Thursday, July 19, 2007

Application of the Week: Ooma -Yes! We've hit the bottom!

How long have you been saying that carrier based telephony is a race to the bottom? Well, you can stop saying it, as we've arrived.  When you purchase an Ooma phone, you never need to pay for your minutes again. You might shell out four Bennys for the privilege, but that's it.  Yes, that's it folks - no more paying by the minute ever again.  We've pressed the bottom button on the ol' telecom elevator, and the doors have opened.  And what I love about this story is how complete the bottoming out is.  Andy is always telling me to be as positive as I can in my posts, and when I criticize, to give an example of somebody who's doing it right.  A challenge here, my old friend - but I'll try.

Technical : C.  No, C-.  I wonder if anyone told the investors that the Chinese could produce the exact same phone for fifty bucks, or that it simply isn't that hard to write a peer-to-peer VoIP network.  Of course, if Ooma makes any connection to the PSTN (such as DIDs), Ooma has to pay for that somehow, so they have an incremental cost for each customer, no matter how peerish they get.  If they don't, why would you make a bet on yet ANOTHER walled garden? Maybe the phone rocks, but so did PingTel's.  And you know how they turned out.  Let's face it, do you think any phone that attaches to a wall is that compelling? How much better would this be: don't make a new phone. The old one works fine. Use the same old phone to do something valuable, like Jott is doing.

Business : D From a business perspective, when do you think the investors will learn that business plans that start out with "Yes, we won't make any money on the basic service, but we can monetize it later on by doing..." are like something that's too good to be true? Right - it usually IS too good to be true.   Ooma (minus five points for stupid Web 2.0 name) will rely on selling value added services to their subscribers to increase their profits from the phone sale.  Value added services?   Did anyone check to see the adoption rate for new services with cell phones?  The most popular VAS available for phones are ring tones (you want that in your kitchen) and text messaging (does this thing have a keyboard?)   How much better would this be: find something so valuable that I'd be willing to pay for it, like GrandCentral.  Give it a smart name, like GrandCentral.  Get a real business plan, like GrandCentral.

Buzz : B.  Well, compared to Ashton Kutcher's acting career, this might be a real step up.  He typically entertains me for an hour or so at most, but now I can watch Ooma blow through 20 million dollars, it will take months! Maybe even a few years! Nice. Best thing about the company is imagining my retirement with commercials from Ashton encouraging me to make phone calls.  I met Demi in 1986 when she came to the restaurant I was working in, and let me tell you, she's not just pretty - she's 100 foot pretty.  I might buy the damn phone if she signs the box.

Overall : I so wish I could short a private company. Anyone want to bet me?  


Dean Collins said...

Ok Thomas I'm prepared to step up and take that bet from you, easy money in my books.

In 12 months from now I bet that Ooma will still be in business and am prepared to wager a dinner here in New York.

Reply post here to your blog to accept so we have this on public record.

It may be because of some of the consulting projects I've been involved with here at but I think Ooma have capture some very interesting aspects;

1/ Ease of use and design (so sorely lacking in a large number of basic projects I see) their ATA is 'the' best ata I've seen, nothing revolutionary but it's just well designed plain and simple.
....and whats dissapointing about this fact is that with all the brains in the voip industry no one else came up with this design until now.

2/ Ease of uptake (keeping original number is such a barrier to entry to skypein and similar - yes I'm looking at you Grand Central).

3/ Ease of implementation in their business model (peer to peer using existing ethernet/internet infrastructure with zero billing - how easy is that).

Like I said easy money and I look forward to accepting your bet.

I'll set up a page on the website to track developments over the next 12 months.

Dean Collins

Thomas Howe said...

Ok, Dean - you're on. Since they raised 27 million (or some God awful amount), I think being in business in twelve months isn't a fair measure of success, but that aside - I'm up for it. What's a reasonable way to call the bet? How about we annoint a third party to judge the outcome?

Alec Saunders said...

You're both my pals. I'll volunteer to be the judge. Provided, of course, the loser has to provide steak for all...

Dean Collins said...

sounds good - looser buys steak for the judge (alec) as well.

see you all in 12 months from now.


Anonymous said...

The concept of ooma is that a lot of users are required to have a landline. Excuse me, isn't the purpose of getting internet phone service is ditching your landline?

Why would I want to continue to pay landline service? I see this device as an expensive box to entice users to buy additonal equipment for it.

These investors are going to make a lot of money sellng a very low cost device to a lot of users, who eventually want to get rid of their landlines, which will be the end of the company.

An innocent bystander said...

Dean will win the bet for the reason Thomas states - they can't burn $27M that fast.

The real question is, will the investors still be in love with the management team? Will the company be on track for the (presumably outrageous) growth commitments? Or will management be persona non grata, or perhaps even replaced, by then?

Mike P said...

Why do people keep saying things about Ooma like "Yes, that's it folks - no more paying by the minute ever again"? Haven't they read the fine print on Ooma's web site that says that "free forever" is only guaranteed to be 3 years?

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