Is it time to drop the Twit, Tweet, etc. from your App Name?

There has been a storm of sorts this past week surrounding Twitter, their developers, and the “ecosystem”.  It started with some comments from VC Fred Wilson followed by comments from Twitter CEO Ev Williams in a New York Times interview, and culminating in Twitter buying Atebits and thereby creating an official iPhone app: Tweetie.

This has, of course, created quite a stir in the Twitter development community, with accusations that Twitter is “eating their young” and pushing third-party developers out of the market.

These recent events have really brought home for developers the risk that when building on top of someone else’s platform, they could decide to compete with you head-on. Of course we’ve seen this many times in the past, most notably with Microsoft, but also with Google, Cisco, and many others. Those seeking funding for Twitter mashups often struggle with this push-back from potential investors. Perhaps now, that will become even worse and it will be even harder to get funding for a Twitter-based product or service.

That’s not good news for Twitter. While their platform is popular, with a claimed 50,000 developers, it’s still relatively small, compared to Facebook with 500,000 or Apple’s 185,000 apps in the app store. Furthermore, both Facebook and Apple’s App Store have spawned lucrative breakouts like Zynga, Tapulous and PopCap, while Twitter’s ecosystem has yet to produce a similar hit in terms of revenue, to say nothing of profit. Even among the most popular Twitter apps with lots of users, there are plenty of companies burning cash, but few producing any.

So, is it time to drop the “twit” or “tweet” from your brand name and become less intricately linked and integrated with Twitter and the Twitter platform? Or is this a perfect time to show loyalty to Twitter in the hope that they reward you for that loyalty? To Twit, or not to Twit. That, is the question.  What do you think?

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Rich Buchanan out at Ooma

I missed this in February via, hdvoicenews.com

By Doug Mohney, on February 8th, 2010

After two years as Ooma’s Chief Marketing Officer (CMO), Rich “The Dude” Buchanan is departing the company for another project.

Makes one wonder who is left there.

I understand the company has raised about $61 million and have obtained approx. 100K customers (for which they must provide phone service for life). No one outside the company knows how much of that money they have left – rumors suggest they have burned though over $50 million, but know knows.  Hard to say when they’ll next need more money or how hard it will be to get more or how close they are to positive cash-flow (if it costs them $600 to get a customer that pays them $300 and brings liability of lifetime service, not sure that line ever crosses into the black). I was pretty amazed to see them raise as much as they have over the past few years, and especially last summer when money was really tight.

But man, $50 million, if that number is close to reality – Wow.

Apparently some of the early investors took it in the shorts – the most recent round of financing was based on a reported $30 million valuation (note that amount is less than they have raised).

BTW, by most accounts, Ooma has very happy customers in general and their voice quality is generally regarded as being very good among VoIP services.  It might be one of those deals where the customers “love them to death” kind of like WebVan.

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Skype grossly over hyped, even with the Verizon deal

Ok, short and sweet here.

The recent hype about Skype, and in particular surrounding the Verizon deal has been blown WAY out of proportion, IMHO. It’s time to set perspective here.

First, Skype was supposed to have killed off traditional telecom by now. Last I checked, that hasn’t happened (still a trillion dollar business).  In fact, Skype actually PAYS traditional telecoms a significant amount per month, thus helping them stay in business.

Second, Skype was supposed to revolutionize everything. Ok, they’ve done some cool stuff, especially if you like video.  And they introduced the world to HD Voice.  On the other hand, if you look at where Skype gets revenue, oh gee, it’s from traditional telecoms services – like phone calls, and phone numbers, and voicemail!  Where is the new and revolutionary business model? At the end of the day, Skype is not all that different than other Chat applications with Voice and video.

Third, lets not forget that Skype still is a black eye for E-bay and (now candidate for Governor of California) Meg Whitman. Meg paid (at least) $3 billion US in 2005, then wrote off $900 million. And of course now E-bay sold 65% of Skype to a PE group at a valuation of roughly $3 billion. That’s zero percent growth in valuation over 5 years. Not quite the wonderful story it’s perceived to be.  What’s more, not only did it not appreciate in value, but Skype added no strategic benefit for Ebay either – it was simply a distraction- a bad deal all around.

So before we go rewriting history, and (once again) claiming how Skype will tear down the telecoms world, maybe a little grounding in fact is in order.

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PhoneGnome participatory marketing challenge

It’s been over 4 years since PhoneGnome’s initial release.  It has evolved a great deal over that time and I’ve learned a lot.

Over on the PhoneGnome blog, we look at where it is, and where to go from here:

http://www.phonegnome.com/blog/2009/12/02/phonegnome-participatory-marketing-challenge/

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Don’t pay to pitch – no way

In response to Jason Calacanis’ recent post Why startups shouldn’t have to pay to pitch angel investors and the ensuing debate, short answer: Don’t do it. Don’t pay. Such angel outfits are scams, IMHO.

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Verizon CEO exiting one dying business for another

The NY Times reports that Verizon CEO Ivan Seidenberg has finally accepted that his landline business is going to keep sliding:

Mr. Seidenberg said that his “thinking has matured” and that trying to predict when the company would stop losing voice landlines “is like the dog chasing the bus.”

This is being touted as the most progressive thing anyone has ever heard (which might be true, coming from a telecom exec), but the irony is this:

“Video is going to be the core product in the fixed-line business,” Mr. Seidenberg declared. And the focus will move from selling bundles of video and landline to video and cellphones, he added.

That’s freaking hilarious. Verizon thinks video will replace all their landline revenue losses. They are jumping into Video just as it is approaching its end of life, or the beginning of the end anyway. People are starting to “cut their video cord” just as they began cutting their landline cord a few years ago.

My son’s dorm room at college includes a landline phone, Internet, and a cable TV connection. They actually have a phone plugged into the landline (probably mostly to talk to the school’s internal numbers, like the I.T. dept to keep the Internet working). They do not have a TV and don’t have anything connected to the CATV wall jack – and they don’t seem to miss it much.

Over the years to come, there will be as many people dropping Verizon’s video service as there are people dropping landlines today.  So this seemingly “progressive” view is sort of like saying we’re finally abandoning Betamax and embracing HD DVD!

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Vonage World versus Skype Unlimited World

Below is a run down of what’s different between the Skype “Unlimited World” plan compared to the new “Vonage World” plan.

This table only lists the countries where there are differences between the plans (specifically, where the Skype plan lacks coverage, since there are no countries included in the Skype plan that are not also included in the Vonage plan). For instance, the “Vonage World” plan includes landlines and mobiles in Puerto Rico whereas the Skype “Unlimited World” plan only includes landlines in Puerto Rico. Likewise, the Vonage plan supposedly includes all landlines in Mexico, while the Skype plan includes only landlines in Mexico City, Guadalajara and Monterrey.

Both plans include the following countries with (apparently) equal coverage: Argentina, Australia, Austria, Belgium, Bulgaria, Canada*, Chile, China*, Colombia, Croatia, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hong Kong*, Hungary, Ireland, Israel, Italy, Japan, Luxembourg, Netherlands, New Zealand, Norway, Poland, Portugal, Singapore*, Slovakia, South Korea, Spain, Sweden, Switzerland, Taiwan, Thailand*, United Kingdom, United States*

Both plans have hidden limits. For the Vonage plan, the limit is 5,000 minutes per month (section 5.4 of the TOS http://www.vonage.com/tos/index.php). For Skype,  the limits on this so-called “unlimited” plan are “10,000 minutes per user per month, with a maximum of 6 hours per day. Also, no more than 50 different numbers in total can be called per day” (see http://www.skype.com/legal/terms/fair_usage/).

The Vonage World plan is $24.95/mo while the Skype plan is $12.95/mo. They are apples and oranges to a degree, as the Vonage service includes a phone number and hardware box and is used with a regular phone (no need to leave your computer on all the time to receive calls and no need to use your computer to place calls). The Skype service requires that you place calls using your computer and it does not include a number for receiving calls. Vonage is meant to replace a standard landline and work with a regular telephone while Skype is just for use on your computer. But that’s not the topic of this post, which simply compares the countries included in the two plans for outbound calling.

If you’re calling the countries listed above, you probably know how much those countries cost to know whether this plan would benefit you. I would guess that India and Mexico would be the big draws, as there are few flat-rate plans offered to these countries and per-minute rates are significant.

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Oh yeah, Vonage – forgot about them

Vonage recently expanded its $24.99 plan (approx. $33/mo. with fees) to include unlimited calling to landlines in 60 countries, including India and Mexico (subject to normal residential use restrictions).

The news of this reminded me that Vonage was still in business. I’ pretty sure I bet that they would be out of cash by now – so it looks like I lost that bet.  It wouldn’t be the first time (and it won’t be last, I’m sure).

So how are they doing? In February of this year, the NYSE gave Vonage a “Notice of Delisting”. Prior to this “Vonage World” announcement the stock was hovering around $0.40 per share. After the announcement, the stock hit a new 52-week high at $2.63. Since then, it has fallen back a little, but it’s still trading today at $1.35.  I guess investors like this new plan.

However, to me, the metrics don’t look all that great, so I don’t know what this rally is based on. In their recent 10-Q filing, Vonage reported customer acquisition costs of $363.01 per new subscriber for the second quarter of 2009, while it was $282.89 for the same quarter a year ago. Vonage lost 88,643 customers in the quarter, compared to adding 2,080 customers a year ago in the same quarter. On the plus side, ARPU and churn are holding steady.

Vonage still has an ugly balance sheet with only $56 million in cash and $203 million in debt.

The 10-Q reads:

We are facing increasing competition from other companies that offer multiple services such as cable television, video services, voice and broadband Internet service. These competitors are offering VoIP or other voice services as part of a bundle.

And goes on to say:

In addition, we believe several of these competitors are working to develop new integrated offerings that we cannot provide and that could make their services more attractive to customers. For example, as wireless providers offer more minutes at lower prices and companion landline alternative services, their services have become more attractive to households as a replacement for wireline service.

The new “Vonage World” plan is clearly an attempt to lower customer acquisition costs and reduce churn. However, it will increase costs and lower gross margin too. It’s competitive offer and I bet they will sign up a lot of customers (lot of India ex-pats, for example) – but with the lower margins will it work? The trends still don’t look good to me, but VoIP appears somewhat hot again, so maybe they will last long enough to (finally) be acquired.

UPDATE: country-by-country calling area comparison between Vonage World and Skype Unlimitied World plans.

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Google Voice Calling Hacks Provide Insight

If you’ve not been following this story, Google Voice (formerly Grand Central) offers free domestic calling via “click to call” on their site. A number of hacks have emerged over the past week or so to take advantage of this, particularly a Gizmo5 hack and Asterisk hack(s). Long story short, the Gizmo5 solution rapidly devolved. First it worked, then calls started getting cut off after 3 minutes, then 20 minutes, and now officially Gizmo5 is going to charge .02 per minute for Google Voice outbound calls, with thier new service GizmoVoice.

This thread on dslreports describes “the rise and fall of the Gizmoogle mashup” and explains why Gizmo5 had to start charging, suggesting that Google (Grand Central) blocked Gizmo and that Gizmo is now actually paying for the calls directly with their own termination service and using spoofed caller-ID:

in order to not lose face [Gizmo5] decided to keep the service open but route all calls through there [sic] own outbound servers with spoofed caller ID. they can not afford to do it for free so they are charging .02 per minute.

…

The current gizmoogle mashup is nothing but gizmo5 outgoing service with caller-id spoofed to your GV number.

The thing I find most interesting about all this, and what I don’t see being discussed much, is what it says about Google’s strategy with Google Voice. The story of how a small swarm of hardcore VoIP users could have such a huge impact in such a small amount of time, upon such a giant in the industry, Google, and their new flagship entry into the Voice space: Google Voice.

Google has elected to follow in the footsteps of others by offering free click-to-call calls with their free service. A user initiates a call on Google’s web site and Google pays for two outbound calls, one to the caller and another to the called party, and then bridges the calls together. However, the fact that Google was overwhelmed by the Gizmo5 hack, in just a few hours, suggests they don’t want to give away too many free calls. Every service before Google that has tried this same approach has run into the same dilemma: they use “free calling” as a trick to get customers, but then it works too well, and they have to start imposing limits on the free calls.

If mighty Google was overwhelmed by a few hardcore VoIP enthusiasts within a few hours, what is going to happen when this service comes out of “beta” into full production? They want the service to be popular, but they can’t afford for it to be too popular? That sounds like a problem.

UPDATE 9/13/2009: Google is now also blocking calls to “high termination cost” numbers like those used with many free conference calling services. See: http://www.google.com/support/forum/p/voice/thread?tid=7fd24f8e03c376d2

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SabSe Technologies Acquires Jaxtr

I find it sort of interesting that I had a post about Jaxtr sitting in my drafts, from back in December 2008. Back then, the one-time darling of VoIP whose investors included some of those investing in Skype before it, had reported that it had laid off 13 workers (about 30% of its workforce) and that the much heralded CEO, Konstantin Guericke, had stepped down.

That draft was titled “Jaxtr revisited” and referred to the company’s burn rate:

Jaxtr raised $10 million in their Series A in August 2007. In September 2007, I said they would burn through that within a year, and it looks like they did, because they had to take another $10 million in June 2008.

In that post, I was highlighting some potential trouble spots ahead for Jaxtr, including the fact that they’d soon need even more capital and there would be challenges raising it in this climate, especially with a continued “burn cash now for some future unspecified opportunity later” business model. I also discussed little details like the potential for rampant fraud, once they start charging. I never got around to publishing that draft.

Of course we don’t know if these things contributed to the sale of Jaxtr to SabSe Technologies, Inc. (www.SabSeBolo.com) announced yesterday, for an undisclosed sum, but it seems like they could have.

SabSe was co-founded by Sabeer Bhatia, an original co-founder of Hotmail. They are in the free conference calling business. All the access numbers listed on the website are in India. A large percentage of Jaxtr users are also in India and in Pakistan. I’m guessing SabSe makes money on termination and are hoping to use Jaxtr’s local numbers, in some related manner, perhaps expanding their conference calling services beyond India.

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