How eBuddy's Mobile Monetization Strategy Helped It Turn A Profit

For the past four months, Amsterdam-based eBuddy has turned a profit, CEO Jan-Joost Rueb tells me, by offering advertising-supported services for free in combination with sales of a premium iPhone application.

The company, backed by 11.5 million Euros in venture capital from Lowland Capital Partners and Prime Technology Ventures, markets a Web-based social network and instant messaging aggregator that enables people to sign in to their service once and stay connected to people through various platforms in one single interface where all of them are centralized.

It also offers a number of ways for people to use the service on their mobile phones, through a mobile web service, a Java-based messenger client and applications for iPhone and Android.

(Keep reading if you want to try their premium iPhone app for free, by the way)

Rueb informs me that the J2ME client in particular has seen phenomenal success, recently surpassing 50 million downloads. The free app is currently the most downloaded program as registered on GetJar, a one-stop shop for mobile applications, with more than 36.7 million installations (up from 10 million in March 2009).

Its iPhone applications (a free one and a premium one that goes for $4.99) are also quite popular: in total, the apps have been downloaded 3 million times since their debut in the App Store. The free version was released in July 2009, the paid app late November 2009.

eBuddy expected between 4% and 8% of its free app users to convert to the paid application, and says it is indeed currently hovering around a 6% conversion rate. A back-of-the-envelope calculation suggests that its revenue from the premium app is thus about $900k, or $600k if you take into account Apple’s 30% cut. Conceivably, adding the revenue from ads on its free app, eBuddy is raking in around $1 million from its iPhone applications alone.

If you’re keen on giving the premium app a whirl for yourself: the first 1,000 users who purchase eBuddy Pro from the U.S. App Store and follow the instructions on this promotion page will receive an iTunes gift card worth $5, i.e. the price of the app.

In total, eBuddy has attracted about 100 million unique users, of which about a quarter uses the service at least once every month. These are heavy users: on average, 14 billion messages get sent via eBuddy per month. And don’t think all of them are using their cellphones: eBuddy’s Web application has seen 50% growth year over year, says Rueb.

Still, its strategy of having a feature-limited, ad-supported app in Apple’s App Store alongside a paid premium one with more bells and whistles, has resulted in close to 50% of the company’s revenues now coming from its slew of mobile products. Advertising accounts for about 60% of that income, and 40% comes from app sales today.

Rueb declined to share revenue numbers in greater detail, but said that the company has now been profitable on a net income basis for the past four months and is cash-flow positive, which means its mobile monetization strategy is clearly working out well for them.

A bit of good news for BlackBerry users, finally: eBuddy expects to (finally) ship a custom client for the platform in the next couple of months.