I read with interest your post outlining the possible economics of a free directory service. We appreciate your thinking about the issues a company like ours (Jingle Networks) faces as we build out this market. While we agree that there are always some challenges we face to grow and become a viable, long-term business, I wanted to address, and in some cases point out differences we have with your perceptions and number crunching. I hope it’s helpful:

“It costs around 18 cents to service a call at the moment.” Actually, automated calls are well under 10 cents, while live operator calls range from 17-30 cents. The blended average is less than 15 cents.

“For instance, white pages queries (name lookups) cost just as much as yellow page queries (more commercial in nature) but make up roughly 50-60% of queries (have that on pretty decent authority).” Both our experience and industry data present much different figures. According to Pierz Group, residential lookups are 20% of the total; among our callers it is around 12-15%.

“So that means that 15,000 call conversions. Let’s say the average price per call is around $2 net. That’s $30k/day in revenue.” Our average pay per connect is much higher than $2, and we typically wouldn’t do a deal as low as $2 per connect. A connect fee of $8 with a response rate of 7% produces an average revenue per call of 56 cents. One call like that pays for a couple of calls with no revenue.

“Ingenio is providing the ads at the moment and are likely getting around 30-50% of the revenue.” Without going into specifics, this figure is not very close to the typical revenue sharing percentages we are seeing.

“No wonder VCs have kicked in $30m. This to me seems another YouTube type business, and one where a VCs can really help because of the significant cash drain in the startup phase. Over time it could be a great business but as Greg notes, history is littered with failed 411 startup attempts.”

I’d really like to clarify this statement. While there have been other 411 startups in the past that have not succeeded, previous to a month ago NONE of those have been based on starting with a basic free 411 proposition. The only failed independent 411 startup attempts have been with companies not starting with this basic tenet. Therefore, we believe that those companies may not have had a compelling enough benefit to drive rapid adoption and loyalty. What we have learned from them is that consumers are not looking for fancy 411 concierge-like offerings. We’ve found that consumers care more about having access to a free basic 411 service, which is the foundation of Jingle Network’s 1-800-FREE411 service. This model (our model) had not previously been tried.

In the past month, InfreeDA shutdown. In our opinion, InfreeDA failed because their approach to providing free 411 services required a very high cost structure and put pressure on their economic model, which is different than Jingle Networks’ model. In addition, unlike Jingle Networks, InFreeDA’s 800-411METRO had a name for their business that would require them to invest huge marketing dollars to brand themselves nationwide. At Jingle Networks (utilizing the memorable 800-FREE411 number), we have been able to generate our call volumes largely through viral marketing, PR and word of mouth, allowing us to grow quickly and efficiently. Given this, we believe the VC’s ultimately determined it would require too much additional investment in pre-breakeven operating costs.

I hope that helps to clarify some of your points. Thanks again for your thoughtful post.

Lyn Chitow Oakes, SVP Marketing, Jingle Networks