Unified messaging service mBox watched its subscriber base shrink more than 80 per cent when it switched its model from free to fee a few months ago.
For any Web business stuck in give-it-away mode and wishing it could migrate to a more revenue-rich approach, that alone is food for thought.
But three months after its changeover, mBox is still being nipped by follow-on costs that weren't immediately evident.
One of those costs has just forced the company to alienate a large section of its remaining user base by changing their phone numbers.
The action has stirred what mBox founder Barksdale Brown understatedly calls "unhappiness" among customers who use their mBox number as a one-stop shop for fax, e-mail and voice phone messages.
The problem is that its earlier subscriber exodus saddled mBox with large volumes of unused phone numbers for which it was still paying.
The 160,000 phone numbers it originally sourced from Telstra were delivered in all-or-nothing blocks of 100.
Blocks that cost mBox $385 each were left looking like Swiss cheese when subscribers pulled out of the service rather than pay a fee.
As customers dipped to 20,000 from 135,000, many blocks ended up with only a few numbers still being used, but mBox was being billed for the full block.
That translated into an annual overhead of $600,000 and the single largest operational cost for the five-person company.
By releasing all the old numbers and picking up new ones organised in fully populated blocks, mBox has shaved its bill to less than $70,000 a year.
"People out there are upset and rightly so," Brown says. "But the only other option for us was to not continue as a viable commercial entity."
With $4.6 million still left in its kitty after a public float 18 months ago, mBox claims its vastly reduced monthly cash burn rate of about $60,000 will see it through to profitability.
On the retail side, it is still signing up five to 20 new fee-paying customers A month, Brown said.
But it is pinning more hopes on wholesale activities where it outsources its messaging service to companies like i7.
Such companies offer the service to their customers and pay a monthly fee back to mBox for each one they sign up.
For mBox, it is a way of leveraging other people's customer databases that radically lowers the per-customer acquisition cost. - The Industry Standard Australia