What were they thinking? Amp'd Mobile's mad credit strategy

Amp’d Mobile, the hard-charging mobile content company that raised $360 million only to burn through it all and crash into bankruptcy, continues to surprise.

We’re now hearing from people familiar with Amp’d strategy that its mistake was to change its credit check policy, in a foolhardy effort to boost subscribers. The company’s founder chief executive, Peter Adderton, known for dashing in and out of Los Angeles with a helicopter, searched his business for bottlenecks to the company’s growth. The big one he found: Credit checks. While his company’s carrier partner, Verizon, checked customers’ credit to make sure they had enough cash to pay their bills within 30 days, Amp’d decided to relax the requirement to 90 days for its own network.

So Amp’d marketed like crazy to these riskier people with lower credit ratings, got them all signed up, and then 90 days later — oops — found that something like half of them were having trouble making their payments, many of heading into collections, according to our source. We’ve contacted the company for comment, and will update.

Adderton has since been ousted. But what were Amp’d Mobile’s multiple investors — including Highland Capital Partners, Columbia Capital Equity Partners Vivendi/Universal Music Group and MTV Networks — thinking? How did they let him get away with such a careless strategy, especially when it was well known virtual network operators in the past, including ESPN’s had so much trouble?

Two days ago, a peeved Verizon Wireless, which was letting Amp’d use its cellular network, asked a court to let it kick off Amp’d from its network. It said Amp’d is burning through $370,000 a day since filing for bankruptcy in June, and still hadn’t come up with a loan to pay the millions it owes Verizon for usage of its network. Amp’d Mobile will have just $9,000 in cash by this coming Monday, Verizon said.

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  1. [...] de Amp’d Mobile sería más convenientemente descrita como una debacle. Caracterizada por Venture Beat como una «empresa llena de energía que generó 360 millones de dólares para quemarlos y caer en [...]

  2. […] Amp’d Mobile: Amp’d Mobile takes the crown for money-burning, with $360 million that ended in bankruptcy. The company’s major problem was its customers’ ability to pay. While other mobile providers check for an ability to pay bills within 30 days, Amp’d let it go to 90 days and marketed to these risky customers. It has been reported that 80,000 of the company’s 175,000 customers were unable to pay their bills. […]

  3. […] also hear about spectacular failures—Solyndra, Amp’d, and Color come to mind—and plenty of founders seem to view failure as the […]

  4. […] also hear about spectacular failures—Solyndra, Amp’d, and Color come to mind—and plenty of founders seem to view failure as the […]