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Jaxtr's A round

Jaxtr has just announced that they've raised a $10 million A round, and the critics are having a field day.  Why?  The key word is free.  Jaxtr combines some of the services of Grand Central with a free long distance model, transports the calls using VoIP, and terminates the calls on the old fashioned telephone network.  Ouch! Their wholesale costs may be cheaper than AT&T, but Jaxtr ain't free to operate! 

Free, in the context of telephone services, makes for a tough business model because the wholesale costs of the underlying service which they depend on (brought to you by the likes of AT&T et al) isn't free.  According to TechCrunch, Jaxtr will round out these services with paid for models and advertising.  The key will be the paid for models.  Advertisers paying $5 to $10 CPM, which translates into 1/2 to 1 cent PER CALL, are gravy.  The model of a classic web 2.0 ad-funded startup doesn't fit the world of telephony economics.

The other extreme, by the way, is to do as Luca Filigheddu has done with Sitofono.  Sitofono is practically the same service as Jaxtr, but targeted at business users, and priced to compete with the classic toll-free line… except that it's global.  Same feature set, different business model.  Food for thought.

Garrett Smith's opening salvo "Okay so this is really only mildly exciting. Money continues to flow towards VoIP services." really sums it up for me.  For a while VoIP was the enfant-terrible disrupting the telco business model by arbitraging away the bloated margins that telcos have been able to earn without interruption for over a century.  As the bad-boy of the industry, VoIP promised a whole raft of new services as well that would change the way that we all used our telephones… for ever.  But now that it has grown up, it's become boring… the parent with a drink in hand, worrying about the cost of the mortgage. 

I'm heartened that the Jaxtr team has raised money promising new paid for services, and that VC's are responding.  That's a sign of life beyond paying the mortgage, which is good for all of us in this industry. 

{ 1 comment… add one }

  • paulsweeney August 29, 2007, 12:44 am

    I think the Jaxtr team are doing a great job. Sure they are making a bet, at bet I am sure only they are their investors have full visibility on. The question I have (from the outside) is what kind of strategic flexibility do the Jaxtr team have in their plans? If they have a series of future revenue streams, or strategic positions open to them, then the bet could be a good one. Although it may be boring, straight substitition of existing PSTN based services is attractive, because it gives you a clear customer definition and a clear marketing message. The "big bang" potential of IP in Telecoms is still nascent, but perhaps Grand Central and TellMe have shown that 2.0 still has potential to deliver. TellMe? Yes, Tellme. One of the pieces I loved about TellMe was that it was their sheer customer numbers and the repeat usage that grew the best part of their "data inside strategy", namely, the voice recognition.

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