Mobile VoIP Startups Looking Beyond Cheap Calls

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What do mig33, iSkoot and Truphone have in common? They are all startups that have raised gobs of money from venture capitalists. They all offer mobile VoIP clients. And now, all three are looking beyond plain vanilla voice services as they try and navigate the new, post-credit crunch economic reality.

These startups are realizing that in order to make real money they would need to create billions of minutes in calls to off-net services. It is a game only the biggest -– Skype (s EBAY), for instance –- can play. And even then, making profits isn’t all that easy. More than a few startups have died trying to play the low-margin minutes game. (Related post: VoIP – Dead or Alive?)

For these three , the sheer size of their VC funding — over $100 million among the trio — provides a cushion while they plot their evolution.

Truphone, one of my favorite applications, has already gone from being just a mobile VoIP client to becoming an all-encompassing communications offering. By supporting Skype, Twitter and other communications services, Truphone is hoping to become the default (or at least the most used) communication application on the iPhone, which would allow it to generate more call-out minutes and also open up other e-commerce opportunities.

Mig33 is taking a different tack: going after digital goods for additional revenues. These digital goods would include virtual gifts, emoticons, and other means of self-expression. Such virtual gifts have been hugely popular in other online communities, such as virtual worlds and social networks. (Related Post: Venture Capital Loves Virtual.)

During our conversation, Steve Boom, a former Yahoo (s YHOO) executive who recently took over as the chief executive of Burlingame, Calif.-based mig33, said that so far that company’s revenues have come from VoIP and digital goods, and that it will be focusing on the latter over the next six months. The company is looking to become cash-flow positive, and that is a big focus for Boom. Its application (and services) are extremely popular in Southern and Southeastern Asia, in addition to some parts of the developing world, where cheap calls are a lure for signing up new customers. (Related: Mad Money for mig33.)

Like its peers, San Francisco-based iSkoot has also tweaked its focus. So far, the company has been pushing a client-server solution that allowed folks to use Skype on their mobile phones. Its offering is the underpinning of the Skype service on 3, the UK-based 3G service provider owned by Hutchinson Wampoa. The company raised a whopping $19 million in Series C funding in November 2008.

The funds are to be used to develop a new platform for AT&T (s T) that would allow Ma Bell to offer iSkoot’s myriad services to its customers. For starters, iSkoot has released Notifier, a mobile application that allows folks to read RSS, and to interact with Facebook and Gmail on plain-vanilla mobile phones.

Company executives say that while iSkoot will continue to offer its Skype solution, the company has bigger ambitions, and Notifier is part of a bigger strategic shift by the company. (Related post: iSkoot Looks at a New Mobile Future) Who can blame them? It’s awfully hard to make a living selling a Skype solution to carriers who hate Skype to begin with.

Like mig33 and Truphone, iSkoot is making a smart move and losing its reliance on voice, a commodity business with razor-thin margins, and instead looking elsewhere for growth. Let’s hope by losing their (proverbial) voice, these three companies find something to sing about in the future.

24 Comments

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VOIP Providers have reliased that giving away free voip calls is like robbing your own bank account. The valuations and the whole numbers game around users, have matured enough to realise that its not the right way for valuations. With this hard economy, these companies are stray dogs (mind my language).

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Timoti Sanchez

Thanks, I think at the end of the day, there is still a lot of mileage in making money off of cheap mobile calls. The mobile operators have loan shark high profit margins, so even without extra apps and services, there is plenty a room for more players.movie download links

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Thanks, I think at the end of the day, there is still a lot of mileage in making money off of cheap mobile calls. The mobile operators have loan shark high profit margins, so even without extra apps and services, there is plenty a room for more players.

Malik

Truphone is no doubt the one of the best VoIP providers, I like its iPod App. I watched Press/Play of Telecom TV few days back, they provide the great information about mobile VoIPs as which one is the best and why? and also recommends Vopium and Truphone as the best mobile VoIP.

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I am highly skeptical on the possibility of profit for those firms. Even likes of Skype, which was bought out by Ebay, is now facing problems with monetizing.

Moshe Maeir

Om,
At the end of the day, there is still a lot of mileage in making money off of cheap mobile calls. The mobile operators have loanshark high profit margins, so even without extra apps and services, there is plenty a room for more players.

We are taking a little different approach by putting a LCR for mobile engine on a server. All you need to do is sync your cell phone with the server, no need for newfangled smartphones. I wrote more about it at http://flatplanetphone.com/wordpress/2009/01/23/the-last-frontier/ which generated plenty of interest. We are showing it at ITEXPO, so anyone who is down in Miami is welcome to stop by at booth 924 to discuss the future of “Mobile VoIP”

Shai Berger

I think the key sentence in the post is “…develop a new platform for AT&T that would allow Ma Bell to offer iSkoot’s myriad services to its customers….” and then just remove the word “iSkoot”. iSkoot and mig33 are basically aiming to be the next generation “WAP store” for the carrier and at the same time, an answer to Apple’s AppStore.

AppStore showed us how compelling it is when you can discover, download and play apps from your device. And carriers have seen how much it lifts their data traffic. (iPhone trippled AT&T’s data traffic: http://www.shaiberger.com/?p=52)

So the carriers that *don’t* have iPhones want something similar for their flagship phones. And *all* carriers want to extend this concept to their lower priced phones.

But Blackberry can’t make an AppStore and neither can any of the carriers. Those guys don’t have the software chops. (Comparing Blackberry’s “Desktop Manager” to iTunes is like comparing Notepad and Word.)

So the answer is to bring in a 3rd party that has a system where games, chat, utilities, etc can be delivered do feature phones with a good user experience.

As Om put it yesterday: “I wouldn’t be surprised if they use technologies like iSkoot to create a new walled garden, though one with a perception of openness.”

http://gigaom.com/2009/01/26/iskoot-reboots-looks-at-a-new-mobile-future/

But, hey, AppStore is a “walled garden” too: They decide who gets in and doesn’t and they take a cut of all sales. Walls aren’t simply open or closed — it’s all about the nuances.

– Shai

Follow me: http://www.twitter.com/shaiberger

Vinay

Personally, I do not see this happening anytime soon. Eventually most of the mobile VOIP Provider would consolidate or liquidate to form one big mobile VOIP provider, which I guess would emerge from Europe. We have seen most of the mobile voip action coming from europe only.

VOIP Providers have reliased that giving away free voip calls is like robbing your own bank account. The valuations and the whole numbers game around users, have matured enough to realise that its not the right way for valuations. With this hard economy, these companies are stray dogs (mind my language).

Fring atleast has an advantage coz they never positioned themselves as VOIP Provider and always stuck with the application arena which i believe will eventually do well on enterprise scene.

Even though we have strong VOIP sales numbers coming in business and individuals, I feel that many VOIP Providers will go out of business this year. Call it lack of focus or lack of innovation, it would eventually happen.

Vinay

Om Malik

@paul

I think right now there is not a single killer twitter app on iPhone and no IM client that does the job. For now Truphone is doing what it says it can. It could be better and they better get better or they lose all value to me. I agree, though — the functionality needs to be focused and be very tight with whole concept of communications.

Paul

>>Sure it isn’t the most optimal solution but it lets me do a lot more than just make phone calls.<<

But that’s the point – it doesn’t do more than that. And it isn’t marketed as more than that. And even for what it does doi it isn’t optimal.

If you want IM, you install an IM client. If you want Twitter, you install a Twitter client. Users pick best of breed applications on a per application basis. Trying to be everything to everyone is what destroys businesses. If either of these companies diversify too much they’ll be in trouble. They all need to pick their business model, keep a tight focus, and go for it.

If they just keep throwing in bolt-on applications until one sticks, they’ll go under.

Om Malik

@tom

I think if a company’s business model is selling cheap minutes then it should just do that and build its entire operation around that premise and not try and raise a lot of VC dollars. In other words, cheap calling is no different than long distance cards you buy in the neighborhood bodega.

Om Malik

@Peter Sisson,

I think you are right about these service providing value in terms of other applications married to their apps. I think if you use Truphone, you would realize why it actually makes a lot of sense, especially on an iPhone. Sure it isn’t the most optimal solution but it lets me do a lot more than just make phone calls.

Peter Sisson

Given that I don’t want advertising inserted into my phone conversations or on my smartphone screen, it would seem that the future for these companies is to provide new applications that solve problems, problems important enough that people are willing to pay for a solution. I’m not sure they are solving a real problem here by integrating other services. I can already get skype, twitter, or facebook on my phone without their help. iPhones pre-ship with google and youtube fully integrated. The strategies of these companies remind me of the old portal strategies of the early dot-com days: become the place people go first to get access to everything they already do, insert themselves as the intermediary, and somehow monetize the traffic. Will that work here? I think the challenge is that if they are ever able to make it work, then the carriers will simply copy the business model, with the advantage that they control the platform and can give their own solutions the upper hand – just like microsoft.

tom

what people are looking for most in mobile VOIP is super cheap rates and super simplicity. every time a new feature is added the simplicity goes away. these feature may be great for attracting more VC $$’s or even be able to give value add revenue from existing customers. but it does very little to attract new people to the services. most people just want to save some money.

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