For Mig33, a Move to Asia — and Virtual Goods — Is Paying Off

Mig33, a mobile social service with 34 million members, in October of last year decided to shift its center of gravity to where its customers were: Asia. It was a high-risk move for the company, which has raised $13.5 million in funding from Accel Partners, Redpoint Ventures and DCM. But so far, it seems to be paying off.

The company is on track to break even by the second half of 2010 and be profitable by end of the year, CEO and founder Steven Goh tells us. What changed? “[W]e switched to social games and virtual content and that just took off,” said Goh, a strategy shift that coincided with Mig33’s move to Singapore. Until then, the company made its money selling cheap voice minutes.

Like many other VoIP startups, however, it realized that the only way to succeed was to match the size and reach of Skype. After all, more end users means higher outbound calling and voice dollars. But that’s easier said than done. In the meantime, Goh and his team started to notice a peculiar behavior in their community: messaging, or rather a whole lot of it.

Such behavior is usually associated with a social network such as Twitter. Regardless, the social activities on its rudimentary mobile social network prompted Mig33 to start experimenting with virtual gifts in July 2009.

By January 2010, about 1.5 million virtual gifts a month were being exchanged. By April, it was over 3 million gifts a month. Currently some 150,000 virtual gifts are being exchanged over its network every day. This growth is boosting revenues. Goh told us that in some countries only 3-5 percent of its customers are paying for virtual goods but in others that figure is closer to 12 percent. Most are spending the equivalent of a dollar a month, all of which are beginning to add up, leaving Goh fairly confident that the company will be profitable before the year is over.

Mig33 is one of the many companies that live in the often overlooked world of feature phones popular in fast-growing teleconomies such as India and Indonesia. These cheap devices are no superphones, but they still offer plenty of opportunities. Mig33 has focused on that segment of the market.

Up next is the release of a social networking desktop app written using Ajax, slated for this month. The app is meant to provide an experience quite similar to QQ, a popular Chinese social service, and is aimed at cashing in on the growing popularity of netbooks in emerging economies, according to Goh.

When I asked him what lesson he’s learned from all of this, he grinned and said that listening to your customers and being close to them is the answer to everything. Somehow, few of us are able to grok something so basic.

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