Blog Post

Mega Dollars for Mobile VoIP

Stay on Top of Enterprise Technology Trends

Get updates impacting your industry from our GigaOm Research Community
Join the Community!

The trials and tribulations of the competitive voice service provides such as Vonage, have forced venture investors to look at startups that marry VoIP to mobile phones. Any application that can lower the high mobile phone tariffs can quickly gain traction. And that is enough for investors, who ready to put down mega dollars.

You might have heard of names like Jajah, iSkoot, Mobiboo and Fring, with some of them getting big cash infusions from the likes of Sequoia Capital and Khosla Ventures. Add Truphone to this list. The UK-based mobile VoIP startup has raised £12.5 million ($24.5 million) in Series A funding from Wellington Partners, Independent News & Media, Burda Digital Ventures and existing investors Eden Ventures and angel investors.

The company plans to set up what it describes as a global Mobile Internet Network Operator. The company has signed up deals with Wi-Fi network operator The Cloud, which lends some credence to its claim.

Much as I like Truphone the application, I find the company has an uphill climb. The fancy MINO acronym might sound impressive but in reality Truphone will be fighting the battle for cheap minutes, which is great in early days but then it quickly gets old.

The only reason I use them is because the calls are cheap, cheap enough to make me wonder what really is the margin for Truphone after it has paid off the incumbent who terminates my call in India.

With multiple phones to support, one cannot overlook the problems and costs involved with developing and deploying software to many different mobile platforms. This at a time where there are competitors popping up all around them. Of course, what is to prevent the Vonages of the world to play the same game?

Here is the twister: if Truphone becomes really popular and is embedded in all phones, then you can make free calls to other Truphone-enabled phones. In other words no revenue opportunity, just like Skype. Forgive me for thinking, that this investment is laced with a dash of irrationality.

10 Responses to “Mega Dollars for Mobile VoIP”

  1. Not all services that are claiming to be mobile VoIP are equal and it is very much our belief that Truphone is smarter than just a price play.

    1. Unlike PC products where people have to consciously load an app. and choose to make a VoIP call, Truphone works seamlessly/invisibly with the handset to give free/low cost calls using your exact same contacts book and method of dialing. This means Truphone gets used for higher-margin regular PSTN inbound/outbound calling – automatically providing savings for the user.

    2. Furthermore, because Truphone can use the internet for 100% of the call, innovative added-value services are possible. Watch this space.

  2. The really clever things about Truphone are that

    1. It can be ‘bolted on’ to an existing cellular phone account really easily and for no additional cost.

    2. When active it transforms a compible phone from a GSM phone into a converged SIP VoIP / GSM phone that can use commercial WiFi Hot Spots OR Access Points in the home or office to route traffic for free or very low cost.

    3. Truphone sends and receives sms messages.

    4. Truphone has a sound business model that currently generates revenues from both inbound and outbound voice and SMS traffic.

    5. Voice quality on Truphone (unlike some other VoIP offerings that use complex waveform/low-bitrate codecs) is really superb, yet consumes very little bandwith.

    6. Truphone allows mobile phones to be used in places that normal GSM phones do not work (like my 370 year old house in rural UK)!

    7. When out of WiFi coverage, calls (and SMS) are forwarded via GSM – so gaining the dual benefits of economy and coverage.

    I am now a dedicated Truphone user who has broadband with WiFi in both home and office. Using this technology I can make and receive calls and SMS (for FREE) when at home or in my office and also still operate as a conventional phone when driving on the road.

  3. I disagree with your observation. I have been in the Mobile VOIP business for a bit. Investors are clearly not investing in just another Mobile-VoIP product. Most of those investments that you see are probably because of relationships than because of the product.

    Most VCs are quite clear. The application has to be compelling. It has to marry voice with data in some unique way. No one really buys the cost argument.

  4. Sandeep Sahai

    I think Mobile VOIP will follow the same route which VOIP did…i.e. when VOIP was first introduce, it met with failure because of lack of voice clarity etc…
    Now, VOIP is acceptable to all of us…so once our mobile speed is upgraded to 3G then yes there are emerging standard which will enable mobile VOIP a possibility.

    I am not sure but there are certain plan on card from US wireless service provider to provide VOIP based phone on there network..which in turn will route the call via net instead of traditional way.

  5. Jesse Kopelman

    The funny thing here is that mobile VoIP has exactly the same problem as old school VoIP — the cost of voice keeps going down. If your main draw is cheaper calling, you are going to be in trouble (see Vonage). There is money to be made on the single number / multiple device side of things, but is it enough to satisfy investors?