By Timothy Hay
WSJ Online
While the economic downturn may have slowed large-scale spending on Internet telephony services, start-ups can still turn a profit in this space – provided they know how to think on their feet when it comes to finding customers.
“There is still enormous opportunity,” said Larry Lisser, vice president of Montreal-based Mobivox Corp., a voice-activated technology maker. “There are novel and compelling opportunities to make money.”
Lisser and executives from notable voice over Internet protocol, or VoIP, start-ups Jajah Inc. and Voxeo Corp. made a case for themselves on Wednesday in a panel discussion at the eComm Emerging Communications Conference in San Francisco.
The VoIP industry has gone through a wave of consolidation and shutdowns in the past year as revenue from free calls did not always come in and larger players moved into the space. In May, one of the earliest of the VoIP players, Jangl, struggled to turn its access to millions of users into subscriber or advertising revenue and subsumed into rival Jajah. In July, a more lucrative outcome for investors was reached when Ribbit Corp. was acquired by BT Group PLC for $105 million in cash. That deal was followed by the recent, quiet shutdown of Yoomba Inc., which offered a service that allowed people to send and receive phone calls and IM conversations from their email programs.
VoIP providers have seen spending from large corporations dwindle as they attempt to weather the recession. But as mobile technology evolves, various types of companies are scrambling to add value without more capital outlay, and voice services fits the bill, panelists said.
For example, major telecoms have been hit hard as more consumers scrap their land lines in favor of mobile phones.
“The land-line guys want to keep a line in [the consumer’s] home,” said Trevor Healy, chief executive of Jajah. “They can offer Jajah as a white-label service, and make back some” of their lost long-distance revenues. Jajah, which boasts more than 10 million customers, offers cheap Internet-based calls routed through regular land lines or mobile phones.
Meanwhile, providers of wireless services, Healy said, are finding their current market saturated and want to expand to new areas without building new towers or buying new spectrum.
Lisser, of Mobivox, said the downturn had prompted his company to look beyond the top American telecom companies to find new customers. “Mobile virtual network operators are a sub-market,” he said. Mobivox, backed by $11 million from Brightspark and Skypoint Capital, lets people make phone calls to 40 countries for 2.1 cents per minute through its network.
Mountain View, Calif.-based Jajah – which has raised some $30 million in venture backing from investors including Intel Capital, Sequoia Capital and Globespan Capital Partners – has also found a great number of paying customers among top Internet companies like IAC/InterActiveCorp’s Match.com and Yahoo Inc., which last year turned over the premium voice part of its instant messenger service to Jajah.
“What we are seeing is people like Match and Yahoo really monetizing with voice products,” Healy said. “Many of these companies have been relying on ad revenue” that has been drying up.
Additionally, cable operators like Comcast Corp. – a Jajah customer – are increasingly looking to add voice to their suite of offerings. Healy declined to say whether Jajah is yet profitable, but he said that 2009 – like previous years – would be a year of explosive growth for the company.
The panelists agreed that the fast-changing mobile-technology world would bring new customers out of the woodwork, and that VoIP companies should concentrate more on giving consumers what they want now instead of anticipating what they might want in the future.
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While the economic downturn may have slowed large-scale spending on Internet telephony services, start-ups can still turn a profit in this space – provided they know how to think on their feet when it comes to finding customers.
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