February 9, 2004
Press Release
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CellFund Business Model Changes
CellFund established a standard in fundraising at its startup in 2002 by providing a cost-free program for groups to collect and ship used cell phones. There was a unique payout model of $7 per qualifying cell phone where a qualifying phone was defined as one that had enough value in the secondary phone market to pay $7 to the groups collecting phones plus referral money. On average, 31% of phones qualified for the $7 payment during that period. In addition, the CellFund Referral Program paid groups $1 for each qualifying phone shipped by groups that they referred to CellFund.
FALL 2003
As a used cell phone processor, CellFund watched with interest as the Federal Number Portability law took effect last fall. This capability began flooding the used cell phone market as people switched to new phones because they could now keep their old number. However, not many of the formerly popular phone models supported number portability. Plus, the in-demand e911 and text messaging handset features would not work on many mobile handsets.
FIRST MAJOR PRICE ADJUSTMENT
The used cell phone market began to respond to the market demand for phones that supported these three features: number portability, e911, and text messaging. From September to December 2003, the value of most qualifying phones on the secondary market dropped to the amount paid to CellFund clients. Unnoticed by CellFund clients, most of the same phones still qualified for payment but overall CellFund was paying more to clients than it was able. As a non-profit organization, CellFund was able to weather this tight financial season.
SECOND MAJOR PRICE ADJUSTMENT
CellFund compiled the market price list for January 2004 to discover that over 90% of qualifying cell phones would no longer qualify. In other words, the market value of most phones dropped under $7, the amount CellFund paid per phone. In order for CellFund to pay for phones, it had to change the business model.
THE NEW BUSINESS MODEL
The new payment solution for cell phones arriving in 2004 is to pay for every phone that has value. The prices paid for most phones have dropped but the number of phones that have some value have tripled since December. (Phones that have no value are used as 911 emergency handsets for the elderly and battered women shelters or recycled.) Each month, CellFund publishes the new price list at www.cellfund.com/phonelist.htm.
CellFund is continuing the Referral Program by paying 10% of the amount paid for every phone collected and shipped to CellFund by the groups that are referred.
The entire used cell phone market has been negatively impacted by these changes. However, CellFund believes that this downturn in the market will not continue. Many of the cell phones being turned in now will support the new feature requirements and will bring increasing prices. For example, the number of phones paying $25 and $40 increased significantly from January to February.
CellFund is committed to benefit groups’ fundraising efforts by working to get higher prices to pay out as much as possible.
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