Telephony 2.0

Telco Take: What MS+Yahoo Means For Service Providers

by Rich KarpinskiFebruary 1st, 2008

If the telecom and Web worlds are merging, then a mega-merger on one side — Microsoft’s proposed $44.6 billion acquisition of Yahoo — surely affects the other.

But how?

1. The Ad Angle

The combination of Microsoft and Yahoo is, above all, about online advertising. Google is the paid search leader (with more than 75 percent market share in 2007, according to eMarketer), with Yahoo and Microsoft chasing from behind. This week, Google reported fourth quarter revenue of $4.83 billion, mostly on ad revenues, up 51 percent from a year ago. Too bad its stock is taking a hit, down from a high of 750 to a shade north of 500 in a few months. The cause: part law of big numbers, part recession worries, part challenges in selling off its ad inventory, particularly social ad inventory (including a deal with MySpace), which nonetheless remains a priority for both Google *and* Microsoft (which is partnered with Facebook). Even as Web/search/social network advertising shakes out, the next big market — mobile ads — is beginning to emerge as well, with all the same players targeting the riches and just as much uncertainty.

The telco take here is obvious: service providers need to figure out how to add advertising their revenue mix, but mastering this volatile market is not going to be easy. For more on the carrier advertising challenge, read our cover package from our current issue, which includes a big-picture overview of the telco ad opportunity plus examinations of IPTV advertising and mobile ad developments.

2. Portal Partnerships

Google, Microsoft and especially Yahoo have been key content and ad partners for carrier broadband and mobile portals. So combinations and shake-ups in the Web search/portal market absolutely affect those deals.

It’s probably no coincidence then, given Yahoo’s sliding share price, that days before the unsolicited Microsoft offer Yahoo announced a renegotiated portal deal with AT&T. The deal essentially removes broadband “bounty” fees paid to Yahoo by AT&T, replacing those with an ad revenue-sharing arrangement on AT&T Web and mobile sites. The deal means less guaranteed money for Yahoo but could result in greater revenue for the company if Web and in particular mobile advertising takes off on AT&T properties. AT&T will relaunch the att.net portal soon, powered by My Yahoo content and the Yahoo Mail platform, the companies said. Yahoo recently renegotiated a portal deal with Rogers Communications with similar terms.

The AT&T/Yahoo deal demonstrates a shift in the Web/telco power positions, with service providers now in a position able to cut better deals with their portal partners. Yahoo — which has stated a goal of becoming the “start” page for as many users as it can — clearly remains interested in service provider partnerships. Google, on the other hand, is being viewed more warily by carriers due to its wide-ranging mobile device and wireless services ambitions.

3. Partner/Competitor Matrix

While Google’s moves are beginning to position it as both a potential partner and competitor, Microsoft may be even more so in that position. Microsoft today provides a variety of software and services to fuel service providers’ core businesses, from plain old server software to IPTV middleware and set-top software and more. At the same time, Microsoft’s telecom ambitions, particularly in the area of unified communications and software-as-a-service, place it potentially in competition with the service provider market. “Coopetition” isn’t a new concept in the telecom world, but for service providers a potential Microsoft/Yahoo deal adds yet another dimension of complexity to the partner/competitor matrix.

4. Web-Telephony Route-Arounds

Yahoo has been fairly silent on the Web-telephony/unified communications front. Microsoft, on the other hand, has broad ambitions there with the release late last year of Office Communications Server and its unified communications strategies. And Google is clearly eying the telephony market as well with its spectrum bids, Grand Central acquisition, VoIP-enabled Google Talk software. While no Web-based telephony company or startup has taken a leadership position yet that would cast fear into the hearts of service providers, a strong move by a larger player like Microsoft/Yahoo or Google will likely have a much bigger impact. It’s an area carriers must continue to watch closely.

5. A Grand Duopoly

We’ll take a bit of a U.S.-centric view here, but clearly a Microsoft/Yahoo combination will compete with Google as the two big dogs in the online/mobile search and advertising markets. Will the major U.S service providers, notably AT&T and Verizon, pair up and partner along those lines as well? So far, AT&T seems to be playing both sides of the fence, dealing with Yahoo on portal content and ads and working closely with Apple on the iPhone (noteworthy because Apple and Google seem linked on a number of fronts including Google CEO Eric Schmidt serving on Apple’s board). On the social network front, Microsoft has aligned with Facebook while Google is linked with MySpace. Will we seem the same sort of choosing up sides on the Web/telco side? One would think so.

What Do You Think? Let us know what you think in the comments section below. What will the Microsoft/Yahoo potential combination mean for the carrier market and the intersection of Web and telephony?

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Reading List: Amazon Stretches; The Inevitable ‘Adult’ Market; Whither Twitter?

by Rich KarpinskiJanuary 31st, 2008

Today’s Telephony 2.0 Reading List:

Telco Take: Amazon continues to impress. From selling books online, it now delivers a wide variety of digital goods including audio books, music (no-DRM MP3), video (Unbox) and more. Plus its Web services platform and cloud services (storage, database) have set the stage for the company to further spread its wing beyond inventory-addled physical e-commerce.

Jangle Powering Anonymous Sex on Plenty of Fish

Telco Take: How’s that for a salacious headline? Eventually, Web-embedded click-to-call VoIP will take hold. Online dating sites seems a likely spot, though the “creeper/stalker” factor could be high. Of further interest is the market for “adult” content — saw a story on the iPhone becoming the iPorn phone today. What will be the operator share of those “sordid” but inevitable revenues?

Telco Take: Microblogging service Twitter has become hugely popular with the Web-set, but it’s centralized nature makes it hard to keep up and operating — especially in crunch traffic times. Wouldn’t it be nice to have QOS and performance guarantees? But those are telco concepts! Look for the “five 9s” telecom and “good-enough” Web worlds begin to collide as Web services become more mission-critical (or at least cause frustration when they disappear). The alternative, such as the WordPress folks are trying above, is a distributed, P2P alternative to Twitter. But such architectures present their own problems.

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Reading List: VoIP Services Compared; Plaxo/Facebook?; Google’s Map Strategy

by Rich KarpinskiJanuary 15th, 2008

Consumer VoiP Services Compared (LucaFiligheddu.com)
Rebtel comes out on top for cost and usability in making voice over IP call from U.S. to Italy via a mobile phone (no PC clients involved).

Facebook Buying Plaxo? (Venture Beat) – Not So Fast (TechCrunch)
A move that would focus less on social network features and more on combining address books and friend lists into a powerful Web-based unified directory/profile service.

IMS vs. Web 2.0 (OpenGardens)
Blog post asks all the right *service* questions about IMS, mainly: if Web services are standard, universal and cheap, what’s the pull for IMS?

Who Will Operate the Cloud (News.com)
Question raised: can an “IT arms supplier” – IBM, HP, Sun — also run a network services clouds? My question: can a telco run a network services cloud?

More Google Queries Get Google Maps (NYTimes)
Data-driven proof (300% increase in search queries returning with a Google map as top return) of how Google hopes to leverage dominance in one area (Web search) to try to take over other key areas, including directory services/yellow pages and mobile, location-based advertising.

Facebook’s Real Problem: Monetization (Dave McClure)
Key quote: A service isn’t a real *platform* until it makes — actually until it MINTS — money. It took Google four years to start up its mint, now running like clockwork. Facebook is dominating as Google did, but how will it create revenue for itself and its partners (Google’s “stickiness” is due to the “Google economy” — all the various advertisers, micro-publishers, etc. that suck on the Google teet).

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How ‘Voice 2.0′ Service Ribbit Works — And What They REALLY Want

by Rich KarpinskiDecember 18th, 2007

There’s been a lot of coverage of Ribbit, self-proclaimed “Silicon Valley’s first phone company,” which came out of stealth mode this week (for more background, read a bit here: TechCrunch; GigaOm).

In short, Ribbit — ridiculous name and questionable tag-line aside — has tremendous potential to be the startup that drops into the voice 2.0 application market and shakes things up a bit. Whether it “wins” (by building a solid business) or is acquired or scares larger players into copying its model is irrelevant. It’s done enough right that it its launch feels like a tipping point event on the path toward next-generation telephony services.

Technically, Ribbit has developed a carrier grade softswitch, integrated it into a nice telco-style stack of APIs to OSS, billing and other back-office services and made the whole thing accessible on the front-end via Flash. Yet another layer in the stack “normalizes” different (mainly Web-centric) communications protocols including XMPP, Skype, Flash Media Server and various IM clients, with a standard SIP stack handling the voice side of things.

But Ribbit’s value equation and point of differentiation starts and ends with its appeal to developers (the company claims it had 600-plus developers at a developer meeting last week).

By providing developers (Web developers, telephony developers) easy access to call control and service APIs, it hopes to unleash a wide variety of voice-enabled applications (see here for our debate on voice-as-a-feature versus voice-as-an-application). It will develop some of those services/applications itself, but it is really counting on a growing a developer community that will take its offering and run with it.

It’s an interesting model, and an inevitable one. Some new companies have played around with such an approach (from VoIP providers like Oomah or Jaxtr to vendors like BlueNote and LignUp to Asterisk-driven open source projects to telco efforts, most notably BT Web 21C). But few have made such a textbook play of it as Ribbit or come out of the box with such hype.

Let’s go deeper:

How Ribbit Works And What They Really Want

To handle the telephony call control and routing side of the equation, Ribbit built — and is hosting — a SIP softswitch (which the company claims it even put through some switch testing with Lucent). The switch is located in Northern Virginia and hosted at managed hosting provider Opsource (which even has a small case study on the set-up), with VoIP peering handled by IntelePeer.

Those capabilities are skin in the telephony game. The software in their set-up — handling typical BSS/OSS functions, including managing billing for their developers — is interesting in that they expose it too to developers. Banking on Flash and Flex scripting as the basis for application logic provides an easy developer entry point while ensuring integration with more developer-class IT tools like Eclipse, while avoiding telco-style development languages and APIs altogether (you can read the Ribbit call control API docs here; see the screen shot below for an example). The Flash-based demo phones Ribbit is showing on its Web site (see the screen shot at top) and talk of consumer services at best represent a reference application and at worst are a distraction to its core business.

Ribbit’s real target — which in an interview co-founder Crick Waters (who helped manage AT&T’s VoIP business, by the way) called “the big fat middle of the curve” — is to make it easy for companies running software-as-a-service applications to integrate voice into their workflow. Their first deal is with Salesforce.com, a good place to start, and Waters demoed a variety of voice functionality integrated into the Salesforce.com interface. The key, said Waters, is treating voice “as a first class data object” within the programming environment, enabling voice calls to be launched, voice messages to be appended to customer profiles and much more — all from within standard CRM business processes.

If Ribbit can effectively serve customers in that way and make their Salesforce.com deal work, they can then perhaps spin that success story up into a few more SaaS (software as a service) deals. Then they may have something.

The key, however, is that in the end Ribbit is NOT the be-all-end-all of “voice 2.0″ companies — despite a flashy (no pun intended launch) launch and the over-stated claim to be ‘Silicon Valley’s Phone Company.’

Rather, Ribbit represents one of the first high-profile, venture-backed startups to get into the voice application platform business — a business that service providers are aiming to get into themselves via service delivery platform (SDP) deployments. The opportunity is that Ribbit, and a handful of others, can build real businesses by targeting real markets (small business CRM, for example) that would benefit from Web/voice-integrated apps.

That is if Microsoft (with Microsoft Office Communications Server) and Google (with its Grand Central acquisition and Google Apps strategy) and all the world’s service providers don’t catch up to them first.

“We’re not displacing the functioning telephony system [a business] may have,” CEO Ted Griggs told me. “We want to take voice communications and integrate it into the [application] workflow on which they run their business. It’s a tremendous opportunity.”

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Reading List: Google Clouds; Amazon’s Database-in-the-Sky; Static for Verizon

by Rich KarpinskiDecember 18th, 2007

- Business Week: Google and the Wisdom of Clouds
Cloud computing is finding its way into the mainstream press. Story is pitched as Google versus Microsoft, but really there’s more to it than that. Google’s cloud is coming at you, the service provider, too. The buried story here is that Google isn’t just talking about cloud computing, or using it for its own services, but getting ready to offer pieces of its cloud computing infrastructure to companies and developers to use.

- We’ve written about Google’s ‘cloud factories’ in the past.

- Also: Google’s CEO on the Power of Clouds (Q&A)

- Pertinent Schmidt quote:

What [cloud computing] has come to mean now is a synonym for the return of the mainframe…You never visit them, you never see them. But they’re out there. They’re in a cloud somewhere. They’re in the sky, and they’re always around. That’s roughly the metaphor…In another sense, they’re one large supercomputer.

- Related graphic: check out this supercomputer (a cloud computer) installed in a former chapel at the Barcelona Supercomputing Center (BSC) (see more pics here).

Does your central office look like this? ; >
(Note: these are real pics, not photoshop-jobs)

Meanwhile…..

- Amazon is adding online database capabilities to its Web services offerings. Lots of push back that a cloud DB can’t compete with a first-class relational database engine (not to mention the the type of high-powered, transaction-intensive systems banks and stock markets run on). Which conveniently ignores the concept — pointed out here – that in true “innovator’s dilemma” fashion disruptive technologies nibble at the edges until the leader (in this case, Microsoft and/or Oracle) can’t stop the bleeding….

- NYTimes: Static on the Dreamphone
Concern about Verizon’s open network plans being centered around a Verizon-controlled testing lab and a call for service providers to go the extra step toward embracing Web models:

And what if this phone company opened up its databases to developers of software applications? We could soon see mash-ups of your call history with the address books from your personal computer, your telephone and your social network. Now imagine a user community turned loose to annotate that data.

Like my journalism professor once said of writing, it’s best to think of “open” as a process and not an event….

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Voice is a Feature, Not An Application: Do You Agree?

by Rich KarpinskiDecember 18th, 2007

Service Provider Bottom Line:Carriers that view voice as a monolithic application rather than as a feature in service of countless applications could miss the boat. Read on…

We’ve written about and talked to (podcast) Thomas Howe in the past — he’s doing great work exploring and building voice-enabled enterprise applications.In a story written for VON magazine, he gives a great explanation at what is driving the intersection of telephony and Web development and what it all means (emphasis mine):

There is a simple truth behind voice innovation, and it is that voice is a feature, and except for a relatively small number of very voice-centric situations, it’s not an application. You can take a thousand non-voice applications, like disease management or credit scoring, and enhance them in very interesting ways using voice. The reason why these applications aren’t the primary focus of our industry today is not because adding voice to a human resources application is difficult.

In fact, given today’s mashup architectures, it is very simple and cost-effective to do for organizations of all sizes. The reason is because voice used to be difficult, and so we had to spend decades learning about the technology and large amounts of money to deploy anything, so we simply stopped looking outside of our cubicles.

The logical consequence is that we focus on voice services for the masses because that’s all that was practical, and we really know nothing about the applications that the masses require outside of ringing phones. It works in the other direction, too. Since telephony was difficult, the vertical application developer never stuck his nose into the world of voice, and thus the gulf was created. Like a puppy that’s kept in a cage too long, we run around in circles long after the door’s been opened.

I’ve run into just this situation myself when trying to understand new voice development models and businesses, like Ribbit or new telco-delivered service models.

It’s very easy to get stuck thinking that voice is an application delivered to a handset rather than a feature or capability that could be used to support any number of applications — that is, things you wants to accomplish. In the enterprise, those things are a business process. In the consumer world, it’s some sort of activity — scheduling soccer practice, distributing family photos, getting a Christmas gift lift for your grandkids, etc…Voice is one way to do this — as is IM, email, etc.

When service providers start to think like this, and help developers to code like this — then you’ve really got something.

But voice as an application is a tough mindset to break.

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Reading List: Social Platform Wars; Cisco Web 2.0; the Google Cloud; and more

by Rich KarpinskiDecember 14th, 2007

- Did you know there’s an open source implementation of Google’s Open Social platform called Shindig? I didn’t. Google’s getting a hard time for pushing the release of Open Social to 2008 — but the software clearly is moving forward. But Facebook isn’t standing still…..

- Facebook has made its social network platform available for any company to license, a clear counter to Google’s Open Social initiative. Any service providers interested? Second-tier social network Beebo is basing their platform on the code. By doing that, they automatically ensure that all Facebook applications will run on their platform — voila, instant interoperability. Meanwhile, Here’s a good story on where the social network “open network” evolution is headed.

- What do the last two postings mean? The social network *platform* wars are underway. Service providers need to watch this platform competition closely and begin to make bets or align themselves among the various camps if they want to play in this area rather than see their customers jump off the telco “platform” and onto new platforms where they might find their voice needs served with just-good-enough VoIP calling. Think this has no chance of happening? Think again.

- This Firefox extensions brings VoIP calling to your brow ser toolbar — you still need a provider or SIP server but it makes it easier to make a Web-initiated P2P call. You can even input a corporate server or Asterisk PBX if your enterprise is running voice over IP.

- Mobile advertising is apparently off to a slow start — but it’s early and the best practices and accepted models haven’t been discovered yet.

- A bit of news on Cisco’s Web 2.0 plans, which have been formalized into its Entertainment Operating System, still more vaporware (or revenue-vapor) than meaningful product for the networking giant.

- Business Week cover story on Google’s “cloud computing” strategy. – Scott Karp blogs “Why I Stopped Using Twitter”: Answer: consumption-overload. This will clearly be a generational-divide issue.

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Google Knol — Another Shift From Content Indexer to Producer (and Full-On ‘Embrace and Extender’)

by Rich KarpinskiDecember 14th, 2007

Service Provider Bottom Line: Google is using its Web market power to extend its business in new directions, a tactic it is likely to leverage as Google eyes wireless, handsets/mobile OSes and VoIP. Read on…

Earlier this year, Google took the (widely-noticed in some circles, under-the-radar in others) step of hosting Associated Press news content on their Web site. The move was at least in part to counter AP complaints about how Google *pointed* to their content.Regardless, it moved Google into the business of hosting content rather than just indexing it. And other sites that host AP content, most notably newspapers, found themselves competing with Google for traffic on those news stories.Google “hosts” other content as well, obviously, most notably YouTube videos but also if we broaden the definition of “hosting” email (via Gmail), documents (via Google apps) and more.Any business that relies on advertising thrives on page views — Google has the unique model that it benefits almost wherever those pages are found thanks to its AdWords and AdSense programs.

Today, Google started to move into another profitable content area — encyclopedic content — with a new beta program called Google Knol. From ReadWrite Web, a quick description:

Knols participants will write reference pages on any topic, using a Google content creation tool apparently in the works, and those pages will be highlighted in Google search results. Authors will choose whether they want ads to appear and will receive a “substantial revenue share.”

Competing Knols pages on the same topic will be judged by reader votes and the Google Search Quality process. There will be reader commenting, the ability to add additional information and more social features. It won’t be a walled garden but will live on the open web. Attribution will be substantial and Google is presumably working with high-profile topic specialists on the Knol project.

This isn’t a new idea. Wikipedia is the most obvious user generated content site, but upstarts like Mahalo and Squidoo have been creating user generated content stores as well. The screen shot above (courtesy of SearchEngineLand, which does a great job exploring this topic), gives a feel for what a Knol page will look like. Today, search on most any topic and a Wikipedia result will be near the top of the list. That may not change, but almost overnight (and apparently without the strict algorithmic approval other sites are required to meet) it will now be joined by a Google Knol entry as well. If high Google-ranking is the pixie dust for Web 2.0 businesses — and it is — than Google just sprinkled a little dust on its own already be-crowned head. Google says it won’t give Knol posts an unfair page rank advantage, but Udi Manber, Google vp of engineering in announcing the project, writes:

A knol on a particular topic is meant to be the first thing someone who searches for this topic for the first time will want to read.

That sure sounds like Knol’s will get to the top of the search heap fairly quickly. Bottom line, here’s what’s notable:

Google is getting deeper yet again into the content business, competing with its customers and partners
Google is using its market power to fend off upstarts by attempting to embrace and extend (a tactic typically attributed to Microsoft) winning business models
As much as Google believes in the power of the machine (algorithmic search) the power of people (original, spot-lighted content, social networks) is coming to the fore as well
Compete directly with Google, as Wikipedia is doing with its new search engine, and it may come back on you
SEOers are going to have a field day with this — though it’s hard to imagine they’ll be successful gaming such a high-profile Google project

What markets will Google try to embrace and extend next? For service providers, it’s not a big logical jump to expect Google to use its Web market power to enter the wireless spectrum, handsets/mobile OSs and VoIP (particularly the Web-initiated VoIP market via integration into its Google Apps suite) areas.

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Why a VoIP Company is Adding An Open Source Software CTO

by Rich KarpinskiDecember 11th, 2007

Update: Listen to a podcast interview with Jaxtr’s Taneli Otala.

The post title here poses a question and the answer is probably obvious — IP-based voice communications today is all about software.

So it shouldn’t come as a surprise that Jaxtr — which today announced it has grown ten-fold from half a million to 5 million active users of its call-back voice over IP service in just over five months — has hired Taneli Otala, the former chief technology officer of open source database provider MySQL, as VP of engineering to help it expand its “network.”

I put network in quotes because what Jaxtr and its rivals offer is certainly a step removed from traditional telco networks and even P2P networks like Skype. In a nutshell, Jaxtr buys up a bunch of local phone numbers to fuel a call-back service that combines local PSTN-driven calling with the shuttling of the long-distance legs of those connections over the Internet. That combination makes most sense for international dialing, where per-minute prices are still high — and explains why almost 85% of Jaxtr’s users are from outside the U.S.

Jaxtr offers some bells and whistles — like Web-embeddable call widgets and advanced call handling — but really it’s the numbers game (price) which is driving its numbers growth (users).

We’re hoping to talk with MySQL’s Otala once he settles in. For now, Otala gave a statement describing the challenge he faces at Jaxtr:

Whether it takes Jaxtr another 140 days or a year to grow its membership yet again 10-fold to 50 million, we are designing a unique system that can handle such unprecedented growth.

Jaxtr runs its VoIP service on a cluster of Linux servers running MySQL and has been scouring the Web for MySQL admins, with Otala noting as he comes in the door: “We are hiring on all fronts.”

We talked with Jaxtr CEO (and LinkedIn co-founder) Konstantin Guericke about the addition of Otala. “[Jaxtr] is more of a Web company than anything else,” he said. “We use existing pipes to route traffic; voice traffic doesn’t hit our server at all, we just manage the signaling.”

Guericke noted that a system like Jaxtr’s really brings together the Web and telecom worlds in a whole new way. “It’s a very interesting time in telecom,” he added.

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