Paltalk, an online video chat firm, announced today that it has acquired Vumber, a virtual phone service, in an effort to capture additional revenues by offering virtual phone numbers to existing subscribers. The deal could provide Paltalk with additional features to bolster its existing video conferencing product, and give it a leg up against services like Skype in an industry that’s becoming increasingly competitive.
Like Google Voice, Vumber was created to allow users to create virtual phone numbers that link to their mobile or home numbers, adding an extra layer of privacy and security to consumers who don’t want to share their personal contact information. But despite having a paid subscription model, Vumber, which was founded in 2006, was never able to realize the revenue it needed to support its expenses.
The acquisition builds on an existing relationship between Paltalk and Vumber. The companies entered into a partnership and a revenue-sharing agreement in early 2008, when Paltalk made disposable phone numbers from Vumber available to its video conferencing customers. Knowing that its partner was having financial troubles, Paltalk made an offer to pick up the Vumber assets and integrate them into its own service.
Financial terms of the deal were not disclosed, but Paltalk CEO Jason Katz said in an interview that four Vumber employees have joined the Paltalk staff. In addition to personnel, Paltalk gained all of Vumber’s hardware, two trademarks, and one patent on anonymous calling that is pending approval.
There will be no interruption in service to existing Vumber users. Paltalk hopes to bring more functionality to the Vumber platform, such as offering PC-to-phone calls out, as well as PC-to-phone calls in. “It’s a matter of making some of our features available [to Vumber], and making some of their features available on Paltalk without losing the brands for either one,” Katz said.
Paltalk, which offers a video social-networking service that allows multiple users to chat in real time, has been profitable since 2004. The company was founded in 1998, and introduced a subscription service to its users in 2001. Katz wouldn’t disclose how many of Paltalk’s 4 million active users are subscribers, but said that 85 percent of the company’s revenue comes from subscriptions.
In addition to acquiring Vumber’s assets, being profitable enabled Paltalk to buy out venture capital firm Softbank Capital Partners’ stake in it earlier this year. Softbank paid $6 million for 20 percent of Paltalk in 2004, but Katz said his company was able to buy back that stake at a solid profit to the VCs. And now, with a profitable video conferencing business and new virtual phone features, Paltalk has even more artillery against competitors.