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Jaxtr's Challenge: Turn Try It Into Buy It

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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?

23 Responses to “Jaxtr's Challenge: Turn Try It Into Buy It”

  1. Hi, I subscribed to Jaxtr free service and found it interesting. Then I needed to call some countries not on the free list so I purchased a premium membership for 50$ on May 20th for which I have received a correct invoice.

    7 days ago, I received another invoice for another order for the same amount which I have never placed.
    I alerted Jaxtr and received a response with a ticket number with ticket ID SJN-683924. They promised that a support personnel will get in touch with me. This never happened
    I resent a couple of mails again and no response. Can somebody let me know if it has faced this issue before. I will put an objection on the financial transactions with my bank is this fraud

  2. niddi

    i purchased credit from jaxtr once and they charge my account every chance they get for the same purchase. and the worse thing there is no contact number for them and the support link does not work!!!!!!!! i want my money back.

  3. They are clearly a fraud.
    Ages since I gave it up as a crap, do not use it anymore. Have sent numerous reminders to them and they still keep charging my card every month, sometimes even thrice a month.

    This despite their website mentioning they don’t have my credit card details and want me to give another card number.

    Have lodged a case with my credit card company, hope they have better luck getting response out. Otherwise I am screwed – since they cannot just block these payments legally.

  4. Hi Konstantin,
    Though Skype is free, it gets income by selling skypeout to its users. How is Jaxtr going to monetize its big user base, that’s the question. To give free calling time to 5 million users and expect only 1% of it would be paying users?

  5. Jaxtr is about giving your phone a link, and one of the benefits is that people abroad can call you for the price of a local call. But this is only one of many benefits–a lot of our users enjoy the ability to route their calls to the phone of their choice, to allow people visiting their blog/profile/posting to call them without having to disclose their phone number, etc. I think the reason we’ve pulled away from the pack is a combination of a complete set of services and a streamlined user experience. Just like when we started LinkedIn, people didn’t think there was any money to be made, but we always felt that if you provide something valuable that members don’t have a problem paying for it. Even though Skype is free, users spend billions every year on international phone calls because they like the convenience of making calls from their phone–without having to download anything, requiring a phone with Internet connection, etc.

  6. Kudos to Anne for exposing the “free calls” scam. Otherwise called – con(vince) investors into giving you millions and then hand then out to your customers as free calls.

    What do you do when you run out of money? Why worry? Maenwhile you are having fun! There is a market for easy to make low cost international calls. But free calls? What benefit is there from free calls. Your customers as NO loyalty and will leave you for the next “j” (as in jajah, jaxtr, jangl etc…). I have posted about this many times
    and it is nice to see from the comments here, that I am not so far off..

  7. One of the keys to Jaxtr’s model seems to be the way they allocate numbers. If they assigned a DID for each user (like GrandCentral does), the math clearly wouldn’t work.

    Instead the number they assign to you is shared with other users. They look at the incoming number and figure out where to route it based on the number that is “registered” through the Web widget.

    To see how this works, try calling a Jaxtr number from the Web widget and give them your home phone number. They’ll assign a number for that callee for you to use on future calls. Now take that number and try calling it from your cell phone. It won’t work because the system hasn’t associated your cell phone with that number.

    They also won’t let you make calls through the Web widget to the same number twice from the same phone, further reducing the cost. (No inbound leg to pay for.)

  8. Come ‘on. Jajah, Jangl and dozens of voip startups I’ve read about give away free calling, but none are growing nearly as fast, so Jaxtr must be doing something right! I don’t get many calls from my Jaxtr button…quality has been excellent tho. Not sure how much to trust Alexa these days, but Jaxtr’s page views are a lot more than any voip startup I typed in, so if anyone can become the next Skype, Jaxtr is a good bet! Hope they give me some choice of buttons coz orange is pretty garish . . .

  9. i like jaxtr a lot. by i can not understand why they do not let me buy additional jax. i can’t start attaching a widget to every email and posting on blogs and than run out of jax and its useless. they could start making money today if they only accept it instead of limiting me to 100 jax a month. also 100 jax is completely useless if you take your calls on a mobile phone in europe. you only get about 4 minutes.

    if they no want to sell jax than please let me forward to a SIP URI for free in place of a phone number.

  10. Jack Straw

    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.

    United States5.4%
    Dominican Republic3.6%
    Palestinian Territory3.3%
    United Arab Emirates2.8%
    Saudi Arabia2.4%
    United Kingdom2.0%
    El Salvador1.7%
    Other countries24.4%

  11. 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…

  12. 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!

  13. Cheryl's Office

    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.

  14. 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!

  15. 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 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 ??