In our previous post ( we’ve explored the world of long distance calling cards, and a small case of provider that starts-off nicely, but terminated its business with a shattered service. Today, we will be exploring the world of “Ad-Based Revenue” and “Callback Services”.

Around 2006, a small disruptive VoIP company, under the funky name Jajah (which didn’t mean anything to anyone – apart from the founders of course), had brought the world the promise of low cost international dialing – utilizing a web based callback solution. Their motto was: “Use your computer to activate your regular phone – even your mom can use it”. Now, the funky bit here is that when Jajah moved their development to Israel, following an investment from Sequoia and Intel Capital, they contacted me for Asterisk consulting. I was a little surprised, as I knew that Jajah was actually the “Jajah Communicator” – which was supposed to be an instant messaging client with VoIP capabilities. Regardless of that, Jajah changed the way people looked at web enabled telephone services – suddenly everybody were racing to create a similar solution. The race was on…

Case II: Ad-Revenue backed Callback Services

In 2006 I’ve met with a couple of Israeli entrepreneurs, looking to build an Ad-Revenue based long distance calling service. One of the guys was a sales/marketing guy, the other was a fairly skilled web developer. At that time, they showed me a demo of the projected service, which they had created using Asterisk@Home. Honestly, for what it was worth – it wasn’t too shady. It did the job, looked the part and was able to carry its weight – in terms of doing and providing what it was supposed to. Back then, in 2006, they still hadn’t managed to raise all the funds to actually mature the entire product and were in the process of raising capital. We then met again, in late 2008. They managed to raise about $250,000 US of seed capital and we started to work.

The model was fairly simple:

1. You register with the site and login

2. For each call you want to make, you need to view online ads and videos by various advertisers

3. The revenue from the advertisers was supposed to pay for the calls

The solution developed was based upon a “Vanilla Asterisk 1.6”, using a customized automatic dialer to perform the callback scenario. A highly versatile XML-RPC interface was built between the Web Frontend and the callback servers, to enable the service. The first version was built in less than 2 months of work, built by only 2 people – not bad at all. The media blitz went out and surely, we gained several hundreds of users withing a very short period of time.

The company was sold to a Canadian mobile operator around 2010, then was recently sold again to a cloud telephony provider in the US, only a few months ago. During that time, the name never changed, nor has the basic underlining technology.

Was this company a success story? – in one word, NO!

During the course of the company’s life span, the company had managed to take several falls. The initial fall was the fact that it never really managed to live up to its business model – mainly due to the reason that it was impossible to keep. The advertisers simply weren’t willing to pay the CPM value related, nor did the CPC value able to carry the weight of the call. Thus, the company was literally giving away phone calls.

Further into the life of the company, it revamped itself into a “calling cards” company, similar to the one discussed in the previous post. In that respect, the company was fairly successful. It had managed to serve over 10,000 customers, over a period of almost 6 years – till the day it was acquired (and it still does right now). During these 6 years, the company had managed to create several high-end partnerships and deals, but never seemed to be able to monetize it correctly.

So, what went wrong here?

To be completely truthful about it, I don’t believe anything went wrong here – it was simply all wrong from day one. The company had sprung to life, shortly after Jajah became a big hit. VC’s and investors were looking to build a “Jajah Clone”, and this like one of those possible clones. Yes, during the course of the company’s life it had managed to create some successful services and was able to monetize those, but none of them truly managed to sustain itself over a long period of time – long enough to create a constant and predictable cash flow.
I think that the primary failure here was the fact that none of the investors/angels/entrepreneurs actually realized that the user acquisition cost is going to be so high, so that a single user would need to be charged around $500US over a span of a year, in order to cover the cost of acquisition.

In our next post

In our next post we’ll discuss the world of “PRN services” and “IPRN services”.