Innovation

Business plan: Another piece of the pie

Written by Bryan Borzykowski

Any good entrepreneur knows that when an idea strikes, you write it down wherever you are€¹even if it’s a smoky bar. When Nick Quain’s big idea hit 10 years ago, he was in the midst of a heated discussion with a technology-minded friend (who would soon become his business partner). With a beer in one hand and a napkin near the other, the Web media exec began jotting down his thoughts on what would soon become his new full-time job. A year later, in 2000, Quain launched CellWand Communications and began marketing his company’s innovative service, called #TAXI. The cellphone-only abbreviated dialling code helps millions of North Americans find cabs every year. The idea was spawned from a simple question: how can people get a cab if they can’t find one on the street and don’t know a number to call?

A similar question helped Quain dream up CellWand’s second mobile application. When — or if — it launches this fall, #PIZZA will give consumers an easier way to order a pie. “The service is for when that initial avenue for finding a pizza is all the sudden not there,” says Quain. That happens a lot. According to market-research firm Harris Interactive, pizza is the No. 1 business-listing request made to 411 in the restaurant category — which is the most popular category. Imagine if those callers were to dial #PIZZA instead. With about 250 million mobile users in North America, if even half of them use #PIZZA just once a year, CellWand could easily become a $100-million company, says Quain. But for the service to take off, CellWand must secure some much-needed marketing partners to help spread the word; without them, #PIZZA’s launch, which has already been pushed back by a year, might be further delayed.

Like #TAXI, #PIZZA relies on CellWand’s interactive voice-response technology, created with angel investment “in the low six figures,” says Quain. When you press #74992 (which spells #PIZZA) you’re directed to an automated voice program. The software determines your location, then asks a series of questions to determine your preferences, such as highest quality, lowest price or fastest delivery. Finally, the program connects you to a restaurant that fits your criteria.

To create the database of restaurants, Quain’s employees spoke to thousands of pizza joints across Canada and the U.S. to find out where they deliver, the quality of food, price and service. They also aggregated data from social media, magazines and university-campus discussion groups to determine which pizza places have the best product: “It’s usually some small, family-run business,” says Quain.

The #PIZZA service isn’t meant to circumvent people’s usual pizza-buying methods; Quain is the first to admit that most people craving a pizza will continue to call their favourite local parlour or the one with a catchy ad jingle. CellWand is going after folks who may be out of town or simply across town, where their usual choice doesn’t deliver. “It can be the soccer mom on her way home who doesn’t have a number for a pizza place and needs to order quickly, or the student who’s staying at a friend’s and doesn’t know what restaurant is open,” says Quain. He’s also hoping people new to a city or others who “don’t have the faintest idea who delivers pizza in that area” will use his service.

With the technology and the database ready, Quain is now focusing on marketing. To promote #TAXI, CellWand partnered with Mothers Against Drunk Driving, bars, and liquor and gaming commissions to, as Quain says, “help promote the social responsibility message.” It’s a little more difficult to see buying a slice of pepperoni as an altruistic act, so to get #PIZZA out to the hungry masses, Quain is largely focuing on partnerships with the pizza parlours themselves. His proposition: pizza companies can get premium placement within his service in exchange for his logo being placed on their promotional materials, websites or even pizza boxes. “When you call #PIZZA, we automatically figure out who’s open and delivers to you,” Quain explains. “So, if, say, Pizza Hut is one of those, we could ask, €˜Do you want the cheapest pizza, the best-quality pizza or this cool promotion from Pizza Hut?'”

Quain isn’t worried about securing marketing partners. “Our service is the ultimate shortcut to get a pizza, so stakeholders in the pizza industry are extremely interested in associating themselves with it,” he says. Although he has struck no formal partnerships as yet, he’s had “a lot of conversations” and is confident he’ll soon ink some deals.

Once his marketing partners are in place, Quain will strike up deals with cellphone carriers, who have also expressed interest in the service — not surprising, since it represents a new revenue stream. The $1- to $2-per-call charge to #PIZZA users will be shared between CellWand and the carrier. (Quain won’t reveal the percentage split.)

#PIZZA is most likely to launch in Canada first, with a roll-out in the U.S. soon after. Quain has existing relationships through #TAXI with a number of U.S. cellcos, such as AT&T, Sprint and Verizon, but that doesn’t mean getting a new abbreviated number will be easy. In fact, dealing with the phone companies is the hardest part of his job. “We’re at the whim of carriers,” he says. “And, while it’s easier now, it [still] may be difficult to build a business on the backs of those companies.”

That doesn’t mean Quain won’t try. He says he has other abbreviated phone-number ideas. And he’s also looking beyond dialling codes. For example, CellWand is developing a GPS-based mobile app that, once activated, would tell the system exactly where the user is and what the nearest cab or pizza place is.

But what has Quain most excited is the sheer potential of this business — that is, the millions of students, soccer moms and travellers who have yet to buy a mobile phone. “I remember when there were 10 million cellphone users in Canada,” he says. “Now there are 20 million, and we’re not done yet.”

What the experts say

PROFIT asked a seasoned mobile executive and a professor of entrepreneurship about #PIZZA¹s prospects for success.

Gary Schwartz
President, Impact Mobile, Toronto

The exciting aspect of CellWand’s #TAXI and upcoming #PIZZA service is the number of revenue options in this channel€¹advertising, conversion and possibly mobile commerce. Much of the mobile industry is following “shiny objects” such as smartphone widgets, and there is little to no revenue model behind 95% of those applications. CellWand’s challenge, being the broker and chief architect of this value chain, will be to identify these multiple revenue streams and manage them to profitability. Key to success will be getting the critical reach and frequency with the end-consumer required to attract advertisers and brands, as well as help courting the wireless carriers’ participation and promotion of the service. But I sure like the model. It is a pennies-in-the-night transaction model. I like transaction companies in the mobile space because they will make money in a scalable fashion as the mobile market ramps up.

Elspeth Murray
CIBC Teaching Fellow in Entrepreneurship Queen’s School of Business, Kingston, Ont.

CellWand has obviously hit on a legitimate problem; who knew that a popular 411 call is for a local pizza place? Quain has a very interesting challenge ahead of him, however: how to position his company within the shifting sands of the mobile-commerce space. The cellphone carriers have lost a great deal of power within the industry, thanks to the iPhone, iTunes and mobile apps. One no longer needs to be at the whim of the cellphone carriers. However, Quain’s approach should be very attractive to the carriers as they seek to recoup some of the power and revenue they’ve lost. In any case, as the mobile space continues to morph daily, Quain should consider hedging his bets in a couple of ways. First, social media should be a big part of Quain’s strategy going forward. Second, the app space is exploding. If negotiating with the carriers is too onerous, then perhaps Plan B€¹the GPS-based app€¹needs to become Plan A.

Originally appeared on PROFITguide.com