Partner and bundling strategies for Zonbu – Part 1

Can the Zonbu succeed without some strong partners? Partners who can bundle the Zonbu in with the other key components necessary to make it viable for the end user?

I don’t think they can, but I do think they have a lot to offer a number of groups.

Let’s take a look at one of the options…

Broadband Behemoths

The number one group of of potential partners are the broadband operators: the Comcasts, Cox, Charters, Verizons and ATTs. All represent well established avenues in to the broadband connected home and they are all on the hunt for ways to profitably “enhance” their offering.

Think of the cell phone model, where the phones are heavily subsidized or even free when you sign up for a one year contract.

The broadband market is duking it out over the triple play. Who is going to win the voice, video and data business of the home and how can they differentiate their offering other than price?

Bundle baby, bundle!

The potential is there for any of the big broadband players to offer an entry level bundle of a Zonbu, storage and high speed Internet access all for one low price, say $50/month.

The problem is, the big guys have a habit of letting the start-up carry all the cost on version 1.0 and then pushing them out of the picture when it is time for 2.0. Witness the @Home debacle.

The cable companies and venture capitalits all pitched in to fund @Home when the business looked risky and uncertain.

As was done in the late 90’s, they took it public and let @Home and its shareholders take all the risk as it moved towards cash flow positive.

Once the first generation of hardware was ready to be replaced, and the revenue stream was well established, they (as the principle “partners”) pushed the company in to bankruptcy, bought an all new generation of equipment and installed it in-house.

@Home vaporized.

Zonbu needs to be conscious of a similar risk if they go down that road.

The Operator may include storage and save that cost

The broadband behemoths will want the storage equipment on their network, not at Amazon S3.

This makes sense, it means lower costs for the operator and lower upstream bandwidth utilization. Broadband operators are already operating large data centers, adding scalable storage is not going to present any real challenges. Why have your customers load their files from anywhere past your data center?

Save the bandwidth and get the lowest possible operating cost (once the model is proven out by your start-up partner, of course).

Since it is unclear what exactly the Zonbu business model is, this may or may not be a problem, but it is something to be aware of going in. S3 is fine for 1.0, but come 2.0 I guarantee storage will be localized at the broadband data center (exactly what I intend to do as well, if we deploy Zonbu as a product).

The road forward, or road kill?

Without question, there is real value and real risk in working with the broadband operators.

If there is one thing we hate in the broadband business, it is the spiraling costs of supporting end users – and Vista has only made that worse. This makes Zonbu very attractive.

To succeed, Zonbu needs to demonstrate that its unique mix of marketing savvvy, system updates and enhancements as well as end-user support represent real value that the broadband operator can’t easily replicate in house.

Partnering with Broadband operators is definitely a key avenue for driving volume shipments of the Zonbu platform but it is never easy dancing with an elephant when you’re a startup. That being said, if you are doing well and you don’t partner with the operators, either someone else will or they will do it themselves. After all, we all know the hardware is out there.

The best move would be to take the marketing momentum that is building around the Zonbu concept and start the broadband partner discussions as soon as possible.

-Mr. Zonbu

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