The business of providing voice services to users of social networks is a tough one – you need huge volume to basically make money off what is essentially a new age call-back/calling card business. That is why many companies that aimed at this market have either retrenched or gone out of business.
Jaxtr, a Menlo Park, Calif.-based company, on the other hand, is ready to double down and stay in the game. Helping it do so is $10 million in Series B funding from Lehman Brothers Venture Partners, announced this morning.
The funding announcement is contrary to the rumor I had heard about Jaxtr hiring Lehman Brothers to sell the company. Good thing, I didn’t post that one ;-) Jaxtr plan includes making money to selling minutes for outbound calls to non-network members and ad-supported calls. “Combo of viral growth, ad revenue and paid services is a promising model,” Konstantin Guericke wrote in an email this morning. Jaxtr says it has 10 million users, a number they have been using since early 2008, though I would prefer if they start telling us about active users per month.
The out-of-network calling is a new service from Jaxtr, and is ultra cheap. For instance calls to China cost a mere penny a minute, while calls to India are 6 cents a minute. That’s low price, and I am not sure how they are going to make a ton of money doing that. Advertising-supported business is not an easy one either – as we have noticed in the past. To sum it up, I channel Brian McConnell, a former phone guy, and an occasional columnist for us.
The liquidity and exit opportunities for small telecom companies are also not good. You either need massive amounts of capital, or you need to be bought by a phone company (the stereotypes about phone companies exist for a reason). There are exceptions, of course, but they are rare.
Good thing, Konstantin has the money to soldier on!