[This is the second post inspired by the NMS Connect conference. See also: There's More to Pipes than Smart vs Dumb.]

Y intersection

Voice 2.0 companies can be divided fairly cleanly into two groups. Those who use carriers to deliver features and connect with their users and those who “go direct”. In some cases, two companies have a similar product but on the opposite sides of this divide.

For example, GotVoice will retrieve your voicemail, transcribe it and send it to you. SpinVox does the same thing, but through carrier cooperation. (They just announced a deal with Rogers, Canada’s largest mobile carrier.) Similarly, Kirusa provides a “Voice SMS” service through carriers. Pinger provides a similar product but direct to consumer.

Kirusa’s carrier strategy turned out fruitful, but it certainly wasn’t easy. I met CEO Inderpal Singh Mumick a few months ago through a mutual connection and, at the Connect conference, I spoke at length to CTO Ewald Anderl. The stories I heard from both of them followed the same theme I’ve been hearing from entrepreneurs and investors for several years: If you want these deals, you need experienced biz dev people and you need patience. Both of those things translate into “you need cash”. Many start-ups have run out of gas waiting for that carrier deal to get signed; or if it’s signed, for the service to be launched; or if it’s launched, for the marketing push to materialize.

With all this trouble, why do we continue to line up outside the carrier’s door? Because there are things that only carriers can bring to the table…

1) Awareness
Carriers communicate regularly with their customers through the billing process and marketing campaigns. They also have large PR budgets and a team that can tune your product pitch to match their user base. Here’s a TV ad, run by GrameenPhone in Bangladesh, showcasing the emotional power of Kirusa’a Voice SMS product. How many start-ups can afford a TV ad?

(Direct link to video here.)

I’m looking forward to seeing how Rogers deploys the SpinVox product, in particular how they choose to promote it. If they’re smart, they will automatically give everyone a 15-day free trial. (I’ve used CallWave and I have to say that getting your voicemail as text is addictive. It’s painful to go back.) That kind of broad exposure to new customers is something only a carrier can do.

2) Integration
Carriers can integrate a new product into the phone experience in ways that aren’t possible otherwise. Back to Kirusa vs Pinger: Both provide a way to record an audio message and send it to someone. With Kirusa, the process is streamlined by using “short-codes” with the pound or star key. But with Pinger, you have to call Pinger first and that adds significant friction to the process.

411 is another example. There are several options for free directory service such as 800-Goog-411 or 800-free-411. But the majority of people continue to dial 411 the old fashioned way and pay a fee of a dollar or more (and rising). There is a powerful mental lock-in with those 3-number short-codes and only a carrier can assign them.

Services that require an application on the mobile device face additional barriers: Consumers are leery of downloading anything to their phones and the process is not very smooth. Carriers can solve both problems by pre-installing software.Susan Norris, a 25 year veteran of the carrier world, summarize this during one of the sessions: “If someone has to remember to use an application, it won’t work. It needs to come at them.”

3) Billing
This one is self-explanatory — carriers have the infrastructure to create, send out and collect on monthly bills — but don’t underestimate it. Keep in mind the importance of: telephone customer support; setting up free trials, bundles and other promotions; integration with pre-paid plans; extending the right amount of credit to each user.

SoonR recently refocused their efforts to carrier partnerships. Their new CEO, Patrick McVeigh, specifically cited billing as one of the drivers: “[Our] strategy is to go with carriers or large partners … who already have existing billing relationships.” (More on that from GigaOm.)

The bottom line
The Jaiku story shows us that, with an excellent product, you can grow without carrier involvement at all and reach a nice exit. (Google bought them earlier this week.) But counting on an early buy-out isn’t a solid strategy. Stan Reiss, from Matrix Partners, put it this way during one of the Connect sessions: “As a start-up you have to find a way to stand up to the carriers in the long run.”

In my view, the best approach is to build a product that can go directly to consumers right out of the gate, and then repackage it for carriers down the road. This way, by the time you are approaching a carrier, your user base has helped you refine the product and (hopefully) become a source of revenue. That’s our plan with Fōncloud.

 

3 Responses to The Two Paths of Voice 2.0

  1. [...] unknown wrote an interesting post today!.Here’s a quick excerptSpinVox does the same thing, but through carrier cooperation. (They just announced a deal with Rogers, Canada’s largest mobile carrier.) Similarly, Kirusa provides a “Voice SMS” service through carriers. Pinger provides a similar … [...]

  2. Jason Bigue says:

    “… the best approach is to build a product that can go directly to consumers right out of the gate, and then repackage it for carriers down the road.”

    Have to agree completely. This is the advantage Internet telephony affords start-ups- the way to reach consumers directly and disrupt those relationships with the carriers.

  3. [...] slow-moving nature of carrriers and the lack of competitive forces incenting them to innovate. (See here and [...]

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