Viva VIVA?

How does a Chinese Newsstand sound? You know, as a platform for contents that could finally solve the content monetization problem once and for all?

Sounds great, right? That’s what essentially what VIVA is. VIVA aims to aggregate all of the magazine contents in China, and make money by selling mobile version of the magazines to consumers. In addition, VIVA will also make money by displaying ads as well as by leveraging its platform to create proprietary mobile media.

Han Ying, the man who heads VIVA, also have the resource to pull such a grand scheme off. Mr. Han has worked in some of the biggest firms in China, such as China Netcom, Asiainfo, and CCTV. A successful businessman as well as a high level bureaucrat, Mr. Han had enough savvy and resource to group together contents from nearly a thousand major media companies, as well as heavyweight corporate partners such as Ctrip.

Many investors are enamored with Mr. Han’s plan and know how. That’s why the latest round netted VIVA 10 million dollars from Highland Capital Partners and Qihoo 360.

With so much good news, there is no doubt VIVA’s plan would succeed – if we live in 2007, that is, before the invention of the iphone. You see, many of the most active participants in the Chinese mobile industry are the remnant of an early era, the good old days of the SP industry, and Mr. Han is one of them.

For SPs (which stand for service providers), making money was easy. By opportunistically providing “joke of the day” text messages or ringtones based on popular songs, multimedia messaging service, and other simple services that didn’t require a lot of technical savvy, the SPs hooked many (unwitting) customers. And you never have to worry about payment: the mobile carriers took care of that.

And that’s where VIVA came in. If other SPs could make a lot of money by providing itty bitty services, how much was VIVA going to make by offering the holy grail: copyrighted content? In the beginning, VIVA’s business model was typical SP, and it was off to a good start. In 2008, VIVA made 10 million yuan. One third of it came from corporate advertising spending; other two third came from providing other services. VIVA’s share was a third of this two thirds, or 22%. The other 44% went to the mobile carrier as well as the content provider.

But with the rise of iphone and other smartphones, the SP industry disappeared from the face of the earth. The appstore replaced the importance of mobile carriers, and sophisticated apps replaced rudimentary services. This transformation has made the mobile industry more akin to the Internet, and the law of free so touted by Chris Anderson began to take over.

This, of course, is the worst of news for VIVA.  The company still grew, and by 2011 VIVA’s revenue has already grown to 50 million yuan. However, most of money are made through  selling ads for free contents.

But as a business model, VIVA is basically back to square one. Right now, VIVA is no different from Flipboard, Zaker, zite, Google Currents, Xianguo, or a dozen other readers. Heck, even Netease and Tencent offer readers in their spare time? How does VIVA differentiate from the competition?

One could argue VIVA has original content. But how would VIVA persuade traditional media, who still bring home the bacon by offering print editions, to abandon their own mobile experiment and provide their precious content on a commonplace app that could not barely monetize? If VIVA don’t pay them, they will provide garbages, if anything at all, to “experiment”. If VIVA pay them, you might never get your sunken cost back.

Besides, even if VIVA some how does get all the best content for free, how are they better than the competition. After all, I don’t pay for the three readers that I use, and they all offer tremendous contents. In an age where a massive amount of quality of information is still free, how is VIVA endowed with the magic touch that could persuade users to pay?

Things change, and pivoting is natural in start-ups, but going from SP model to a brave new world of apps may just be a bridge too far for VIVA.