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In 2009, Telefonica, the Spanish telecom giant which owns networks across the world, announced that it was going to acquire Jajah, an early internet voice service provider, for $207 million. The news was greeted with much applause, not only because of the exit valuation, but also because it showed that old telecoms were responding to the challenge posed by the likes of Skype. Over-the-top services were going to become the norm, and it was good to see a telco that provided both wireless and wired services embrace the future.
And then we all promptly forgot about the company. Fast forward to this weekend, and all hell broke loose:
As of January 31, 2014, Jajah will no longer offer any Jajah.com or Jajah Direct services to its users in the United States or elsewhere. This means that, as of January 31, 2014, you will no longer be able to make any calls through any of Jajah’s services, including the Jajah.com website and Jajah Direct. Registration of new accounts are no longer being accepted.
The planned shut down of Jajah by Telefonica also follows the shuttering earlier this year of mobile VoIP play Tu Me and is evidence of the internal fighting at Telefonica as the TuGo product is surviving (for now). … (It shows) how non-innovative Telefonica really was, as acquisitions are not innovation and (I) referred to Jajah as “two servers in a broom closet connected to a few Tier One networks” at their time of acquisition. It looks like I wasn’t that far off as shutting down a $200 million dollar purchase rivals the BT purchase of Ribbit for over $100 million dollars, which BT has basically wound down after buying the company for what was to be six services BT had on their roadmap, but never executed on either. These two failures demonstrate the difference between Google, Microsoft and Apple who buy strategically, while old line telcos buy out of fear and uncertainty.
Abramson makes absolutely fair points. Telecoms are buyers of the last resort and they are buying way too late. I wrote about Jajah quite a bit and was always underwhelmed by them. They were so much in awe of Skype and their strategy was shaped by what others did — one of the reasons why they felt less of a leader. So perhaps, when they got bought, it was actually a pleasant ending to the company.
The shutdown of the service brought back memories and I made some calls to people who are (and were) intimately involved with the company. As might be expected, they painted a much less bleak picture. The fact is that Telefonica has killed Jajah, the consumer facing service, but rest of the business — and the real reason why Spanish telecom giant bought them — is still in business. Telefonica wanted to get a platform to launch over-the-top applications for its service, and Jajah gave it that platform. Some of its apps in U.K., for example, use the same platform.
Similarly, most of Jajah’s team (minus the management) is still in place, working for Telefonica and working on the platform. Telefonica wanted to get a presence in Silicon Valley and Jajah’s Mountain View offices gave Telefonica leg room to establish itself in Silicon Valley. They have local executives who work with app companies on partnerships and also make investments in startups. So, from that perspective, Telefonica got what it paid for when it bought Jajah.
Jajah the consumer service, however, has been put to rest. It never really was a big enough business and Telefonica just let it lie fallow for years. We are told they had less than 5 million customers for its consumer service — a pittance compared to hundreds of millions of people Telefonica counts as customers. It would make perfect sense for them to kill it. It would also make perfect sense for the phone company to get its act together and communicate the strategy behind this decision more clearly, but I bet someone forgot to read a memo sent to them by someone else.
PS: My view (and I have been saying it all along) is that all carriers need to stop mucking about with applications and focus clearly on back-end infrastructure, billing and networks. Let people invent the apps that would lead to more network usage, which in turn would allow them to sell faster pipes — and make more money.
That’s my 2 cents, but then again, no one really listens to me.