Veoh Video comes to a Verizon Wireless phone near you

veoh_tv_logo.JPGVerizon Wireless has launched a Veoh channel on its V CAST service. Veoh is an upstart Internet Television provider with more than 85,000 video publishers – from Paramount Pictures, Lions Gate, PBS and Us Magazine to many independent content producers, and 15 million unique users per month.

With Veoh, Verizon Wireless V CAST subscribers have access to the “Best of Veoh” video collection that includes animation, comedy, entertainment, drama, and Web-series video. The video clips are specifically selected for a mobile audience. Verizon Wireless is generally very strict about content guidelines, so my guess is that there’s some form of content filtering going on as well.

To get V CAST, a subscriber must have compatible mobile phone. V CAST is $3.00 for 24-hour (great for checking out the service) or $15.00 for monthly subscription. V CAST comes with a unlimited usage subscription and uses the 3rd generation EV-DO network.

Interestingly, this paves the way for Verizon (owns 55% of Verizon Wireless) to bring Veoh to the VerizonSurround broadband entertainment portal on FiOS TV this fall. FiOS TV is a Fiber based TV network. Good for Verizon Wireless and great for Veoh.

Sprint and Clearwire is a win for WiMAX

Sprint and Clearwire, the two companies rushing to build a nationwide WiMAX network, just announced an agreement to collaborate on building a nationwide network by the end of 2008. By working together, Sprint and Clearwire the first coast-to-coast WiMAX network and will do it sooner than by going alone. The companies plan to market mobile WiMAX services under a common service brand. This makes sense because neither company has the money to go it alone. Clearwire is a startup without much capitalization, and Sprint is struggling company with 3 networks (iDen, cdma2000 1xRTT and cdma2000 EV-DO, and WiMAX) and not much to do with it.

The 20-year partnership was aimed at “fostering quicker, broader and more efficient deployment of a mobile WiMax broadband network than either company could accomplish on its own.” The companies will build their respective portions of the nationwide network and then enable roaming for each another’s customers. In certain markets, Sprint and Clearwire will exchange spectrum licenses to use the airwaves.

Sprint will build its part of the network to cover about 185 million people, mostly in urban and suburban areas that cover 75% of the country’s 50 largest markets, and Clearwire’s network will cover 115 million people. The US population is just north of 300 million, so this seems just about right. The joint companies will have service for 100 million people by the end of 2008.

With 4G (4th generation) technologies arriving in several years and upcoming spectrum auction at 700 MHz for broadband data, the ultimate winner will not be known for many years. Right now, it looks like a match made in heaven and it looks like a precursor to an eventual takeover of Clearwire by Sprint. Clearwire is by far the bigger winner because it has been struggling to sign up customers and has a very limited footprint.

Update: WiMAX is still not in a position to threaten cellular, not for another 2-3 years.

Verizon Wireless does U-turn and pays Broadcom to import EV-DO mobile devices

The unending patent saga between Broadcom and Qualcomm takes yet another twist as Verizon Wireless has agreed to pay Broadcom $6 per handset, up to a maximum $40 million per quarter and a lifetime maximum of $200 million in order to be able to import EV-DO handsets into the USA.

Verizon Wireless had previously supported Qualcomm in seeking a reversal of the ban, arguing it would prevent the latest handsets from getting to U.S. consumers. Qualcomm is pursuing a stay of the import ban and if that doesn’t work, a Presidential veto. As part of the deal, Verizon also will drop this effort to overturn the ruling.

I did a quick back of the envelope calculation: at $6 per device, $40 million covers 6.6 million mobile phones. That’s 27 million mobile phones for the year. Verizon Wireless has about 60 million subscribers, and lets say that a typical subscriber changes phones every 2 years. Thus Verizon sells about 30 million mobile devices per year.

The move is a blow to Qualcomm, but it looks like a pretty even deal for both Verizon and Broadcom, with some upside protection for Verizon Wireless. The $200 million maximum should be covered in 5-6 quarters, long enough time for Qualcomm to develop a workaround.

Lessons for Venture Capital firms from SunRocket

SunRocket, the standalone VoIP provider, has gone belly up. This is just the beginning – there will be more casualties among standalone VoIP providers. What’s interesting about SunRocket is that they raised $80 million from BlueRun Ventures (formerly Nokia Venture Partners), Mayfield Fund, Doll Capital Management and Anthem Capital Management, but only have 200,000 customers. That’s a huge amount of money wasted by Venture Capital firms!

I remember the professor (Hello Dr. M) from the Venture Capital class that I took at biz school emphasizing several times that Venture capitalists have “deep pockets but short hands” meaning that VCs have a lot of money but are very careful/stingy with it. Looks like the Private Equity firms that invested in SunRocket weren’t like that.

So let’s look at why anyone would plunk down $80 million. Now I can understand the Series A ($9.25 million in November 2004) and Series B ($25M in September 2005) because VoIP must have looked like a very lucrative opportunity in the 2002-2004 period when VoIP providers were springing up like mushrooms in the dark (the market potential is usually very rosy, but risky at the beginning) and it would’ve been important to get moving fast and get big fast (VCs love that!). Because VoIP features aren’t differentiating, it’s important to iron out kinks and fine tune the technology, customer service, billing, and marketing tactics early on.

But let’s look at the Series C. This is where the existing investors BlueRun Ventures, Mayfield Fund, DCM and Anthem Capital Management and new investors Varma Mutual Pension Insurance Company, The Grosvenor Funds, and Brú Venture Capital (BVC) plunked down $33 million on August 25 2006.

SunRocket has nearly tripled its number of customers in the first 8-9 months of 2006. This 200% growth must’ve looked really rosy when the market was projected to grow 65% (In-Stat, July 2006) to 100% (Telegeography, US VoIP 2006). However, the very high Customer Acquisition Costs for standalone VoIP providers should’ve been a BIG RED FLAG! Vonage’s marketing cost per acquired customer is nearly $275 and SunRocket’s shouldn’t be any different. Even if all the new money was spent in acquiring customers, this would’ve only got 120,000 new customers!

So, I don’t know what the VCs were thinking, especially during the Series C round, and especially the new funders. It’s a pretty sad story when VC firms plunk down $33 million for Series C (3rd round) and see the company go bust in less than a year!! I would also argue that there have been no game-changing events since August 2006.

The lesson here for VC firms is to continue to have “deep pockets but short hands”, do the proper due-diligence, and not get caught in the greed-trap.

Incidentally, Mayfield Fund appears to have deleted their pages on SunRocket. Gotcha!

Google Custom Search will Kill the Competition

Google unveiled a custom search tool, dubbed “Google Custom Search Business Edition”, aimed at small and medium-size businesses (SMB). This is a hosted search service that provides powerful indexing and customized-search capabilities.

Now customers, vendors, and others can easily search your company web site and get relevant search results, without requiring an IT system (people, software, or hardware). The service is $100 per year for up to 5,000 web pages, and $500 per year for up to 50,000 pages. There is a free version, but it displays Google advertisements (much like search results on The only issue is that you cannot search the intranet behind the firewall. Then again, Intranet searching is not a requirement for a lot of SMBs.

Salient features of this service are:

  1. Ad-free search results with the paid version (free version includes ads).
  2. Customizable look and feel allows including the company logo and preferred colors in search results.
  3. Advanced customization of search results via the XML API. The XML feed includes the individual results of the search query, allowing the URL and description text to be displayed in a custom style. This feature requires an IT system to process the XML into HTML format.
  4. Categorize search results applying “Refinements” or labels to pages. These categories appear as links before the search results. When a user clicks on a category, pages tagged with the category are displayed first.
  5. Subscribed links that always show up at the top of search results for specified keywords. These links appear where Google ads normally would.
  6. Reporting of how often and what was searched for.
  7. Multiple language support. Specify the language for the Search Engine or specify “All Languages,” to use the language associated with the user’s browser. Bulgarian, Chinese (Simplified), Chinese (Traditional), Croatian, Czech, Danish, Dutch, English, Finnish, French, German, Greek, Hungarian, Italian, Japanese, Korean, Norwegian, Polish, Portuguese, Russian, Slovak, Spanish, Swedish, and Turkish are supported.
  8. Email and Phone technical support.
  9. Easy enough to get up and running in 10 minutes!

Google Custom Search is based off the general search index, so it doesn’t guarantee it will index a web site or a certain page, while competitors specifically index each customer site. Nonetheless, Google Custom Search is much cheaper than the competition. The Google OS blog provides a price comparison of hosted search services (* indicates configurable crawling frequency, ** indicates password-protected pages are indexed):

Product Price for a year (5,000 documents)
FusionBot** $2,400
Spiderline** $1,200
Freefind* $948
SiteLevel* $863.78
FindinSite* $720
PicoSearch** $498 (6,000 documents)
Mysitesearch* $239.40
Innerprise* $228
Google Custom Search $100

This is also much cheaper and more convenient than an in-house search engine such as Google Search Appliance or Microsoft’s SharePoint Server for Search, because it doesn’t require any IT investment. The Google Mini Search Appliance costs $1,995 for 50,000 web pages and the The Google Search Appliance starts at $30,000.

This is a perfect example of a function that a customer can outsource. First, enhancements to search technology are immediately available, rather than having to wait for IT system upgrades. And a perfect example of an unbeatable strategy (never say never) of leveraging an existing system to provide a new service. That is why Google is able to provide this at minimal cost.

The first reason makes hosted search better than in-house search. The second reason makes Google invincible and put other hosted search providers out of business. Only the Microsoft’s and Yahoo!s stand in the way of Google’s total domination.

Furthermore, looks like Google’s game plan is to make it convenient and cost effective for businesses to outsource search, and leverage this to sell Google Apps. Nice Strategy!

5 reasons why VoIP providers will go Bust

Recent news has highlighted that VoIP service provider SunRocket has gone bust. This is no case of bad management – more and more VoIP providers will fall off the face of the earth in the coming months and years.

Before getting into the why and the who, let’s look at the different types of VoIP providers. Pure Play VoIP providers are those that provide VoIP via an adaptor to “bring-your-own-broadband” customers. Examples are Vonage, Packet8, SunRocket, Lingo, Netzero, Packet8, and Earthlink. PC-Centric VoIP providers are those that provide VoIP on PC platforms, typically as an extension to an IM client. Examples are Internet portal and PC messaging providers such as MSN Messenger, Yahoo! Messenger, AOL, Skype, and Google Talk. Facilities-based VoIP providers are RBOCs (the primary Local Phone companies) and Cable MSOs such as AT&T CallVantage, Verizon VoiceWing, Comcast Digital Voice, and Time Warner Digital Voice.

Being a Pure Play VoIP provider is tough, for the following reasons:

  1. Low barriers to Entry – It is very easy to become a VoIP provider. With an IP-PBX such as Asterisk, a bunch of T1 lines, call termination agreements, an authentication server, a web server for user management, software, anyone can start a VoIP service. As a result, there are many VoIP providers in the market, leading to much competition.
  2. High Customer Acquisition Costs – As easy as it is to become a VoIP provider, getting customers is a difficult task. A lot of people don’t know the company or have reservations about VoIP. Second, Pure Play VoIP providers have no brand recognition or trust relationships with customers. As a result, they have to market heavily to get customers. In contrast, PC-Centric VoIP providers can leverage their huge user base to gain a foothold in VoIP. For example, AOL, Yahoo, and MSN simply leveraged their IM customer base by adding VoIP to IM clients and by promoting it on their web properties. Likewise, facilities-based VoIP providers have access to a huge customer base that they can market at low-cost.
  3. Lack of bundled service – This is where Pure Play VoIP providers are hit the hardest and the reason why Pure Plays will sink while Facilities-based and PC-centric providers thrive. Facilities-based VoIP providers such as AT&T and Verizon already have already have voice, video, data/Internet plays so they are able to offer bundled services with VoIP as an add-on. Likewise, Cable MSOs have video and data/Internet plays, and can provide VoIP/voice as an add-on in a bundle of services.
  4. Expanding scope of PC-Centric VoIP providers – not only are new players joining the VoIP bandwagon, but existing PC-Centric VoIP providers are expanding into the Pure Play VoIP providers’ turf. Skype used to be only on the computer, but is creating an ecosystem of cordless phones, WiFi phones and gateways, to go beyond the PC.
  5. New Game-changers: IP-PBXs are entering the home, especially open-source software such as Asterisk that can be loaded on any computer and you can connect a traditional POTS phone to it.

All these reasons point to a gloomy future for Pure Play VoIP providers. Now let’s look at how these providers compare in terms of market share.


As this dated market share report on from Telephia shows, only Vonage has significant market share. The small players will find it very hard to survive because they don’t have enough scale. VoIP has high gross margins (low incremental cost of service), but to make money when fixed costs are relatively high very high, one needs a lot of customers. If customer acquisition costs are too high, which it likely is for these small unknown pure-play VoIP providers, then no amount of customers are going to help you – eventually you will run out of money. I believe this is exactly what happened to SunRocket.

The future is bleak for these pure play VoIP providers with little market share – they will be acquired or fade into obscurity soon. Ironically, Vonage, the pure-play VoIP provider in the news for patent infringement, may be the unlikely survivor.

Selfcast wants to be the Live Streaming version of YouTube


Selfcast is a new peer-to-peer based technology that enables “anyone, anywhere” to create live streaming content and broadcast themselves live on the Internet. Selfcast comes with a free software application to capture, mix and broadcast live video and audio, and then broadcast it live on the Internet. You can even invite friends, fans and family members to tune in through the integrated messaging tools.

To watch a broadcast, simply select or search for a cast at, and you can watch the live show on the browser itself (requires Windows Media Player). Currently, only Microsoft Windows XP and Vista are supported. Mac support is coming. Selfcast has instant messaging (IM) tools built-in, so simply use your existing Skype login to IM your friends to tune in to your broadcast. Or, just send email from the Selfcast application. Selfcast plans to integrate MSN Messenger, AIM, ICQ, and Yahoo! Messenger into Selfcast in the future.

Essentially, Selfcast is creating the platform for anyone to stream their live video/audio stuff. This works much like, but Selfcast is a platform for anyone to do it. This is going to be the next generation of YouTube. As long as these guys can get the word out fast, this is going to be huge!

‘Selfcast’ is a part of the live peer-to-peer (P2P) streaming company RawFlow and is at

Raketu Launches Mobile VoIP client

Raketu company logoLast month I talked about Raketu, the one-stop shop that combines social networking with integrated communications (VoIP, IM/SMS, feeds) and IPTV. While Raketu is unique in combining all three, which is where the future is, Raketu does not have a strong position in this space.

Nonetheless, Raketu has launched its Mobile version to bring free or real cheap national and international calls from a Smartphone with Symbian or Windows Mobile.

The VoIP client has to be downloaded onto the mobile device (bummer!). Frankly, I don’t think most users will care to or even feel comfortable downloading an application to a device. Furthermore, the user must have a Data Plan (bummer again!), which is still pretty expensive these days. See a related article on Skype complaining of high carrier data charges. Verizon has an unlimited data only plan for $49.99. I don’t think most uses would drop the voice plan and get a mobile with just a data plan (even though E911 will work just fine without a voice plan – something most people don’t know). The good thing is that one could use the service from anywhere in the world, as long as you don’t care about high data roaming charges! Unfortunately for Raketu, the mobile VoIP client is pretty crowded, including those like EQO and Talkster.

Mobile users can watch IPTV and VOD on they mobile phone, as long as they can access RakWeb via the Internet (No download required).

Babelgum strengthens strategy, gets new CEO

babelgum_logo.jpgBabelgum, the upstart Internet TV network that looks and works much like Joost, has appointed Valerio Zingarelli as the CEO. Zingarelli takes over from co-founder Erik Lumer who will now focus on strategic product development. Prior to Babelgum, Zingarelli was an independent Boardmember of Fastweb, the second largest Wireline Telecommunication Company in Italy. Before that, Zingarelli was formerly Vodafone’s Global Director of Networks and Service Platforms, which he joined from Omnitel. Prior to that he worked for Alenia and for Cselt, both in Italy.

The most interesting part is that Babelgum is looking more and more like a Europe-focused company. Babelgum is founded by Italian entrepreneur Silvio Scaglia. Now, the CEO is someone with strong experience in Italy (but not much global experience). Nothing wrong with that, but a more global outlook would’ve been better.

Looks like Babelgum is placing its bets in Europe, rather than in the U.S., the biggest market for Internet TV (or is it?). With the level of competition in the U.S. Babelgum would have a better standing Europe. Contrast that with Joost, another European company, that is focusing on American consumers and American media, as judged by the media distribution agreements with U.S. media companies.

Speaking of Media, Babelgum’s recent content partnerships with 3DD, Associated Press, BBC MotionGallery, Big Picture Limited, Black Diamond, Breakthru Films, Entertainment Rights, Fight Network, Filmchest, Gong Anime, IMG, Fashion, Gamer TV, Golf, Indivisual, Intervision, ITN, Journeyman Films, Quattro Media, Reuters, Spike Lee, aren’t anything to write home about – more evidence that Babelgum is focusing on the indie-like niche.

This is disappointing as I was looking forward to Babelgum and Joost blazing a trail to bring Internet TV to the television via the set-top box.

Nonetheless, I like what I hear about Babelgum’s strategy. By the end of the year, Babelgum plans to grow to 100 employees. In the next year Babelgum will concentrate on the three sequential priorities of building quality content through direct acquisition of content and automatic self-uploads by independent content owners, marketing Babelgum to English speaking viewers around the globe, and addressing the advertising market. I think Babelgum has the right strategy – to focus on a niche. Why compete with traditional TV providers, and Internet TV providers like Joost, Veoh, and YouTube/Apple TV when you can carve out a profitable niche in long-form long-tail media!

Yahoo! 411 service

y3.gif Google has it’s 411 Service. Microsoft recently bought Tellme, a speech-based Internet services provider to power Local Search. For those of us who’ve known Yahoo!, Google, and Microsoft as the triumvirate of search, Yahoo is notably missing from the 411 camp.

411 is just another way to search for information, albeit an important one for people on the go, who have no good way to search the Internet. In fact, 411 is so important for mobile customers that wireless service providers have made it a fat-wallet business, charging $1.49 – $1.79 per call. The U.S. 411 market is worth $8 billion, and this is exactly why Jingle Networks (1-800-Free-411) and others have entered this space to disrupt the wireless carriers stranglehold by offering free calls for a 15 second advertisement.

With such a huge market, there’s no reason why Yahoo would stand idle and watch while Google, Microsoft, and others carve their riches in the market. Yahoo has several options: Build, Make or Partner.

The ‘build’ option doesn’t make sense because, even if it is cheaper to build, it will take a long time to develop the platform and fine tune the speech engine to handle different kinds of accents and background noises. I don’t think anyone who wants a 411 service should wait long.

What about a ‘Joint Venture’? Sometimes, a larger company will JV with a startup to complement each other’s strengths – the startups’ innovative product and the larger company’s sales channel and customer base. However, in this case, all Yahoo would do is help the partner become bigger and better, and make it more expensive for Yahoo! to get in the game one day or shut-off Yahoo! entirely from the market.

The ‘acquire’ option makes sense for the following reasons:

  1. Immediate access to the 411 market. Initially, 411 will not be integrated with Yahoo’s systems, but this will happen over time.
  2. Access to an existing base of customers. Some of these will be repeat users, others will be those coming to the service due to publicity.
  3. Reduce competition – buying out an existing provider always reduces the competition.
  4. Improved Speech recognition – it takes time to build a large Search Index/Grammar and fine tune speech recognition. Here is a great article on why Google is offering the service free.

One way or the other, getting in the 411 market will allow Yahoo to:

  1. Leverage Yahoo! Local & Yahoo! Local Maps, and Yahoo! Messenger IM & Voice service.
  2. Leverage its Ad base, especially geography and category relevant ads
  3. Leverage profile information from Yahoo properties to enhance the user experience.
  4. Take 411 to the next level. For example, send address and telephone number via SMS, send directions and MAPs to mobile phone, connect via phone with store or person, use SMS ads rather than just voice ads (voice ads are intrusive).

So who could Yahoo acquire? This is where Jingle Networks’ 1-800-Free-411 comes into play. Jingle also has an easy-to-remember toll-free number.

Expect Yahoo to go 411 soon, and I’ll bet that its with the acquisition of Jingles Free-411 service!