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Summary:

VoIP startup Jaxtr said today that it has attracted 5 million registered members, up from 500,000 users 140 day ago, making the company “the fastest-growing Internet communications service in history — ahead of Skype, Hotmail and ICQ,” according to its press release. But where is the […]

VoIP startup Jaxtr said today that it has attracted 5 million registered members, up from 500,000 users 140 day ago, making the company “the fastest-growing Internet communications service in history — ahead of Skype, Hotmail and ICQ,” according to its press release.

But where is the money?

Jaxtr logoYou might think that scaling to meet the needs of these millions of users represents Jaxtr’s biggest challenge. Indeed, Jaxtr expresses concern in its announcement over its ability to meet user demand. To that end, it recently hired Taneli Otala, former CTO of MySQL, as VP of engineering.

But Jaxtr has bigger problems than scaling and tuning their systems for millions of users. To make Jaxtr a real business, they need to convert sign-ups into satisfied users, and from there, transform those users into customers who pay.

Even then, there are no guarantees Jaxtr will succeed. If the promise is cheap calling, it’s just the same old VoIP thing.

How Jaxtr works

Jaxtr widgetJaxtr offers free international calls via a web-based widget. To use it, you sign up for an account then publish your Jaxtr widget on your blog, web site, or social networking profile page. You can also email callers a link to your Jaxtr page, which shows the widget. Callers click on the widget, enter their phone numbers, then Jaxtr rings the caller phone and your phone to connect you with one another.

If the caller is located in one of 50 supported countries, they will be given a local phone number they can use to call you next time — without paying long-distance charges. Otherwise, they will be provided with a U.S. number.

Each Jaxtr user gets 100 “jax” a month. Jax represent a Jaxtr-specific currency that is exchanged for minutes at different rates in different countries. Currently, once you run out of jax you have to wait until the next month to get more. In the future, you’ll be able to buy jax — and that, along with web and mobile advertising, is where Jaxtr plans to get its revenue.

The big challenge for Jaxtr: Turning try it into buy it

It’s no surprise that Jaxtr is seeing so many sign-ups: the promise of free international calls, mobile-to-mobile, is compelling. And compared to Skype, Jaxtr doesn’t require any special client software. A caller simply uses the widget once, then subsequently dials the number the widget gave them for future calls. But turning registered members into ongoing users — and paying customers — won’t be quite as easy.

First, the Jaxtr service is somewhat complicated, as a quick glance at the frequently-asked questions list proves. Plus, though it does provide for mobile-to-mobile calls, the first time a caller uses it, he or she must use that web widget.

Second and more importantly, there are doubts as to whether the Jaxtr money-making math adds up. The company must be spending some serious cash on those local numbers it gives out, as well as on connecting phone calls. Will they be able to come up with a pricing scheme for jax that makes the business economically feasible?

Five million users is impressive, but how hard can it be to find 5 million people that want mobile-to-mobile international calls for free?

  1. Interesting to see that someone is really getting into the revenue aspect of click to call companies. How will they make money, especially since they charge twice – read http://blog.tringme.com/are-you-paying-double-for-your-phone-calls/ and companies like flash phone and tringme are offering flash based service and web-based telephony at half the rate and I am doubtful that even they will be making any money. Are these companies merely trying to create a user base ??

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  2. Thanks to Om, I tried Jaxtr’s telephony service. It’s really simple to use the service online, however, there is plenty of system lag which makes me feel unsure regarding the infrastructure they have built to handle call requests.

    Share your Jaxtr experience!

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  3. jaxtr sucks – jajah is lot better

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  4. Cheryl's Office Tuesday, December 11, 2007

    I have tried many of the VOIP solutions as I run my business. While I save money with each of them I cannot afford the quality drop I get. The question is not how much do I save using VOIP, it is how may customers do I lose because of the quality drop and popping they hear.

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  5. This is an excellent article, while many of the other media outlets and blogs (techcrunch, venturebeat, mashable, etc) are simply reporting the press release put out by marketing department, Gigaom decides to look at the bigger picture and questions Jaxtr’s future and points out the revenue aspect of this business.

    Good job Anne!

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  6. @Dragoljub, please send me a jaxtr text at http://www.jaxtr.com/megzozo and let me know about the service lag you have been experiencing. I would love to help get this issue resolved asap. Thanks!

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  7. Most phone numbers in Asia I tried were not supported. For few successful calls, quality was average and pathetic connection time

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  8. Still, 5 million is a BIG number. And to achieve that from 500k in 140 days, that’s very good. Jaxtr wants to convert 1% of its 5mln users into paying ones. The question then, is 1% enough?

    @Rawat
    For asia, you might want to try http://www.myhometone.com

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  9. Hmm…If I stood on a street corner in NYC with a sign that said “Free iPhones”, I could take that title of “fastest growing communications service” away from them in a hurry. Hell if I did it for a week I bet I could get more than 5M users.

    Ohh..wait..but how would I pay for those iPhones. Damn.

    It’s called a revenue time bomb, and it will go off. They are giving away service to get users. And their services have real costs associated with them, as Anne points out.

    Also, I can’t imagine they grew this quickly and I don’t know anyone actually using it. When Skype was Skype, every other person I ran into in the Valley mentioned Skype.

    Looking past the PR B.S., the real test will be if this claim of 5M users holds up under VC scrutiny, because at the rate they are giving away service they likely have burned through their $10M and are about to raise. Convenient timing for questionable PR claims…

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  10. At first blush, 5,000,000 users sounds really impressive. Taking a look at their Alexa traffic and where these users are coming from tells me they will NEVER monotize these guys. Nearly 14% of traffic from India, Egypt in second with 6.1%, Morrocco and Malaysia in the top 5 (US traffic and Western Europe is less than 10%). The UK comes in less than Palestine, Jordan and Pakistan! Only the US, UK and Canada make the top 25 as countries where Jaxtr may actually be able to convert 1% of their users to paying users!!! OUCH. I’m betting tons of those accounts are just the same guys signing up for millions of accounts to get their free 100 minutes per month. Watch you wallets!!! This traffic will kill them over time. When they do start charging, these same users will drive Jaxtr’s fraud rates through the roof. DFJ…you’re about to lost a TON of money.

    India13.7%
    Egypt6.1%
    United States5.4%
    Morocco4.5%
    Malaysia3.6%
    Dominican Republic3.6%
    Jordan3.5%
    Palestinian Territory3.3%
    United Arab Emirates2.8%
    Pakistan2.8%
    Kuwait2.5%
    Saudi Arabia2.4%
    Algeria2.4%
    Tunisia2.1%
    Philippines2.1%
    United Kingdom2.0%
    Qatar2.0%
    Bahrain1.8%
    El Salvador1.7%
    Singapore1.6%
    China1.4%
    Colombia1.2%
    Canada1.2%
    Sweden1.1%
    Oman0.9%
    Other countries24.4%

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