Bronte Media

Lyn Chitow Oakes, SVP Marketing of Jingle Networks posted a very thoughtful analysis refuting some of my points in a comment to my last post on the economics of free 411. So I thought I would re-run the analysis and revise my assumptions based on her feedback (a.k.a. correct my error-ridden napkin analysis)

On the cost side, Lyn says that a blended average of automated and operator assisted calls brings the cost down to 15 cents per call not 18 cents. So our theoretical 500,000 calls per day cost $75,000 per day not $90,000.

One the revenue side, she said “Our average pay per connect is much higher than $2, and we typically wouldn’t do a deal as low as $2 per connect.”

OK that’s fine. Firstly, there may be a misunderstnading in the definition. Mine was a net figure. That is after the ad network, in this case Ingenio, takes out its 30-50% cut. On that figure she said “Without going into specifics, this figure is not very close to the typical revenue sharing percentages we are seeing.” With such a broad range I don’t see any reason why it could not be close but let’s give the benefit of the doubt and say 70/30.

Lyn hints that “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.”

Now, although on the understandably optimistic side, this is likely an endpoint, rather than where we are at the moment. So we need something north of $2 and something less than $8. This is one I don’t think I should budge too much on. I created a dummy ad on Ingenio for the hotels category on a national level. The bids current range from $3.03 for 10th place to $3.78 for 1st. That ad is only shown in Orlando, but let’s take it for our purposes as being the national average (free 411 services only show the first ad).

So $3.78 * 70% = $2.67 net to Jingle. Travel is a category well suited to 411 because it’s not too high (mortgage) and not too low value (restaurants) that it can be taken with as an approximate average.

Now the biggest hole Lyn poked in my analysis was the white pages versus yellow pages lookups. I said 50-50. She said “According to Pierz Group, residential lookups are 20% of the total; among our callers it is around 12-15%.” I am probably (err definitely) dead wrong on this. Let’s dial the assumption down to 15%.

So the final revenue figure becomes 500,000 calls * 85% yellow pages * 7% connect rate * $2.67 net revenue = $79k

So the second time around produces a break even analysis. Clearly Jingle isn’t break even at the moment, but the point I guess is that they could very easily be.

The drivers are clearly the connect rate and the revenue, which depend on advertiser adoption and quality/relevancy of the ads. Those two critical factors are in the hands of a partner at the moment, so perhaps we’ll see Jingle start selling directly to try and control more of their destiny in the near future (again baseless guess using common sense).

Either way, thank you so much Lyn for posting such a detailed response to my post and rickety analysis, and I’d be happy to continue writing about free 411 if you’d like to keep in touch with how Jingle progresses over time (niki dot scevak at gmail dot com).