DENT Marketplace for trading of unused data: a good or bad idea?
As we can see in the roadmap, somewhere in the first half year of 2021, a new marketplace will be introduced for the trading in unused DENT eSIM data.
On this marketplace DENT (App and Exchange) users will be allowed to sell and buy “leftover” data.
This article describes what the possible (side) effects can be after this new marketplace will be live.
I’ll look at the different participants of the marketplace and look at their possible behaviors based upon logical and economical reasoning.
After first making some assumptions about the marketplace and expected behavior of the participants, I’ll discuss 10 negative effects and some positive effects.
I hope DW’s management will reconsider this new marketplace as I think that the negative effects exceed the positive effects.
Table of Contents
As we have seen some screenshots of the new DENT App 4.0, we can make some assumptions…
So, let’s assume that there will be one single product being traded, the DENT eSIM data-only plan (without voice minutes) with the standard worldwide coverage (80 countries) with flexible validity, i.e. the remaining days (up to 365 days), and sizes of “whole” GBs (1GB, 2GB, etc.)
Hence, to make this article easier to understand, let’s assume that only 1GB DENT eSIM data plans are being traded and that (of course) the prices are quoted in DENTs but are based upon the underlying dollar value of 1GB.
Furthermore, let’s assume that anyone with “unused” DENT eSIM data is allowed to sell data. So, in theory, there are 4 groups of sellers on this “secondary market”:
- Regular DENT App users who bought a prior eSIM data plan and have some leftover data.
- Traders and resellers who first buy a larger sized eSIM data plan and split the plan into smaller ones to make a profit.
- DENT App users who either got free eSIM data as a joiner bonus or got the free data for referring new users.
- The marketing team of DENT Wireless can also decide to sell “new” data as “secondary” data. Although, I don’t think the team won’t use this option often, but maybe they can and will add some “liquidity” to the market when needed, or use it to test new price levels.
And in the end, there is only one group of buyers, regular DENT App users who need the eSIM data to consume for themselves (and/or their friends).
(Of course, traders can also buy cheaply priced eSIM data offered by others, but they will sell this data later with a profit to regular DENT App users)
Now, let’s look at the current pricing that DW is charging…
- 1GB for $4.99
- 3GB for $12.99
- 5GB for $20.99
- 10GB for $39.99
- 20GB for $74.99
- [Guess] 100GB for $324.99
- [Guess] 1000GB (1TB) for $2,999.99
Furthermore, all current restrictions are in place:
- DENT Exchange users need to go through KYC/ALM procedures.
- DENT Exchange users are allowed to withdraw DENT tokens (50K DENTs minimum) with 0.1% transaction fee.
- DENT App users are not allowed to withdraw DENT credits.
- DENT App users can buy DENT credits at existing prices with a markup between 13%-21% (see DENT tokenomics).
So, with these basics and assumptions, we can see…
What behavior can we expect?
Regular DENT App users have the choice to either buy 1GB directly from DW in the DENT App, or they can buy the 1GB on the marketplace.
Of course, the DENT App user will opt for the cheapest option. So, we can expect that the prices on the marketplace will be lower than the $4.99 that DW is charging inside the app.
Because, why would a DENT App user first buy some DENT credits (and paying a markup) and than buy 1GB on the marketplace for a higher price?
Also, considering that DWs “primary” data plan includes 10 minutes of Global Voice calls (the data on the secondary marketplace are data-only).
So, on the seller side, the 4 groups of sellers compete with each other and they will set their sell orders for 1GB lower than $4.99.
It depends on the “competition”, but expect the prices to be between $3.00 and $4.99 if only traders will be active. (The $3.00 is the price for 1GB if the 1TB is bought in bulk by a trader who wants to split it into 1,000 1GB plans and make at least a profit)
But remember, there are also sellers who got the DENT eSIM data for free either as joiner bonus or as referral bonus. And these users can set even lower sell prices (as they got it for free and any reward is welcome).
Plus, regular DENT App users, maybe want to sell their leftover data fast, and can also set low sell prices as they just want to get something back for their leftover data (anything is better than nothing).
And the remaining validity is important. The lower the number of days of validity, the lower the price.
So, with sufficient competition from traders and sufficient supply from regular users with either normal leftover data or free (referral and/or joiner) data, we can expect prices for 1GB on the marketplace to be somewhere in the range $3.00- $3.75 (for the data plans with at least 180 days or more validity).
Based upon this behavior…
Negative (side) effects
- By allowing users to sell all their unused data, DENT Wireless misses the income that other providers earn from their users who didn’t spend all their data within the validity period. So, other providers can set their prices lower as they can calculate with on average 15%-20% additional income of unused data. (Compare 1GB with 365 days validity with a price of $4.99 with a competitor who offers 1GB with 30 days validity for $4.00. Many prospects will opt for the competitor if they expect to use the full 1GB within 30 days, but actually on average they overestimate and use less)
- DENT Wireless will mainly sell the larger packages (20GB and higher for prices of $3.75 or less per 1GB) and fewer smaller sized plans (200MB up 10GB) as calculating DENT App users will buy larger plans on the primary market (and sell leftover on the secondary market). Or they will buy immediately on the secondary market. With as result that…
- DENT Wireless rewards traders (who split larger sized data plans into smaller ones) with additional income, while these traders won’t bring in new clients as all buyers are by definition DENT Apps users (i.e. existing users/clients). So, DW is giving away unnecessary margin to these traders. With as negative side effect that…
- Professional Resellers (with own client base) have less room to sell their data plans with a profit (as with one click their clients can also buy on the DENT marketplace for cheaper prices).
- Instead of “showing” the (secondary market) $3.75 price per 1GB on all comparison and review websites, the regular (primary) $4.99 will be shown. Making it looks like that DW’s 1GB price is less competitive in comparison to other providers.
- DENT Wireless opens the opportunity for DENT App users who got free eSIM data as joiner or referral bonus to (immediately) sell this data. And in 2021 we can expect the marketing team to come up with all kinds of free trial and cheap try-and-buy (with extra free data) offers. Does DW really want that these “freebie and deal seekers” can sell their free data? Just think about the Get 5GB for you and your friend campaign where in total the referral and new users will get 11GB for the price of just 1GB.
- Allowing users to sell unused data “kills” the opportunity for the marketing team to “reward” DENT app users with additional DENT credits the more dollars they’ll spend upfront for buying a DENT credits bundles (you know those $3.99-$99.99 DENT credits bundles). Just compare that with RedteaGo who rewards their users with $150.00 value in credits if they’ll pay $100.00 upfront.
- Fiscal consequences. On the secondary marketplace no taxes are involved. But in the EU, all mobile data (that is being sold to customers) has to be taxed with VAT, while in other countries all around the world, there are no taxes involved (sales, state or VAT). Hence, it’s possible that “professional traders” in a “no-taxes” country will buy their primary data plans (without paying any taxes) from DENT Wireless directly, and will sell this data on the secondary market to DENT apps users living (and using their data) in the EU. Well, fiscal authorities in the EU won’t like that and will probably (some day in the future) contact DENT Wireless to claim their missed VAT taxes. (Let alone that a competing provider who has to charge VAT can inform their fiscal authorities).
- The secondary market requires additional KYC/ALM procedures at least for users who want to trade and want to withdraw “earned” DENTs. And we know from experience that it can take several days before a user will get approved. At least this new marketplace will lead to additional capacity on DW’s support and complaining users who have to go through these annoying procedures for “just a small transaction”.
- Along the way, users will find out about these annoying restrictions and complications:
- DENT App users will compare primary and secondary market prices and will notice that the DENT credits $ bundles are priced with a markup (13%-21%) which of course they don’t like.
- DENT users will find out (later) that they can’t withdraw DENT credits and that for DENT tokens there is a 50K minimum withdrawal limit. So, these users will sell their leftover data and will get DENTs but can’t convert these into cash, but only use them to buy new eSIM data, duh.
- If the secondary marketplace becomes very competitive with many sellers, prices will be lower than expected.
All above effects will lead together to the fact that DENT Wireless will become less competitive, “can’t” give (quantum) discounts to users who buy more DENT credits, and can’t lower its prices that easily.
And yes, of course, there are benefits of having a marketplace for trading unused data. It’s a feature for DENT App users that no other providers offer.
But think about it…
With 365 days validity and the easy sharing feature with DENT TEAMS, how many DENT App users will really need to sell their unused data?
With the current expected setup, “freebie and deal seekers” and traders (splitters who buy bulk and sell in smaller sizes) will profit the most at the costs of DENT Wireless and the professional resellers.
Why reward the traders if they won’t bring in any new clients?
I rather prefer that DENT Wireless lowers their overall pricing to become more competitive and leaves sufficient space for professional resellers to make a decent income (and attract new users).
And if DENT Wireless prefers that its users won’t end up with unused data…
Well, increase the 365 days validity into 2 years (or 5 years or unlimited). This ways, as long as the data can be used worldwide, no one has to end up with unused data.
And for those of you who think that it really doesn’t matter that much to increase the validity time from 1 to 2 years…
Look at the comments in the Slickdeals where an enthusiastic DENT Fan promoted the Get 5GB for you and your friend campaign, and you will see many comments from users who either don’t have eSIM yet, or will only need the data on their next vacation trip (expected to somewhere in 2021), but all want the deal and were wondering when the 365 days validity period starts. And they all take the deal if they know that they can use the data later…
And yes, the secondary marketplace where participants need to use DENTs to trade, is an excellent way to improve the DENT tokenomics, but if the effect is that DENT Wireless is losing margin and its competitive edge, and professional resellers will participate less or not at all, the negative effects for DENT token holders are greater than the positive effects.
And if you’ll read the article about DENT tokenomics, there I described many other solutions to improve the tokenomics.
Including my favorite one…
Instead of penalizing DENT App users who buy the DENT credits bundles with a markup on the DENT conversion/market price, reward these users with quantum discounts the larger the DENT credits bundle they’ll purchase, as they committed themselves to purchase DWs telco products in the future.
However, as mentioned in point 7 above, by allowing users to buy eSIM data plans and selling (part of it) to other DENT App users, the aimed effect that buyers of the larger DENT credit bundles will purchase more telco products (and use for themselves) won’t be achieved (the aimed effect is killed).
Or to say it in other words…
By allowing users to sell unused data, all marketing efforts to stimulate users to buy more products or to use DENT (tokens or credits) instead of paying with fiat (to improve tokenomics), are less effective.
It doesn’t matter if the “marketing” is done by giving away free data (trials or joiner bonuses), discounts (i.e. extra free data), giving away free DENT credits (joiner or referral rewards), or rewarding “heavy spenders” with relatively more DENT credits the larger the credits bundle, in all cases, these “gifts” can be monetized by the DENT App users via the marketplace instead of actually being “used” by themselves.
With respect to the fiscal consequences mainly due to EU VAT rules, I don’t see a “quick solution”. I see 3 possible solutions (but there are probably more solutions)…
First, DW can forbid DENT App users who live in the EU to sell their unused data.
Second, DW can make it clear to EU citizens that they have to withhold the EU VAT themselves and have to file the tax declaration (and pay the related VAT amounts).
Third, DW can introduce individual country eSIM data plans and only setup the marketplace for these country plans (and not for the worldwide plan). This way on the primary market, always the proper VAT will be paid, and there is no “issue” on the secondary market (if the original primary data was purchased from DW, and not being acquired as free gift/incentive).
If I had to choose, I would opt for the third solution. But I’m biased, in my opinion DW should introduce individual country plans anyway to become more competitive as explained in this article DENT Wireless’ eSIM: What’s the optimal pricing strategy?
Conclusion and advice
My advice to DENT Wireless’ management…
Please reconsider the launch of the marketplace for trading in unused data.
I think there are too many negative (side) effects. But maybe I’m wrong, and has the team thought about them and found solutions to all mentioned negative effects above. I hope so, and who knows, I’ll be happily surprised.
But at the moment with current knowledge, I’m a little bit afraid for the results.
For me, there is a high chance that the obtained DENT marketplace for trading in unused data will become the 6th leakage where DENT Wireless is giving away money to the wrong people.