No one likes begging tardy customers to pay. But consider the collection dilemma of the now shuttered mobile company, Amp'd Mobile. As a part of a bankruptcy filing, Amp'd recently announced that it had some 80,000 non-paying customers. Now, keep in mind this comes from a company that, by the end of the first quarter of 2007, had just about 200,000 subscribers. Do the math yourself. That's a staggering amount of delinquent accounts.
Amp'd built its business around mobile consumers ages 18 to 25, that most insolvent and fickle of demos. One of several struggling MVNOs (or Mobile Virtual Network Operator) in the U.S., Amp'd resold Verizon's mobile network, letting Amp'd subscribers access exclusive content geared toward younger audiences. In delivering content, Amp'd seems to have been wildly successful. According to the bankruptcy filings, Amp'd users downloaded more than four million videos, songs and mobile games in the first quarter of 2007. Amp'd licensed content from nearly every outlet it could find, including the likes of MTV, the Ultimate Fighting Championship, and Playboy Enterprises.
Yet, another large part of Amp'd's appeal was its lack of monthly bills. Most customers signed prepaid contracts. In fact, according to court documents, "approximately, 90 percent of the debtor's customers were on 18-month service contracts, meaning the company essentially extended customers credit and bills customers for monthly service charges."
Amp'd was willing to engage customers in pay-as-you-go contracts that its larger competitors wouldn't dare touch. This may explain why the business was burning through cash like crazy — it had raised more than $350 million in funding from the likes of Qualcomm, Intel and MTV. Despite its ample war chest, according to court documents, Amp'd couldn't make an emergency payment of $4.5 million payment to Verizon and owed more than $56.6 million to the wireless giant.
What do you think of Amp'd's troubles? What do you think of its choice to effectively act as lenders to its customers? Was this a flawed business model to begin with? What percentage of your outstanding customer bills are unpaid? Can any business survive when roughly 40 percent of its customers don't pay their tabs on time?