FreedomPop moves into financial services, in partnership with Prudential
Ahead of a big fundraising to fuel its mobile ambitions, “free” mobile service startup FreedomPop is taking an unexpected strategic side-road to expand into a completely different area: financial services. The company is licensing its customer conversion platform to Prudential, which plans to use it to up-sell existing customers to more of its products.
FreedomPop itself is not turning away from mobile services. The company — which has services in the US, UK, Greece, Italy, Spain, Mexico and Asia — appears to be doubling down on mobile after expanding internationally beginning in 2014. From what we understand, it is now Ebitda positive and on track to turn profitable at the end of this quarter.
On the back of that, we’ve heard from reliable sources that the company is planning to raise a large growth round in the coming months, to continue its expansion. It has raised $109 million since being founded in 2011, and this round is likely to include strategic investors. Previous backers include Atomico, DCM, Intel and Mangrove, among others.
FreedomPop built its so-called “Accelerate Platform” as part of its own business model: the company offers a bundle of completely free voice, text and data services to customers — using network capacity that it buys off mobile network operators like Sprint in the US and Three in the UK — and then upsells those customers on lots of extras like voicemail, extra data, extra phone numbers, and so on, via Accelerate.
Stephen Stokols, FreedomPop’s co-founder and CEO, says that it is built on machine learning algorithms that sifts through attributes that are based on the person’s usage patterns and other factors, and uses these to recommend products. “It gets smarter with time,” he said in an interview.
FreedomPop claims that the platform has given it one of the highest conversion rates on the internet, with nearly half of all its users buying at least one value-added service. As a point of comparison, it notes that Spotify and Dropbox only manage to convert their free users 23 percent and 16 percent respectively.
I’d argue that part of the reason for that is that the main service is free, and also very bare bones, so it’s no surprise that people are willing to pay for some extras. But in any case, that business model has made FreedomPop financially stable, so for a company like Prudential, it’s a safe and smart bet to try it out, and it will be interesting to see how it works in a different vertical.
The move is an interesting twist for how FreedomPop is building and monetising its assets, and speaks to the wave of adtech and marketing technology that legacy businesses are now trying to bring into their platforms to expand their business with customers.
While the switch to online interactions and web-based portals has definitely expanded the horizons for a company like Prudential, on another level it’s made business a lot more challenging.
Consumers have a lot more choice, and usually a lot less attention, and are generally more reluctant to take big financial leaps online than they might have been in an in-person encounter. On top of this, the rise of big data analytics and a myriad of tools to track your every online move has made it very possible for companies, if not to know you directly, know everything about you based on that online footprint; and to sell to you accordingly.
Those who don’t have the ability to capture and use that information end up at a disadvantage, and that’s something that Prudential will also be trying to tackle here.
“They would have had seven or eight different segments in the past,” he said, referring to the demographic buckets that Prudential would have used to figure out what further products to offer their customers. “Now we’re talking about thousands of micro-segments, based on actual experiences.”
The idea will be for suggestions of products to come up in places where customers are already hearing from Prudential, whether it’s through messaging on their site, direct marketing or through customer service / advisory conversations.
“We chose to work with FreedomPop because they have a proven model and have already demonstrated reliability and scalability with world-class companies,” said Al-Noor Ramji, Prudential Group Chief Digital Officer, in a statement. “We are excited to leverage FreedomPop’s Accelerate platform to surface, assess and maximize data monetization opportunities in new and innovative ways.”
Stokols said that Prudential is the first, but not the last, financial services company that will be using FreedomPop’s recommendation engine, with four more deals with financial services businesses planned to be rolled out later this year.
While the company is not revealing the financial terms of the deal, the size of the financial services market — $100 billion annually — means even a cut might end up having a strong impact on FreedomPop’s balance sheet. “We think financial services might even be bigger than telecoms for us in the long run,” Stokols said.
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