Bronte Media

Greg Sterling has an excellent post on the free 411 industry. Greg summarizes a recent sponsored comScore study about free 411 as well as pointing out the biggest problem: burn rate. And also interestingly he notes that “inFreeDa (1800-411-Metro) has discontinued service”.

The economics of free 411 are not for the faint of heart.

It costs around 18 cents to service a call at the moment. That’s pretty good considering the $1-2 that the phone companies get from consumers but advertising is a little harder to make work.

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).

Let’s be generous and say that half are yellow page type queries. Of those around 10-15% are for restaurant type queries which will be extremely hard to monetize. That 15% assumption is based upon category data from the YP association [warning PDF].

Greg says Jingle is doing around 500,000 daily calls. So 85% of 250,000 is 212,500.

The ‘click through rate’ for the pay per call advertising is 15% at the high end, but 5-10% is more common. Let’s assume 7%.

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.

For the costs, (500,000 calls * $0.18), it’s $90k/day.

The pay per call metric is obviously the most rubbery. Ingenio is providing the ads at the moment and are likely getting around 30-50% of the revenue. So the advertiser would be paying $3-4 per call.

That’s a blind assumption. If advertisers were paying, on adverage, $12 a call, then the business would be at break even, according to the assumptions above. But if it follows the above assumptions, they’d be losing $60k/day.

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.