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| | TANSTAAFL As a favorite author coined - there ain't no such thing as a free lunch.
Every call that MJ connects to a PSTN number costs MJ a certain amount per minute (usually a few cents, occasionally more). MJ to MJ calls are "free" but they are such a small percentage that they are meaningless and will be for a long time.
Given the annual subscriber revenue that MJ is collecting, it's almost certain that MJ is paying more in call termination fees than they are collecting in recurring revenue. The only thing that is keeping them afloat are the sign-up fees. Subtract the cost of the dongle and advertising, and you have to wonder how much longer they will survive. In fact, the whole setup sounds suspiciously like a certain 1920s investment scam.
Don't know what MJs exit strategy is, but I suspect things are going to be quite messy. | |
|  Reviews:
 ·magicjack.com
| Re: TANSTAAFL said by travelguy:- Every call that MJ connects to a PSTN number costs MJ a certain amount per minute (usually a few cents, occasionally more). - MJ to MJ calls are "free" but they are such a small percentage that they are meaningless and will be for a long time. ... Given the annual subscriber revenue that MJ is collecting, it's almost certain that MJ is paying more in call termination fees than they are collecting in recurring revenue. MJ (through it's sister company, YMAX) is a real CLEC. They collect termination fees for incoming calls. To some extent, that offsets the termination fees they pay for outgoing calls.
In fact, it's been reported that MJ doesn't discontinue (even after a year) incoming service for customers who don't renew. It is speculated MJ does this so it can continue receiving termination fees for incoming calls.
The cost/revenue difference between outgoing/incoming usage may explain why MJ has a nebulous "excessive use" police. Some people have reported being terminated for 2500-3000 outgoing minutes in one month. I bet if they had 3000 incoming minutes, they wouldn't have been terminated.
said by travelguy:The only thing that is keeping them afloat are the sign-up fees. Subtract the cost of the dongle and advertising, and you have to wonder how much longer they will survive. MJ users have speculated MJ makes most of its money from the dongle. That it costs 50 cents to manufacture in China. They sell it for $20 (with one year of service for another $20).
Regarding advertising, it seems to be entirely infomercial, which doesn't cost as much as traditional advertising.
Over the past year I've seen a dozen 15-second commercials on TV for MJ at Radio Shack, Best Buy, Walmart, etc.
You're right that selling through infomercials or retail outlets cuts into the profit MJ receives from direct sales. It seems they've tried to remedy this by informing retail customers that MJ only supports people who purchased directly from MJ (creating some ill will).
said by travelguy:In fact, the whole setup sounds suspiciously like a certain 1920s investment scam. The 5-year plan starts to resemble a Ponzi Scheme (which is, by definition an investment, nor merely an unsustainable business model). It looks more like a long-term investment whose service is paid for by new customers.
I wouldn't call the normal 1-year deal a Ponzi.
Mark | |
| | | | Re: TANSTAAFL said by amigo_boy:MJ (through it's sister company, YMAX) is a real CLEC. They collect termination fees for incoming calls. To some extent, that offsets the termination fees they pay for outgoing calls. In fact, it's been reported that MJ doesn't discontinue (even after a year) incoming service for customers who don't renew. It is speculated MJ does this so it can continue receiving termination fees for incoming calls. The cost/revenue difference between outgoing/incoming usage may explain why MJ has a nebulous "excessive use" police. Some people have reported being terminated for 2500-3000 outgoing minutes in one month. I bet if they had 3000 incoming minutes, they wouldn't have been terminated. Fair enough. But talk about walking down a razor edge. On a relatively small user base, it doesn't take much of an imbalance between call originations and terminations to really screw up the financial health of the company. | |
| |  dib22
join:2002-01-27
Kansas City, MO
kudos:2 | they also run targeted banner ads on the machine that has the magicjack connected... targeted by looking at what numbers call you and that you call... not sure it's a lot of revenue but wasn't listed above. | |
| | | Reviews:
·magicjack.com
| Re: TANSTAAFL said by dib22:they also run targeted banner ads on the machine that has the magicjack connected... targeted by looking at what numbers call you and that you call... not sure it's a lot of revenue but wasn't listed above. MJ hasn't displayed any ads yet. Many speculate that this part of their business model will never pan out, leading to the question of whether the $20 annual charge is sustainable. (Maybe it needs to be $40 to make up for unrealized ad revenue?).
Dan says in the lawsuit that they haven't even analyzed phone numbers yet. But, can you believe someone who uses random-number generators, and displays on his site: "hurry, offer ends today," every day? 
MJ's a great deal. But, the owner damages its reputation far more than any commentator.
Mark | |
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| slimtim
join:2002-12-12
Coldwater, MI | I talked to the people @ icall.com
They have special higher rates if you call a MagicJack user...
like $.10 a minute...
whereas a 'typical' phone number would be $.01 a minute.
They said it was due to the fees that YMax / MagicJack charges them for termination.
-TimJ | |
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1 edit | Re: TANSTAAFL Bullxxit slimtim! | |
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