It's a Bad Time to Be ChaCha and Kgb

Recently, services such as kgb and ChaCha have sprung up to serve consumers by answering trivia questions via text message for a nominal fee. At the outset, this seems as if it is a good idea. However, there are several factors that I believe will bring about the demise of these companies. In this article, I intend to detail why these services will go out of business within a year or two.

Right now, America is in the middle of a recession. It's no secret, and turning on any cable news broadcast for five minutes will remind one of that fact. People don't have disposable incomes right now, and if they do, they are less willing to spend them. However, kgb assumes that people are willing to pay $0.99 to have a trivia question answered. I would say that maybe two or three people out of ten would be willing to pay that fee at this point. Here's the kicker, though. I think people might use this service, but they definitely won't use it regularly.

Let's make the conservative estimate that a person has a trivia question or an argument about a fact every other day. That means that in the course of a month, an individual might have 15 occasions in which he or she would want a fast answer to a trivia question or a quick fact or piece of data. Granted, these might not be distributed evenly throughout the month, but 15 burning questions is the number that we are going to use.

How many people would willingly have their cell phone bill increased by $15 a month right now? Very few. How many people would pay $2 or $3 a month to resolve a dispute or alleviate mental anguish? The maybe two or three out of ten estimated above.

So no one's going to make constant use of this service due to its pricing. It's just too much, and it adds up too easily, probably to the chagrin of many parents. What if kgb lowered the price of the questions?

Again, here's the kicker. What's a price a normal person would pay to have a question answered? Maybe $0.50. Maybe $0.25. Maybe only $0.10. The service kgb pays its question answerers five to ten cents per question that they answer. Right now, those people bring in five to ten percent of the gross income of the service. If they lowered the price by any reasonable amount, they would have to cut the pay of the "special agents" answering the questions. And because the people that answer questions do so voluntarily, there's no way that they would continue to answer questions for a cent or two per question.

In short, the price has to be kept high to make any money, especially when one considers the cost of advertising, having a server, computers, hired staff, the special agents, etc. But most people won't pay the high price on a regular basis. None of this matters that much. The target market is all wrong anyway.

Although ChaCha might not charge anything now, it does pay people up to 16 or 18 cents to answer submitted questions. There's no way to put out money and not bring any in, unless they allow third parties to do significant advertising through them. It's just not a sustainable business model.

Services such as kgb are geared towards people that turn to technology to solve problems, that have disposable income, and that are familiar with text messaging. At some point, this becomes the description of someone that would likely be near a computer or have a phone with internet access, and therefore be able to look up the answer or figure in question. Otherwise, it describes a teenager that will quickly lose his or her phone to angry parents.

These services were doomed to failure. Within a year or two, I think most people will have smartphones, and the cost of data plans will drop considerably. Since people will have internet access, they will be able to look up answers on their own. Likewise, Wifi has proliferated over the past few years, and people will be able to use their laptops or iPod Touches to search for answers. (Note: a reader made a good point in a comment. If we are in a recession, how will people have smart phones? Like I said, I think the price of the phones and plans will drop. Maybe not everyone will have one, but enough people will that a person can say, "Hey Bill, can you look up some baseball stats from such and such a year...")

In short, it's not a good time to be kgb or ChaCha. The price of kgb is too high, they geared themselves to the market that would be nearest to a computer and most capable of looking up answers on its own, and they failed to consider that in a year or two, most people will have smartphones or Wifi capable technology on them. If you have any thoughts on this article, please share them in the form of a comment. Thank you for reading!