This is a post of our guest writer James Barnes, the author of Affenstunde, a blog where he is sharing his thoughts on the mobile industry.
Google finally announced the death of Gizmo5, a pioneering Mobile VoIP service that the Mountain View search giant acquired back in November 2009. Gizmo5 was founded in 2003 by mp3.com creator Michael Robertson; under the auspices of SIPphone and then the Gizmo Project it was one of the first companies to offer a true VoIP experience from a smartphone. Though several elements of the Gizmo5 app have popped up in Google Voice and Google Talk the stand-alone brand is now deemed surplus to requirements and consequently the dialtone will ring silent on April 3rd 2011. Gizmo5 was a poster child of the successful acquisition exit, snapped up by Google for $30 million. The question is will this be the last of the MVoIP acquisitions we’ll see?
As I sat down to write this piece I drew up a list of Mobile VoIP service providers. Straight off the top of my head I had noted down twenty-five companies. Some are on their way to becoming household names, others you may never have heard of, all are going concerns. In the former group we have: Nimbuzz, Fring, Rebtel and Tru (Truphone); and the latter group includes: Vopium, iCall, Mobivox, Talkonaut, iCall, Beejive, Goober, Onsip, Ooma, Telfree, Voxigo and Vyke.
Firstly, let’s do away with the myth that any of these companies are devoted wholly to Mobile VoIP, they’re Internet Telephony Service Providers (ITSPs). As well as provisioning low cost and free peer-to-peer VoIP calls from a mobile, most offer: video-calling; on-net and off-net aggregated Instant Messaging; micro-blogging; SNS; SMS, MMS; HTTP and SMS triggered callback for connecting two remote end-points; voicemail; and conferencing.
As I say, for most of these companies initiating and completing calls and managing an account is not restricted to the mobile but may also be from a desktop app or in some cases, direct from the browser. This makes perfect business sense, if you’ve gone to the trouble of building or buying a softswitch, call control and billing platform you might as well sweat your assets and enable every possible feature you can. Over time I’ve tried out all of these companies. Pricing and routing are generally quite reasonable and most offer free trial use, bundled minute plans and discounts for calls to frequently dialed numbers. Whatever kind of mobile or computer you have at your disposal chances are you will be able to use some or all of their services.
Pretty much every ITSP in this category is privately owned, so if we want to know how they are getting on we have to rely on the limited information they publish about their accomplishments. To get a general idea of progress we’ll have a quick look at a notable achiever, Nimbuzz:
Nimbuzz recently announced a 40 million registered user milestone. In its media kit the company states that it carries 3.65 billion call minutes a year from some 520 million calls (which equates to an absurdly long average call time of 7.3 minutes) and that it grows by 100,000 users a day, or 1.5 million users a month (yes, do the math and pick which stat you want, the press kit states both). The figures are certainly impressive and consider that Nimbuzz has none of the infrastructure overheads a Mobile Network Operator like AT&T has to worry about day after day, and AT&T only carries 18 billion minutes of International call traffic each year. Backed by Naspers and Mangrove Capital to the tune of $25 million to date, Nimbuzz has had more than enough capital to take the to break even in this space. What I’d really like to know is the proportion of paid vs free calls and the subsequent generated revenue, this should be a healthy and profitable business.
Carrying that thought on, depending on the scale of operation and ambition in development, any one of these ITSPs that carries a few million revenue generating call minutes a month should be profitable. Even if it were true that voice is dying and telecoms has become a race to zero pricing there’s room for the best of these companies to survive independently for a few years to come yet.
Given the crowded nature of the ITSP market it might seem surprising that new start-ups can find investment to get off the ground but they are and even more surprisingly they are launching with no discernable revenue generating model. Focusing on Android and iOS devices only, Viber offers free calls and Tango offers free video calls between registered users. Both companies have received glowing coverage in the tech tabloid press; Tango in particular has enjoyed the kind of TV product placement of which other ITSPs can only dream.
Some cynical observers might suggest that the availability of funding for these start-ups is driven by the ‘hotness’ of the platforms they utilise and the inflated seed/angel/venture climate. With nothing new to offer it’s hard to see that either company has any exit in mind beyond acquisition, but at this stage who would be buying? Google? No, they sorted their Google Voice/Talk requirements out with Gizmo5, Grand Central and GIP. Apple? No, they already have Facetime up and running. Facebook? Maybe, though they have Beluga onboard for Group Chat and there have long been rumours of a forthcoming collaboration with Skype. Perhaps the target purchasers are the traditional telco operators themselves, the incumbents. That’s a long shot if ever there was one and less we forget, the free model worked for Nimbuzz and Fring for a time, then suddenly Nimbuzz Out and Fring Out were launched.
As for the Mobile Network’s desire to buy up app start ups, well they are still operating under the delusion that Voice over LTE (VoLTE) is a necessity in a SIP powered world and that proprietary technologies such as Rich Communication Suite (RCS) can offer something that IP can’t. Perhaps eventually they’ll come around.
One incumbent that might be open to the idea of buying code and talent is Skype. Let’s not fool ourselves – Skype is no longer a start up. At any one time they carry about 40% of the world’s international calls; Tony Bates can wear a hoodie as he apologises for a global network outage but with Skype’s ambitions in Enterprise I think he’d look better in something french-cuffed from Pink. Following hook-ups with Hutchison and Verizon Skype is fast becoming the establishment and judging by their continued investment in Palo Alto R&D, keen to catch up in mobile in advance of an IPO. I wouldn’t be at all surprised to see an acquisition being made in the near future.
About the Author
James Barnes has worked in wireless for sixteen years, first in New Zealand with Telecom NZ, then in the UK with LCR Telecom, and Primus Telecommunications Inc, and China. In 2006, James co-founded Morodo, a mobile VoIP company whose apps work on every on-market and legacy phone. James is currently taking a break from the start up world to catch up on his reading and writing.