Startup DNA

Startup DNA: FreedomPop Helps Consumers Ditch Their Data Diets

Too many consumers are on a data diet. Each month, they allot themselves or their families a certain amount of data usage, and they make tradeoffs on the basis of how close they are to being tapped out. And it’s getting harder to stay on those data diets as apps come onto the scene that use varying amounts of data as part of the experience.

That’s where FreedomPop, literally, pops into the picture with its “freemium” payment model for voice, text and data. Its freemium model is similar in many ways to Spotify with music and Dropbox with online storage.

“We have the ability to give consumers 40–50 percent more data consumption,” Stephen Stokols, CEO of FreedomPop, told Karen Webster recently. “It was an idea that I had when I was working for a carrier and saw the disconnect between the carrier’s need to monetize data and the consumer’s ability to pay for it.”

The genesis of Stokols’ company came after beavering away on a variety of innovation-related projects at a British telecom company that didn’t have the appetite for the freemium mobile model he proposed. Undaunted, he left and kept the idea fresh by managing to persuade Skype Founder Niklas Zennström to invest in FreedomPop.

“He helped us get some of the initial carrier deals for us,” said Stokols. “Ultimately, free data is just an extension of free voice.”

Part of the service is indeed free, and the other part is on a subscription basis.

“We’re basically giving away free voice and text data every month on a base plan, and our model is predicated on being able to convert users via either heavier packages, heavier data plans or — what makes the model really unique is — additional value-added services, which generally enhance the value of voice, text or data, which is generally associated with big, large carriers,” he said.

While Stokols can easily talk about the basics of the platform, Webster pushed a bit more on the connection between FreedomPop and payments, as well as what she thought could represent a real opportunity to connect FreedomPop to commerce. Recalling an article that she read about the tradeoffs that consumers were making in developing countries, like India, between data and buying consumer goods, she posited that FreedomPop might be a much-needed lifeline to those companies who don’t like being on the wrong end of those tradeoffs.

“We actually look a lot at the innovation going on in the payments space, which is great for us,” said Stokols. “But, because it actually helps the freemium model, where every percentage increase in conversion can really make a difference in profitability or viability, it actually helps make the model. To be honest, without electronic payments, our model wouldn’t work.”

Working in the sense that, with checkout buttons that make it easy to click and buy on a mobile website, conversions are as high as 50 percent and growing. But that’s only part of it.

Consumers with more data can buy more stuff — everything from digital goods to games to, well, anything.

And, in turn, that continuous usage allows for more “free data” given to consumers.

“The conversion turns into value-added services, which ultimately subsidizes our ability to give away voice, text and data,” said Stokols, who added there are some similarities and differences to the bigger tech giants in that way. “And if you think about it, Google and Facebook can substitute voice, text and data with advertising, while we’re doing that by selling additional services. So, slightly different monetization.”

Looking ahead, Stokols hinted about other ways that he and his team have considered keeping consumers loyal and engaged via a mobile wallet play. To that end, FreedomPop is beginning to partner with more mobile wallets and then expand those wallet relationships across a variety of commerce use cases.

“In Mexico, when the user signs up for our product, they’re signing up for a specific payment wallet as well,” said Stokols. “Eventually, consumers will be ‘paying’ for their FreedomPop through paying with a certain wallet. So, it’s almost integrated into the mobile service. That will then be able to push payments across not just FreedomPop but other platforms as well.”

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