David Steinberg, founder and CEO of InPhonic, is not shy about claiming what his company can do for a wireless carrier's online sales effort. He maintains that InPhonic can boost the Web traffic to Web sales conversion rate by at least five times. And, given access to certain merchandising and marketing methods, he claims he can get that conversion rate to jump by a factor of 10.

That may sound like an outrageous sales pitch, but Steinberg isn't hyping an unproven product. Across its entire portfolio of reseller, mobile virtual network operator (MVNO) and carrier customers, InPhonic has increased online sales for its carrier partners by an average of 700%, he said.

And those customers aren't small. InPhonic handles the online sales and activation for the wireless storefronts of America Online, Yahoo, MSN and Radio Shack. It handles the procurement, provisioning, customer care and billing for various other MVNOs, including the future AT&T Mobile. It manages individual data and content services for vanity wireless players. And it owns and runs two MVNOs and its own online comparison-shopping storefront, WireFly. All these ventures have made InPhonic the third largest third-party activator of wireless service in the country, and the largest activator of online accounts.

InPhonic's results have been so pronounced that it also has begun to attract the attention of the Tier 1 carriers. Instead of looking to InPhonic as a third-party sales partner, Sprint decided to hand a portion of its own marketing and e-business venture to InPhonic. The self-styled mobile virtual network enabler (MVNE) is not just selling Sprint service on its Web sites anymore. It has taken over all of Sprint's off-portal online sales.

“The Web is the lowest cost acquisition channel for the carrier, and we're making it cheaper every day,” Steinberg said.

InPhonic's success in all of its various business ventures can be traced back to one thing: the company's powerful e-commerce platform, which handles 12 million to 15 million hits on InPhonic's various managed and owned Web sites every day. The platform is InPhonic's pride and joy — the baby that Steinberg and his executive team have nurtured since the company's creation in 1999.

In those six years, InPhonic's e-commerce platform has grown from a simple provisioning engine into a mammoth back-end system that stores and tracks Terabits of data on customer purchasing behavior and carrier service plans.

InPhonic's e-commerce platform is essentially an Oracle database and EMC information storage and management system built on Microsoft's .Net Web services platform — all optimized through years of tinkering by InPhonic's technical staff.

“Nobody was doing this when we started, so there was no product to buy,” Steinberg said. “We built it ourselves.”

The platform's databases are constantly mined to determine customer buying habits and trends at any given moment. The key to the system is how quickly InPhonic can react to those changing trends. While many carriers update offers and information on their Web sites eight to 10 times a year, Steinberg said, InPhonic updates its own and managed Web sites eight to 10 times a day.

Proprietary XML feeds link directly into all of the major carriers' back-end systems, allowing them to take over the activation of an account and the provisioning of service. In many cases, the process is highly automated — InPhonic gets direct access to the systems — but in some cases, InPhonic has to deal with a highly proprietary interface. Then it must perform what is known as a “screen scrape,” a process by which an automated bot replicates the data entry process through the carrier's credit application and provisioning system — basically becoming a virtual sales rep.

On the front end, InPhonic manages some 6000 individual Web storefronts. Its sites all have sophisticated navigational tools that allow customers to search by price, minute, plan or carrier in their markets, supplemented by paid content from J.D. Power & Associates and feedback information about customer service, billing and network quality pinpointed all the way down to specific ZIP codes.

InPhonic's new carrier business puts a new spin on the service engine's capabilities, however. While Sprint's new white label site, for instance, carries only Sprint plans and phones, InPhonic is leveraging data across its entire e-business platform to sell Sprint's products. Although it does not share information about other carriers directly with Sprint, InPhonic will mine customer behavior information from the way different minute plans or phone subsidies are working across all of its carrier customers' networks and apply what it learns to the way it displays, markets and merchandizes Sprint's plan in its third-party sales portal.

Say, for example, that 300-minute plans with 25 free SMS messages a month are selling like hotcakes across InPhonic's entire platform. InPhonic will then promote a similar plan from Sprint on its Web storefront. In such a way, it is very likely that the plans and phones featured on Sprint's own homepage, Sprint.com — which Sprint still manages — will be different from the plans and services InPhonic is marketing for Sprint on its white label portal.

From Sprint's perspective, the partnership allows Sprint to preserve its portal more for existing customers, instead of converting Sprint.com into a mere sales engine. David Dickey, Sprint's director of consumer e-business, said that while the carrier would continue to market, sell and provision service from its Web site, it can leave a good deal of the segment marketing and merchandising to InPhonic.

“We have conflicting priorities on our site,” Dickey said. “We want to generate new sales, yet we want to support our existing customers also. InPhonic's entire focus is on sales — they're the best in the online space. As a result of that focus, they can do things we can't.”

InPhonic is by no means the only MVNE in North America. According to the Besen Group, of all the MVNEs in the world, half of them are in North America. Most of them focus on a specific part of the mobile business, whether that is CRM, billing or data services. Of the big full-service MVNEs, Visage Mobile has perhaps received the most attention, but so far the provider has announced only two customers, Primus Telecommunications and ESPN Mobile.

The role of MVNEs is about to become more prominent, possibly allowing several new entrants to make a name for themselves, said Alex Besen, founder of the Besen Group. In Europe, MVNEs have already taken over the entire content portfolios of carriers, taking the hassle out of constantly managing and updating applications and content relationships so that carriers can focus on their own network operations and sales, he said. If carriers such as Sprint are already outsourcing sections of their online sales efforts to MVNEs, it might not be long before they start handing over other service aspects to the MVNE, Besen said.

Steinberg sees opportunity in all of these possible outsourced services, and InPhonic is targeting every single one of them. The company announces a new business unit or venture on a monthly basis, launching efforts that address specific consumer segments or carrier services. Recently, InPhonic bought into a satellite TV provisioning system that will allow it to start offering direct broadcast satellite services to its e-business portfolio.

But its core business is still online wireless sales, and there's still a lot of room for growth. According to the Yankee Group, online wireless activation as a percentage of overall activations tripled between 2003 and 2004, from 2% to 6%. While online sales remain a small portion of overall sales, and the Yankee Group doesn't expect 2005 to see quite such a dramatic increase as 2004, there definitely is momentum toward online purchases, said Andy Zawel, the Yankee Group's director of U.S. Wireless Research.

Part of that growth can be attributed to the rise of companies like InPhonic, which devote an enormous amount of attention and marketing toward generating online sales. But a lot is also attributable to customers' own comfort level with purchasing goods on the Internet. Not only are consumers more Internet-savvy, but wireless data services have led wireless users to associate their wireless services with Web services, Zawel said.

More customers are using the carriers' Web portals to manage their accounts and optimize their data settings, creating a degree of comfort with using a carrier's Web tools. It's only a short leap from using the Web to managing service to using that portal to buy service, Zawel said. Carriers themselves are also paying much more attention to the possibilities of e-commerce as it becomes more difficult to capitalize on traditional sales channels.

“Carriers are desperate for new subscribers,” Zawel said. “They see the end approaching very quickly and are looking for new ways to find those customers.”

Despite encouraging figures, online sales of wireless plans and phones still trail that of other consumer electronics. Steinberg said that online electronics purchasing hovers at about 10% — but there are reasons why consumers are more reluctant to buy a phone online than, say, a DVD player. First, it's quite a significant purchase, factoring in not just the cost of the phone but also a recurring monthly charge locked in by contracts for one or two years.

Second, people still aren't as familiar with mobile phones as they are with other electronic devices. While he doesn't expect phones to become commoditized, Steinberg said he expects people to become more familiar with handsets and service plans to the point they don't need the “look, hold and touch” experience when buying a new device. As people purchase their second, third and even fourth phones, they'll become far more comfortable with the idea of ordering online, he said.

Steinberg has no doubt that the online side of wireless will become a huge sales channel, and InPhonic is doing a lot to help. The overall numbers may be small now, but Steinberg points to one significant statistic: Some 68% of consumers research wireless services online before they buy. The key, Steinberg said, is to make it easier for customers to click the “buy” button.