Bango CEO: Operators are getting more flexible on terms for carrier billing

By Kim-Mai Cutler Comment

Bango has become a vizier of sorts to consumer Internet giants like Facebook and Amazon that want to build platforms for mobile apps. Over the last year, the U.K.-based company has become a selected provider that helps partners wade through the complexity of setting up carrier billing for mobile app stores and platforms.

Recently, the company scored a deal to be a provider of undisclosed services to Facebook. Not long after, Facebook’s chief technology officer Bret Taylor announced one-click carrier billing for mobile web apps on-stage at Mobile World Congress.

I initially argued that Facebook is probably breaking even, or even potentially losing money, on these types of transactions because of the steep cuts carriers usually take. The public rates listed on Bango’s website are pretty painful. Some carriers only remit 55 or 60 percent back to the Bango customer. So if Facebook is paying out its standard 70 percent share to a developer, it’s definitely losing money and then you have to factor in the R&D costs associated with supporting the platform.

But after talking with Bango’s chief executive Ray Anderson, it sounds like carriers are becoming more flexible and are charging less than they historically used to for preferred partners.

Several years ago, they might take half or more in transaction revenue. But when Apple launched the iTunes app store, the company established a benchmark revenue share of 30 percent for the platform and 70 percent for the developer. Other companies like Facebook and Google with Android followed suit and copied the structure. Anderson said carriers are acquiescing to this new reality and are actually lowering their takes as long as they’re comfortable with the quality of content being offered on their devices.

“In the olden days, the piece the carriers took was quite large,” he said. “But now they’re becoming more flexible, provided that they understand the customer experience is going to be a good one. The bigger brands give them more comfort because they feel the quality will be good.” He added that in the U.K., some carriers are remitting up to 90 percent.

He said Bango’s publicly-shared standard rates are not representative of what it offers to partners like Facebook or Amazon. “The published rates on our website are for Charlie the Snowman who wants to sell pictures of snowmen to thousands of his friends,” he said.

Anderson says the reason Bango has become a partner of choice is because it can do one-click billing given all of the data it has collected on consumers over the years. Through years of doing billing for feature phones and creating its own unique identifier, Bango can recognize tens of millions of consumers. Consumers can add to their monthly phone bills without going through a tedious process of waiting for a special text message or remembering a special PIN.

“Because we’re involved in payments transactions across wide range of vendors, there’s a reasonably good possibility we’ve seen the person,” Anderson said.

Anderson says that when app stores implement Bango’s one-click billing, it bumps the conversion rate to 75 out of 100 transactions to 50 out of 100 potential transactions. “You’d make an extra 50 percent of revenue if you were a developer,” he said.

But even with its newfound traction, the margins are thin for Bango to operate. Generally, the company is looking at a 5 percent share, based on documents shared in its last earnings report.

In total, the company made 8.66 million British pounds ($13.6 million) in revenue for the six months from March to September of last year. That produced a net loss of 0.22 million British pounds ($345,000), which was about half the net loss from the same time a year earlier. The company is publicly traded because Anderson said the company decided to raise $10 million on public markets in 2005 to enter the U.S. market.