How Marketing Gimmicks Killed Helio

UPDATE: Helio was sold to Virgin Mobile for $39M – in equity!  SK Telecom and EarthLink spent over $275M to build this loser and gain a whopping 170K users and wound up selling it for pennies.  I knew their marketing was totally f#$$ked up, but who knew the rest of the business was so bad off.

Yesterday an email from Helio caught my eye since I’m considering switching cell phone providers. The email promotes one of their slick handsets, The Ocean, for just $99.00– a great price considering it is normally over $300! In case you didn’t know, Helio is a cell phone company–founded by serial entrepreneur Sky Dayton and backed by SK Telecom (NYSE: SKM) and Atlanta-based EarthLink (NASDAQ: ELNK).

I’ve always admired Helio for their no-nonsense approach to marketing. In fact, when they launched in October 2005, Helio and Sky Dayton promised to “End Confusing Rate Plans and Cheap Gimmicks.”  Something went terribly wrong.

As you can see, the email indicates Helio is offering the phone at $99 when you sign up for a $60 plan. However, when I clicked the email and landed on their site I could find no mention of a $99 sale price. The closest thing I found was a price for $199 and that’s only after you get their “new member discount” by signing a sign a two-year contract. I can handle two years I guess…but where is the $99 sale price? Maybe the $99 promotional offer would pop up at the end of the checkout process? No such luck. After spending the better part of an hour picking apart Helio’s website, I decided to call them last night. Good thing I didn’t have much going on because I waited on hold for nearly 20 minutes.

Finally a Helio customer care associate informed me that, in fact, there was no $99 sale price on the Ocean. In reality Helio is offering the Ocean at $360. They will lower that price to $199 if you agree to sign a 2-Year Contract. Once you have signed the 2-Year Contract and paid the $199, you can visit Helio.com and download a form to mail back in and request a Prepaid Visa Debit Card with $100 loaded on it. Getting that card ain’t easy. I’ve received rebate debit cards before..but never had to jump through rings of fire to get it. The Helio associate assured me as long as I met all NINE conditions listed on the form, I should receive the Prepaid Visa in about 4 weeks. She explained that once Helio issued the Prepaid Visa Card, I should receive an email requesting final confirmation and verification. Once Helio got the email verification back from me, then–and only then–would the Prepaid Visa Card be mailed out. But wait, there’s more.

The Helio rep said that upon receipt of the Prepaid Visa Card, I would need to “activate” the card by calling a toll-free number and entering my identification information and Social Security Number. After that was completed, the card would be ready for use. However, she was quick to remind me that this card could only be used at retailers who accept Visa Debit and not for any cash or ATM transactions. If this isn’t a cheap gimmick and a confusing plan, then I don’t know what is. Whatever you say or promise in your advertisement or email campaign, you better be able to deliver–without making someone jump through hoops. When it comes to marketing, follow the golden rule “Do unto others, as you would have others do unto you.” Honesty is always the best policy in business and in life. The most successful companies and entrepreneurs I know are also the most honest and sincere people I’ve ever met.

After this experience I looked into the state of affairs at Helio and discovered they’ve already burned through $560M. Their balance sheet is a train wreck with cash dwindling and a loss at Helio of over $326 million last year alone. To make matters worse, Sky Dayton quit and left Helio a bill for over $600,000 in back pay and severance. A sad ending for a company that launched with such star-studded fanfare and a promise to change the wireless industry.   If Helio can’t be honest, they should just not advertise!