SAN FRANCISCO—VeriSign Inc.’s mobile content business is “looking like a disaster,” according to a report released this week by American Technology Research analyst Albert Lin.
Lin downgraded VeriSign to a sell rating, citing a flattening in revenues from ringtones, which account for as much as 90 percent of the company’s sales through the Jamba and Jamster Web sites. The market will continue to explode in usage, Lin said, while revenues decline and eventually disappear as users learn to create their own ringtones on computers, digital music players and mobile phones.
“(The) mobile ringtone industry has peaked and will likely see rates of growth decline (and then go negative) as activity will be concentrated in convenience-based sales that are generated from the phone (spontaneous purchase) as consumers quickly figure out almost any tone that is commercially available can be ripped and taken without charge,” wrote Lin. “We believe getting out of the ringtone business would be a positive move (for VeriSign) and we would reconsider our stock opinion.”
Lin’s note comes amid growing competition among third-party aggregators such as Jamster and Buongiorno Vitaminic’s Blinko, as well as newcomers like Fox Mobile Entertainment’s Mobizzo, which launched earlier this week. Analysts say ringtones account for 80 percent to 90 percent of revenues for the Internet-based storefronts.
Other vendors report increased sales in the market, however. 9 Squared Inc., a subsidiary of European mobile content company Monstermob Group, reported increased sales through its Web site, The Mob USA, which launched several months ago.
“What we’re seeing on that side is that there’s quite a bit of traction,” said 9 Squared Chief Marketing Officer Ted Suh, adding that the subscription-based service has seen steady increases in membership during the last three months.
