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Summary:

Toktumi CEO Peter Sisson talks about how he’s managed to grow despite launching the wrong product initially and Google’s entry into his market. He also highlights how he plans to take his hosted telephone system to the next level by going mobile.

Toktumi's original product

It’s a nightmare that startups and big businesses alike fear — Google suddenly getting into their market and sucking away users and profits. With hundreds of product launches, it’s a legitimate concern, but it doesn’t have to be the end. For San Francisco-based Toktumi, its trial-by-Google began earlier this summer about a year and half after the startup debuted with the wrong product which it then revamped, only to later have it come head-to-head with the search giant.

Toktumi launched a business-based softphone at DEMO 2008 in January. CEO Peter Sisson said he quickly realized the company had launched with an unsuitable product when it signed up few users and those people immediately began to complain.

“We got it wrong and launched a softphone-based service that was like Skype with business calling features built into it,” Sisson said. “We had no traction and maybe 100 customers. So we asked them what they wanted.”

It turns out they wanted mobility, rather than a phone that tied them to a computer (see device pictured above).  Toktumi listened, and began to provide a web-based client and hosted telephone system that reaches users on their PC, mobile or desk for $14.95 a month. It’s a similar enough service to Google Voice that when the search giant released its telephone product in July, Sisson told his board that he expected the company would lose 25 percent of its customers. Instead the company’s paid subscribers grew 56 percent each of the three months following the Google Voice launch.

Sisson managed some of this by using Google’s own services to help expand his business. Reasoning that potential Google Voice customers would search for the term on Google, he bought a Toktumi ad against Google Voice searches. He said the whole experience actually helped Toktumi because it educated consumers and businesses about the benefits of a hosted PBX. It doesn’t hurt that Toktumi lets users bring in their existing telephone numbers, rather than assigning them one.

Sisson would not give me actual sales or consumer figures, but the company is still tiny with between 5,000 and 10,000 customers. And in the coming weeks, Sisson plans to take his customers’ focus on mobility a step further by offering an iPhone app called Line2 that will allow them to make and receive VoIP calls on the Wi-Fi network. However, unlike other VoIP offerings, Toktumi’s Line2 service will still work over the cell network for placing and receiving calls when Wi-Fi isn’t available.

Sisson, the co-founder of VoIP startup Teleo which Microsoft bought in 2005,  recognizes that the future of the phone is its ability to offer voice wherever a person is — and on the network of his or her choice. If it can survive launching the wrong product and Google’s entry into its market, he might be a player in telecom’s IP future.

  1. Poor headline. So Google’s ‘attack’ was releasing a product marginally related to yet another ‘web-based client and hosted telephone system that reaches users on their PC, mobile or desk’?

    The real story is Toktumi’s Googjitsu in using their own searches against them.

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  2. I think it’s very hard to use the Toktumi example to make the case that there is life even in a domain where Google has entered. We signed up for the Toktumi test a couple of months ago. Then we heard about Google Voice. In our tests, we figured that both Toktumi and Google Voice were lacking some of the features we wanted, but assumed that Google Voice would add them sooner or later. So we dropped Toktumi altogether from consideration.

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  3. One of Toktumi’s big advantages and the reason why I continue to subscribe is the 888#. I am effectively paying $15 a month for unlimited minutes on an 888# that rings my desk phone (via a toktumi interface such as you have pictured above) and/or forwards to other number(s). However, Toktumi lacks the voicemail transcription of Google Voice, but that is an easy solution. I just have my Toktumi number set to forward to a Google Voice number instead of my cell or other numbers. Then I set Google Voice to ring my cell or other numbers. That way all the calls come to me at my desk and/or cell phone but all the voicemail is handled by Google, who provide me transcription.

    It’s really a perfect combination. I get all the Google voicemail features and ringthrough and the unlimited 888# usage and great rates on international calls from Toktumi.

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  4. We’ve found that business customers need a service that supports multiple lines, offers an auto attendant (“press 1 for…”), doesn’t brand call announce with google, and offers service level guarantees and live customer support. If you’ve ever started a small business, you know that looking bigger and more professional is key, and many folks dont want to trust something as important as their phone line to a free service. Also, they are deeply concerned about privacy and they don’t trust google. These are all subtle but very key points as to why we are seeing our growth accelerate. And from a business model perspective, it’s a wonderful thing for us because we cream skim all the serious business people who have the willingness to pay for service out of google and leave google with the rest.

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  5. This is a worthy topic, referring to the notion of what to do when Google comes knocking. In many cases – including this one – the results can be positive. Pre-Google (in telecom that is), innovators used to worry about once-giants like Nortel encroaching on their space; yet more often than not the innovators benefited from the marketing might the giant brought with them. More competitors meant often more inquiries, and while you didn’t win them all, you were now playing in a bigger pool.

    The same can be said for GoogleVoice. Great for telecom and an expanded set of choices for the consumer and prosumer alike. But I’ve talked with more than one leading virtual PBX player and all have seen increased numbers in the last year.

    GoogleVoice – at least for now – serves the sole proprietor (ie. no colleagues) and the mobile professional who may want something other than what their employer has to offer. And does both well. But in creating demand from the prosumer population it forces some of them to look at what else the market offers (free or not). After all, $15 is not to ask for if it runs your business.

    One thing Google does not do – nor can we reasonably expect them to – is answer the phone when a small business person (with low IT skills) actually wants to talk to someone about configuring their phone service. We should not underestimate the leverage this gives competitors like Peter or others.

    Last thing: I am fortunate to know Peter and see what a patient yet very realistic entrepreneur he is. His quick shift to mobile is evidence of this. And the mobile PBX (bad name, I know) is a concept whose time has surely come. The opportunity to get this right is tremendous, and is now.

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  6. [...] honk: Gigaom provides a “surf or die” example in “When Google Attacks: Toktumi’s Tale”. The write up summarizes what a mobile phone gizmo maker did to stay in business when Googzilla [...]

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  7. To be able to compete against Google is commendable!

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  8. Even though this space seems to be quite crowded already, it’s refreshing to see the SMB mobile VoIP niche addressed. I have yet to find a decent SMB mobile VoIP offer in any of the mobile app stores thus far.

    The mobile/virtual PBX play should certainly pay off as growth of mobile VoIP in the SMB sector increases. I am not sure if this will not be the only SMB mobile VoIP offer of 2010 but it may just be the first complete offer.

    Looking forward to seeing it in action Peter!

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  9. [...] which launched at DEMO 2008, has had to traverse a difficult path to get to where it is today, and Sisson is understandably excited about the kind of exposure the approval from Apple of its app [...]

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  10. [...] late December, Om Malik wrote an insightful blog on a related issue called ‘When Google Attacks’. It recounts how Toktumi, a small business telephony provider, ran into the Google Voice wall. Its [...]

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