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Roughly a third of all mobile users download ringtones and 40% change them on a frequent basis (according to a study from Ipsos MediaCT). More importantly, ringtones are a lucrative source of revenues for mobile carriers and content owners.
To keep up the innovation, the next phase in the market is actually video ringtones. And this is the focus of Vringo, which has filed to go public.
The company's underwriter is small, Maxim Group. But Vringo does have a large investor: Warburg Pincus.
Founded in 2006, Vringo has built a platform that allows users to create, download and share video ringtones (there are over 4,000 in the library). What's more, the company has VringForward, which allows for engaging on social networks like Facebook and Twitter.
So far, Vringo has established relationships with mostly foreign-based mobile carries. Examples include: Avea Iletisim Hizmetleri (12.1 million subscribers in Turkey), Maxis Mobile Services (11.4 million subscribers in Malaysia) and Emirates Telecommunications (7.3 million subscribers in the United Arab Emirates). There is also compabability with the major technology systems, like Symbian, Java, Windows Mobile, Google's (GOOG) Android and RIM's (RIMM) BlackBerry.
In terms of the business model, Vringo has focused on free offerings. Of course, this has resulted in lots of traffic.
But, now there will be a move to premium services (on a subscription basis). In other words, the business model is a risk. Keep in mind that revenues came to only $36,000 for the first nine months of 2009 and net losses came to $4 million. No doubt, this is be a big concern for IPO investors.
Tom Taulli advises on business tax preparation and resolving tax problems. He is also the author of a variety of books, including The Complete M&A Handbook
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