Solavei - Failed Business Model!

Over the years I had received a LOT of inquiries from people trying to sell me on Solavei no contract wireless service.  It was very much unlike any other wireless company I've encountered (Lightyear Wireless being the closest), and my initial understanding and research made me very skeptical of the program.  I even found the people reaching out to me to be irritating.  That said, I determined that only further fact-based research would be valuable, and this page shares the facts, as well as my personal opinion about this provider.  Please note the update at the bottom regarding Solavei's termination of its business!

[I updated the content on this page to reflect everything being in the past!]

What Was Solavei?
They launched on September 21, 2012 as a T-Mobile MVNO using their 4G network.  Their team (including board members) was actually quite robust, with real business leaders, including Motricity's former CEO Ryan Wuerch, VP of Amazon David Limp, Chief Digital Officer at News Corp, John Miller, former COO of Walmart, Louis Vuitton, and Target John Rittenhouse, former JPMorgan Chase Payments executive Jose Rojas, former COO of T-Mobile USA Sue Nokes, and others.  Needless to say, these are smart, experienced people with a solid track record across numerous industries.  In other words, this was an A team.  So did that alone make me comfortable with their program?  A little, but not enough.


How Was The Company Unique?
Rather than spend hundreds of millions, and even billions of dollars building a brand and marketing directly to consumers using traditional media, Solavei paid its customers for referring new customers.  This sounds harmless enough, and even very wise, and is really a basic MLM (Multi-Level Marketing) approach to growing a business.  You can essentially earn free monthly service for yourself by referring nine new customers that they call three Trios.

So Why Was I Concerned?
There are a number of elements that I didn't like:

• How far can you really take the referral model?  I don't know about you, but if my friend, acquaintance, colleague, or whatever, is getting a kick-back on selling me on a product or service, I'm less likely to trust them.  The most valuable referral is from a trusted person who is NOT getting paid to promote something.  I feel that businesses/marketers are forgetting this fact.  These days I always ask people if they're getting paid when they try to refer me to something too aggressively or enthusiastically.  Sure their model is mostly based on customers who are using their service, however, if someone can refer enough people to get free service for themselves, or even have a revenue stream, you've gotta ask yourself what someone is willing to put up with for free service.  Or maybe they don't actually use the phone and are simply seeing it as a small business to put cash in their pocket?

• If you want to become an affiliate without paying for the service, you can sign up as Social Member Without Service.  However, I was never successful figuring out how to do that on their website.  Furthermore, they require such affiliates to pay $149 annually for the privilege of referring their program.  This is not a standard model.  I have many affiliates that I work with, none of which charge any fees.  If someone learns about a product on this site and links over using an affiliate link, and they purchase a phone or service, that company gets a new customers, and I get a one-time commission.  That makes a lot of sense.  Why charge me a fee?  The fee is nominal, though I'm not sure if they're counting on the revenue from that fee (not expecting most affiliates to sell much product), or if they're trying to cover some kind of administration cost.  Either way, charging affiliates a fee feels wrong.

• Other than the ability for a customer or affiliate to make money for themselves, I don't see any value proposition with regards to their product or service.  Any company can price them out of the market, or provide more or better services that would render their program uncompetitive.  A price play is the weakest form of market positioning that puts any business at risk, and that was their only real positioning outside of the referral fees.

Conclusion
While they were in operation, I never came around as being a fan of Solavei.  Promoting their program on this site for $149 per year seemed to be low risk, however, I wasn't comfortable with their service to recommend them.  I liked the fact that they'll sell you a phone or allow you to bring your own unlocked GSM phone, though BYOP (Bring Your Own Device) programs were quite prevalent at the time as well.  Would you recommend a service for which all you can really say is that it saves people $1 per month ($49 vs. $50)?

If it went viral, I could see the opportunity to grow rapidly, however, how was their customer service?  Were they innovating with new products and services that couldn't be found on other carriers?  Would people be so happy with the service to continue to recommend it?  Once customers churn off (i.e. cancel service), would those that referred them that now don't have that revenue coming in still choose to stay with them?  Would the entire business crumble if a mass exodus occurred?

In other words, the referral model can quickly grow a company, however, as the levels churn off, that same business can collapse just as quickly.  I think that an important question that was never answered was: Is the referral model simply a good marketing initiative within a portfolio of marketing and brand awareness programs, or can a company be successful using only this means to grow?

As you can tell, there were way too many unanswered questions for inquiring minds to make a solid conclusion one way or the other at that time.  As it turns out, Solavei couldn't sustain profitability, filed for Chapter 11 bankruptcy, and ultimately closed its business in December 2015.  The greatest shock wasn't the outcome, but rather than so many smart business people actually thought this was a good idea!

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