a dry cleaner by name. You can bet that dry cleaning businesses near the Empire State Building would want their business to be listed. And they’ll bid just like paid search to be listed toward the top. The cost per connection to a business in pay-per-call is upwards of $2, and the “connection rate” for a category search query will be nearly 100%. That certainly makes the cost per call of $0.12 look very cheap. Nice margins.
Obviously, a big key to turning a profit for companies in this space will be if the mix of calls shifts toward bid-based models like yellow pages search. Running the math, it would not require an unreasonably high percentage of yellow page search calls with +90% connection rates and $2 per connection to turn a profit.
I applaud what 1-800-FREE411 is trying to do and I wish them success. They are certainly doing the consumer a big favor, and they are presenting a compelling, highly targeted new channel for local and national advertisers.