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Summary:

Ooma, a Palo Alto, Calif-based company that launched with much fanfare last year had run into a wall in recent months. It lost some key executives and failed to live upto its promise. Ooma promised free voice calls for life married to slick hardware was a […]

Ooma, a Palo Alto, Calif-based company that launched with much fanfare last year had run into a wall in recent months. It lost some key executives and failed to live upto its promise. Ooma promised free voice calls for life married to slick hardware was a classic case of too much sizzle, very little steak. Lately there were signs that the company was staring down a dark abyss.

Ooma is not dead, yet. In a bid to try and regain some of its lost momentum, Ooma is cutting the price of its Hub and Scout package by $150 dollars to $250. The company is going to sell a premier service package that is going to cost $12.95 a month or $99 a year. The company is refocusing on the consumer electronics retail channel, said Rich Buchanan, a former Sling Media executive who just joined Ooma as chief marketing officer.

I had a very candid chat with Buchanan, pointing out that it is hard to develop enthusiasm for a company that had overpromised and underdelivered. Instead of developing cheaper products and getting into the retail channel, the company focused on developing strange concept promotions for a device whose value proposition in a nut shell is: cheap calls.

Cheap calling is a tough, low margin and volume business – as Skype’s recent performance shows. Ooma device despite their slick packaging had some performance issues. Buchanan wants to refurbish the company’s reputation and brand. “Clearly I have my work cut out for me,” Buchanan acknowledged, admitting that “Ooma has a black eye.” He said the company had realigned and is focusing on building a retail channel.

I think even at $250 for the package, the device is still too expensive. You can buy PhoneGnome . Despite some distinct differences, the two companies serve the same end goal of making voice calls cheaper/free. (The comparisons between the two riles up our readers.) Buchanan who has been a retail guy for a long time, acknowledged that the right price for Ooma is between $99-to-$199. But in order to get there, the company will have to overcome some serious odds.

In US, the introduction of unlimited plans and other cheaper options from say Skype, has put Ooma on the backfoot. Given that I was impressed by Ooma at the time of launch, I hope

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  1. Raymond Padilla Wednesday, April 23, 2008

    Ooma have been very uneven for me so far. I got in the program early thanks to this site (thanks Om!) and was very excited at its potential. Domestic calls have been great, but that wasn’t why I was interested in the product — I can get comparable solutions through Skype and Yahoo! Messenger. International calls were the big deal here. Ooma’s pricing is very competitive. A lot of the rates are half that of Skype’s and slightly less than Yahoo!’s. While the rates were fantastic, service was another story….

    Initially, international calls were a mess on Ooma. There were all kinds of connection and voice quality issues. These were sorted out after a few months and the service was very solid. More recently, the company claims to have made “changes” to how international calling works. For the last week, more than half my calls do not go through and the call quality is unacceptable. When I make the same calls on Skype, Yahoo!, or VoIP Discount, the quality is much better, so this is clearly an Ooma issue. Customer Service hasn’t been helpful at all. I get such useful advice as “please try again”, “dial slowly and correctly”, and “please bear with us”. I tried working with customer service on these issues and was surprised to learn that my failed calls don’t show up on their system at all, so they have no idea how unreliable the service has become.

    Anyway, Ooma is still just a potentially great product that’s a tough sell. By now the service should be solid, but it’s not. I don’t see how a company can go on a big marketing push when its product doesn’t work the way it’s supposed to.

  2. When I start reading that a start up is looking at re-branding a product I run for the exits.

  3. Ommma should have had a subscription type offering from the get go ….$450 up front is just too much for most folks especially when people have been burnt by start ups in the past

  4. if you tell me that the sweet spot for a product is x, and it’s currently priced at 2x, why would i want to buy it now at 2x when i can just wait for the drop to x – especially since you just reduced the price.

    mine is still in the box

  5. This explains the problem my wife encountered last night when trying to make an Int’l call to Japan. She told me that every time she dialed, the call automatically dropped.

    We’ve never had issues with their Domestic calls but now I’m a bit concerned about their future. Fortunately I didn’t pay the $450 for the box.

    Let’s hope they stay around.

  6. Funny that Ooma is now offering a monthly subscription. When I put up a website detailing Ooma’s problems, and offered the suggestion that they needed to do just that for any hope of surviving, I got several calls from Ooma execs, threatening legal action for “slanderous” comments about their product. Now I undestand that those 2 execs are gone.

    I don’t feel sorry for anyone who paid $400 for what will likely soon be worthless. There were plenty of web resources (including mine) that pointed out the pit-falls.

  7. Recall that those first early adopter buyers were told that they were getting a “special” price at $399 – they were told they were “saving” $200 off the future “real” price of $599

    Now they find out they really paid $150 MORE (and that if they just wait a little longer they will only pay $99).

    That’s a great start towards “refurbishing the company’s reputation” and fixing their “black eye”

  8. Hi Raymond and Fernando,

    Yes, we have been experiencing problems with our international prepaid billing provider. It is a top priority for us and we are actively working to get this fixed. Our customer’s experience is of utmost concern for us, so we cut our billing provider out of the loop when we can detect an extended outage. Thank you for your patience so far and please continue to let us know about problems you experience so that we can address them promptly.

    Dennis Peng

    1. Hi Dennis
      My hub & scout purchased from Dell.com arrived today. I was so excited to follow the instruction to activate the unit. What I got was – “You have entered an invalid Activation Code”. Double check the code and same message. Called tech support and was told to just wait. Is this something you can help quickly. I’d like to get it setup over the weekend. By the way, googled and read that you can help on this matter through Ooma’s forum, however, can’t register there to contact you from there… Thanks in advance.

  9. Om is correct that the primary value proposition is making free US calls
 with no monthly charges. This is why we decided to decouple the core 
value of the ooma system from the enhanced features. This allows our
customers to choose which bundle is right for them.



    Our new retail bundle offers unlimited US calls with a familiar suite of features (caller-ID, call-waiting, and voicemail) for $249 with no monthly charges. They’ll also get a free trial of ooma Premier, after which they’ll have the option to subscribe for $12.95 per month or $99 per year.

    
Early ooma customers who purchased the ooma Hub(tm) device for $399 will
 continue to enjoy “ooma Premier” services without monthly charges. This
 package includes the Instant Second Line(tm) feature, real-time message 
screening, Send to Voicemail, Do Not Disturb, a personal number with private voicemail, and more.
     
    To show our appreciation to our early customers, we’ll be offering them
 complimentary number porting along with an extended three-year warranty 
(valued at $79 and $69, respectively).



    We are very excited about this new pricing model, as we believe it will
 make the ooma system more affordable to consumers and allow
 our customers to decide which package is right for them, whether it’s
 eliminating monthly phone bills for US calling or enjoying all of ooma’s innovative calling features for a low monthly/annual fee.

    1. Mr. Peng,

      I have read about Ooma and was on the verge of making a purchase.
      I had a few questions, and I have become very exasperated in trying to get answers.
      I submitted questions through the Ooma website several months ago, and I never received a reply.
      I am also quite peeved that the Ooma website lists a phone number where Ooma can be contacted,
      but when you dial that number all you get is an automated message sending you back to the internet.
      I was about 90% convinced that I would buy one of your units, but your unresponsiveness has now given me new reason for pause, as I don’t want the same exasperation if as a customer I have a question that needs to be answered.

      As you service still looks very appealing, I will ask you the questions once again.

      1) I am still a bit confused about using Scout.
      My idea is that I will disconnect the external phone line (leaving my house) altogether, and then if I connect
      your hub to any phone jack in my house, ALL of my wired phones should still work, because all
      of the phone jacks in the house are wired together.
      I should therefore not need to use the Scout unit unless I wish to use two separate telephone numbers simultaneously.
      Please confirm if my understanding is correct. If not correct, and I would need to use
      a Scout on each other jack in the house, then please explain exactly what Scout is doing.
      On one wired phone, I have a splitter between the phone and the jack, with a caller ID unit also connected.
      Wll that still work with just the core, or will I need the Scout for that too?

      2) It is not possible for me to run a cable or wire between my cable modem and any phone jack in my house.
      I will instead connect the Hub to my router through a Wireless Access Port.
      Are there any special conmsiderations for that configuration?

      3) I have Cable modem service, 10Mbps download and I would like an estimate of how much of my available bandwidth will OOMA use?
      Is the Ooma bandwidth also used when I am not on a call?
      Will Ooma interfere with on-line browsing and/or with video streaming?
      Will the Ooma call quality deteriorate if I am browsing or streaming video and also place a call?

      Thank you for your attention.

  10. Mr Blog » Blog Archive » Lessons from a VoIP Entrepreneur Thursday, April 24, 2008

    [...] Malik today posted about the woes of a silicon valley VoIP startup that launched with much fanfare last year. In this post, Om says: the company focused on developing [...]

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