When Google Attacks: Toktumi's Tale

Toktumi's original product

It’s a nightmare that startups and big businesses alike fear — Google (s goog) 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.