giu 04

Why mobile must solve its data dilemma – or die

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As little as 18 months ago, mobile VoIP and IP messaging apps were considered niche by operators. Now we pose the biggest “threat” the industry has even seen. In fact, a Telco 2.0 report suggests that within three years, 40 percent of messaging and 21 percent of voice revenues will vanish due to over the top (OTT) players like Rebtel, Whatsapp and Viber.

For any telecommunication company these are frightening numbers, and they’re reacting to them in the only way they seem to know: by blocking, charging for or throttling competing services that are cannibalizing their revenues.

But this fear is caused by business imbalance that they seem unable (or unwilling) to fix. Look at any European mobile operator, and it’s clear that around 80 percent of their revenues are still attributed to their most traditional — and most eroding — service: voice and data. At the same time, around 80 percent of their investments go into improving the congested infrastructure necessary to support the dramatic growth of third-party data services.

It’s obvious that this situation isn’t going to get any better. According to Håkan Dahlström of TeliaSonera, the current average monthly data spend is roughly 300MB — and it’s expected to reach 3GB by the year 2020. Needless to say, this model is in a state of transition.

So why do operators seem so reluctant to move to a sustainable (and inevitable) data pricing model?

The truth is that even though traditional revenues are eroding, they are still able to produce mind-boggling figures thanks to their staggering margins. And with consumers firmly attached to the notion of unlimited data, there are few — if any — telecoms companies that want to be the first mover. Meanwhile the longer this transition is delayed, the more cashflow operators are bound to generate, which means good news for shareholders and smiles all round.

On the flipside, however, subscribers will have to endure more expensive and more complicated variations of data access packages, with a plethora of potential data cap limits, access add-ons for VoIP and other OTT services. And it is not looking like it will get easier any time soon.

How will operators fight back, then?

Some in the telecom industry are pinning their hopes on RCSE — the Rich Communications Suite. This is, effectively, an industry-wide attempt by major mobile operators to create their own version of Viber and WhatsApp. However, the core feature set of RCSE was defined in February 2008 and the product is still not out the door: anyone who’s followed the development of VoIP in the app stores knows that four years is equivalent to several generations in the mobile world. Can anyone say with certainty that it will ever emerge?

In fact, I’d be surprised if RCSE was able to compete — but as one leading mobile operator VP put it at the recent Open Mobile Summit in London, what else is there?

Operators are being marginalized and put under pressure from all directions. In 2007, they controlled access, address book, billing relationships and services. Today they essentially just control access and billing. The OTT layer now provides services, address book and a digitalized billing relationship that are all far superior to the legacy systems provided by operators.

Adding to all this is the ongoing net neutrality and regulation debate. The EU and its commissioners already have a dim view of operators in light of the endemic blocking and throttling of services: if mobile VoIP is being blocked and discriminated against and the operators roll out their RCS solution, wouldn’t that scenario qualify as seriously anti-competitive behavior.

Regardless of how this issue is twisted and turned, the real solution is that operators need to move faster to a tiered data revenue model; they need to educate customers about data spend; they need to simplify their offerings as much as possible and, last but not least, they need to do their utmost to allow creative developers to build great communications services that add real value to the access they provide.

Andreas Bernstrom is CEO at Rebtel, the world’s largest mobile VoIP company after Skype, and is an industrial advisor at EQT Partners. He started his career at Goldman Sachs, before becoming U.K. managing director and later COO of TradeDoubler.

Speed bump photograph copyright Shutterstock / Stacie Stauff Smith Photography

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mag 31

Rebtel expands the VoIP calling assault with iPad app

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Rebtel, which bills itself as the biggest mobile VoIP company after Skype, is expanding its emphasis on mobile with the launch of its first iPad app. The company is looking to ride the wave of iPad growth and get even more people on to its free and low-cost calling service.

Rebtel is now up to 17 million users, who access the service over Wi-Fi and 3G on iPhone, Android devices and PCs. IPad users previously could install Rebtel’s iPhone-optimized app on their slates, but now with the dedicated iPad app, they get a fuller experience that takes better advantage of the larger screen real estate. The app offers tablet-optimized navigation and graphics and also integrates with an iPad address book, making it easy to see who you can call for free. An Android tablet version is expected in the coming weeks while a Windows Phone client is expected by the end of this summer.

Andreas Bernstrom, Rebtel’s CEO said the app makes sense as more people shift their computing work load to mobile devices. He said one of Rebtel’s strengths is that it was built from the ground up to be mobile, which is how most of its customers utilize the system.

“We are squarely in the middle of the post-PC era, marked by an increasing amount of consumers who have leapfrogged the classic desktop PC in favor of multi-purpose mobile devices that allow for greater creativity and social interaction. We are excited to expand our development pipeline to respond to this growing global demand for tablets and iPads.”

Rebtel, which just passed the 15 million user mark in February, continues to grow as more people are turned on to its ability to offer free and cheap calls. Bernstrom said Rebtel calls to outside linesare up to 60 percent cheaper than Skype. He added the company, which is set to do $85 million in revenue this year, has an average revenue per user that’s three times that of Skype. He said the average user is spending 350 minutes a month calling on Rebtel.

The rise of so-called over-the-top voice and messaging providers is putting more and more pressure on carriers, who are seeing some of their most profitable services undercut by Internet-based apps. Bernstrom said the operators are increasingly having to confront the new realities of business as more users look to OTT services. A Juniper Research report forecast that 640 million people will use OTT mobile VoIP services by 2016.

Carriers will need to adjust their pricing plans and reconcile the fact that while most of their traffic is data, most of their revenues comes from voice and SMG. Mobile analyst Chetan Sharma reported recently that 85 percent of carrier traffic for the four nationwide mobile operators networks was pure data, but that data only accounted for 39 percent of all mobile data revenues.

“At some point, they’ll have to say, ‘Screw voice, you’ll get it for free. Now, do you want 5-10-15 GB of data?’” Bernstrom said. “That’s years away but we’re helping speed that up.”

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set 26

The carriers’ voice gravy train is over

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Kevin Tofel - GigaOM; Ilja Laurs - Founder and CEO, GetJar; Hjalmar Winbladh - Founder, Rebtel at Mobilize 2011Voice is in the process of transitioning from providing the bulk of phone companies’ revenues and profits, to becoming just another part of a data service that can be provided by web players, explained execs from voice-focused startups Rebtel and GetJar at GigaOM’s Mobilize conference in San Francisco on Monday. As this shift happens, web players like Facebook, Skype/Microsoft and Google, and smaller startups, will begin to disrupt the phone companies’ voice and text gravy trains.

It’s a shift that has been happening for years, and was accelerated by the launch of Apple’s iPhone and Google’s Android platform. Voice over IP (VoIP) companies began eating away at carrier’s revenues since the early and mid-2000′s. Rebtel, a five-year-old mobile VoIP company that enables users to talk for free via the web, has been profitable since 2010 and has a $75 million revenue run rate, said Rebtel founder Hjalmar Winbladh.

Still, carriers continue to be very reliant on voice for their businesses. Winbladh said that voice and text messaging currently provide 85 percent of revenues and 95 percent of profits for carriers. The carriers all over the world have been able to maintain their voice revenues partly through a combination of government policy and the ecosystem of monopolies, said Winbladh.

Add to that ecosystem potentially some unsavory practices. Winbladh said that two carriers in Germany had blocked Rebtel’s service in their markets, and one did so after it purchased a competitor to Rebtel. It’s an “interesting business model. . .I’m not sure it’s legal, to be honest,” said Winbladh.

But while carriers can try to slam small companies, they’ll have a harder time brushing off the web giants like Facebook, Google and Microsoft. These companies will be the next-generation of voice players said Ilja Laurs, founder and CEO of mobile application company GetJar. In addition, these web players will be able to provide web innovation and the communications services that consumers want.

Voice applications from the phone companies have been “too limited,” and consumers are looking for voice to be able to be integrated with communications and social networks like Facebook, said Laurs, adding “Facebook is the ultimate communications service.” As voice shifts to the web it will become “an add-on service,” or yet another API that is added to a data service, said Laurs, for example, adding voice to social gaming. Voice is being disaggregated across the web, and the carriers better get used to it.

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ago 08

GigaOM Euro 20: Almost Famous

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While some of Europe’s shooting stars have come and gone over the years, not all have either burned brightly or fizzled out. An important part of the development of the continent’s startup scene recently has been the emergence of a different sort of success: persistent, independent and innovative businesses that have stuck around when others chose to fold or flip.

Often living for years with a relatively small amount of investment, this generation of companies is characterized by having endured setbacks, switches and significant changes in the landscape. It’s a situation that, in many cases, has helped foster a real sense of community and a survivor’s attitude.

In the third part of GigaOM’s Euro 20 roundup, we’ll look at five startups we’ve dubbed Almost Famous. They’ve weathered the storm, come out the other side, and have solid products to offer.

Criteo

Founded: Paris, 2005
Investors: Elaia Partners, IDInvest, Index Ventures, Bessemer Ventures
Business: Online ad re-targeting

Europe’s advertising industry is rich and creative, with a long tradition of building clever and innovative startups. But of all the names that are bandied around the continent, perhaps France’s Criteo is the one to keep notice of over the next year.

It focuses on “re-targeting” — that is, catching users who have visited a website but failed to complete a purchase, and then showing them ads on other sites in order to tempt them back.

It’s proven highly successful, with annual revenues set to pass $200 million soon, but the real question is what happens next. The company has raised money every two years since its inception, suggesting that another round could be on the horizon — but with such good numbers, perhaps an acquisition or flotation should be the next logical step.

Mind Candy

Founded: London, 2003
Investors: Accel Partners, Index Ventures, Spark Partners
Business: Online games

Early efforts from London game developer Mind Candy were critically acclaimed but not commercially successful: a formula that led founder Michael Acton Smith to change direction in 2007 by introducing a new game, Moshi Monsters. A virtual world aimed at tweenagers, the title has become a significant multimedia brand and allowed the business to reposition itself in the social gaming space.

On the back of recent growth, the company — led by serial entrepreneur Michael Acton Smith — has seen its value rise dramatically in the past year. That led to investor Spark recently selling half its stake. Is this just the beginning for Mind Candy’s journey to Super Star?

Moo

Founded: London, 2006
Investors: Atlas Venture, The Accelerator Group, Index Ventures
Business: Customizable business cards

When it began five years ago, Moo took one of the London’s newest industries — the web — and married it to one of its oldest: printing. It harnessed new digital printing techniques and hooked into photo-sharing services such as Flickr and Picasa, to allow people to customize and print business cards, postcards, greeting cards and more. With a strong following among early adopters and a charming, human approach, it offered something other print-on-demand services struggled with.

A move to the next level may feel overdue. The company’s long-term plans have no doubt been hampered by the increasingly gloomy retail climate in Britain. But the business seems to be carrying on without too many hitches. It’s important, however, to see Moo not only as an interesting entity in its own right, but also as a crucial player in building up the vibrant startup scene in Britain.

Shazam

Founded: London, 1999
Investors: Kleiner Perkins Caufield Byers, Institutional Venture Partners, DN Capital
Business: Music discovery

The oldest startup on our list by several years, Shazam has always been built on great technology. Its first product, launched in 2002, allowed users to identify music they were listening to simply by waving their mobile at the sound. With an audio fingerprinting system that feels like magic, the team has expanded its business to apps and partnerships, with customers like AT&T, Vodafone, NBC and Fox.

But what looked like an increasingly maturing business two years ago, suddenly took on fresh verve with an injection of capital from Kleiner Perkins and a change in management. That switch escalated the company’s plans and now, with an expanding scope and huge ambitions, the business is looking at the television advertising market.

Viadeo

Founded: Paris, 2004
Investors: AGF Private Equity, Ventech
Business: Business networking

It’s fair to say Europe has developed a reputation for clone services — most notably with the Samwer brothers, a duo who have made their careers building and selling German-language versions of sites like Facebook and Groupon. It’s no surprise, then, that French professional networking site Viadeo, is sometimes spoken of in disparaging tones; after all, it started just a few months after its biggest rival, LinkedIn.

It might not have developed as much as its transatlantic cousin, but it’s no slouch either. It has been consistently profitable since 2009, and having rolled up a number of smaller companies, it now has 35 million users. Next up? It’s plotting a course to become the network of choice in rapidly growing markets such as China.

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