Greetings! We hope your year has been safe and fruitful thus far. We have important announcements regarding the Handango Software Partner Program, including (1) a new class of channels and the associated business terms and (2) new channels.
Several years ago, we recognized an unprecedented opportunity in the wireless industry and focused our publishing services, platform technology and distribution strategy accordingly. That focus yielded great successes in 2002 and 2003. In this time, we opened new distribution channels with many mobile operators and leading phone manufacturers, including ATT, Cingular, Sprint, T-Mobile, Orange, O2, Telcel, Nokia, Motorola, Sony Ericsson, and Kyocera.
As many of you know, the distribution of mobile software in the wireless industry is much different than in the tethered world. Some of the key differences include:
--TRANSACTION TYPES. Conducting transactions and fulfilling orders may now involve Billing-On-Behalf-Of (BOBO), direct billing, micro billing services, Interactive Voice Response (IVR or 1-900 billing) systems, SMS messages, premium SMS and Over-The-Air (OTA) delivery.
--CHANNEL DEMANDS. Mobile operators have become more interested in wireless data services because they want new products and services to increase their average revenue per user (ARPU). They place huge demands on their solution providers, such as Handango, in return for granting access to their millions of subscribers, as well as for providing their marketing and billing services.
--COMPLEX ENVIRONMENTS. Our largest channel partners in the wireless industry support dozens of unique devices across multiple operating systems, networks and geographic territories. This broad diversity makes software provisioning inherently more complex.
--QUALITY STANDARDS. Mobile operators have very high quality standards, and all solutions must be "carrier-grade." We see these same rigorous standards across the entire wireless industry.
--MORE PLAYERS. The supply chain in the wireless industry includes more players and more regulation.
These unique dynamics present obvious challenges for both you and Handango, but we believe the opportunity justifies the challenges. Indeed, pursuing opportunities in the wireless industry is clearly more costly and resource-intensive, but the tradeoff is significantly higher volume and ultimately much greater revenue and profits. As a result, our infrastructure, technology, and team are now even better equipped to meet the challenges.
NEW CLASS OF CHANNELS AND ASSOCIATED BUSINESS TERMS
Consistent with our Software Distribution Agreement, we have also created a new class of channels in Handango's Software Partner Program to address the unique dynamics of the wireless industry. For sales in the "Wireless Value-Added Channels," you receive 70% of net revenue - no tiers or other expenses.
Please note the following about sales in the Wireless Value-Added Channels:
--NET REVENUE DEFINITION. Net revenue is equal to gross revenue less distribution costs, which include billing, delivery and channel partner fees.
By way of example:
Gross Revenue = $10
BOBO and SMS fees = $2
Net Revenue = $8
Royalty = $5.6 ($8 X 70%)
--FEES. Examples of billing fees are credit card transaction fees and expenses from processing IVR/1-900 orders. Delivery fees may include SMS message transmission costs. Examples of channel partner fees are direct bill fees charged by mobile operators and sales commissions paid to a channel partner.
--EXEMPTED CHANNELS. The new terms do not apply to http://www.handango.com or to the PC versions of the Value-Added Channels, including (but not limited to) Palm, Microsoft, Sony, Handspring, Hewlett-Packard, Casio, Dell, Yahoo and AOL.
--LIST OF WIRELESS VALUE-ADDED CHANNELS. The new terms apply to mobile operators, phone manufacturers, and other channels that enable customers to purchase your applications wirelessly. The Wireless Value-Added Channels currently include:
1. The Over-The-Air (OTA) versions of all distribution channels.
2. AT&T Wireless, Cingular, T-Mobile, Telcel, Orange, O2, Nokia, Motorola,
Kyocera, Sony Ericsson
3. The new channels announced in this letter
--TIMING. The first monthly payment incorporating the new class of channels will be in October 2003, reflecting September 2003 sales.
--FIXED PERCENTAGE. Your royalty percentage in the Wireless Value-Added Channels will remain 70% regardless of sales volumes. This model is in contrast with the tiered structure of the other Value-Added Channels.
--CSV SALES REPORTS. We renamed a field in your CSV sales reports. You will notice a "Net Revenue" field where you formerly saw "Extended Price" on the Sales Royalty CSV layout and "Price" on the Detailed Sales Revenue CSV layout.
The new class of channels enables us to grow together and to continue supporting and pursuing opportunities in the wireless industry. Our incentives are clearly aligned with yours because (1) we are paid only when a sale occurs and (2) we are paid on the same net revenue as you. Accordingly, our goals include maximizing distribution and maximizing net revenue.
On that note, we would like to highlight our newest channels:
--Verizon Wireless (US-not yet publicly announced)
--Sprint PCS (US)
--CSL (The Hong Kong based division of Telstra)
--Orange (France, Denmark)
We now count five of the top five US mobile operators as channel partners, and many more exciting announcements are coming soon. In the meantime, if you have any questions about the new class of channels or any of the new channels announced today, please contact your Handango representative or write to partners@....
We appreciate your support, and we look forward to working with you during the rest of 2003 and beyond!
The Handango Team