June 22, 2010

Let Thousand Virtual Number Providers Bloom

I am sure you would have heard by now that Google Voice announced today that they are "excited to open up Google Voice to the public, no invitation required." Apparently even under open enrollment, they will continue to offer all the services for free: one number to ring all your phones, voicemail that works like email (with transcriptions?), free calls and text messages to the U.S. and Canada. Of course there are similar consumer service offerings; but as far as I know none of them are free. So it will be an interesting exercise to explore how would they be able to offer the service for free under open enrollment.

To get a handle on their cost structure, we just have to observe that MagicJack is offering a voice service for $20 annual subscription fee. But Google Voice needs to make two outgoing calls for each call, whether incoming or outgoing. So a reasonable estimate would be double that amount. In other words $4 per month per user is a reasonable cost estimate.

As a conservative estimate for revenue potential, let us ignore all of the premium features like international calls. But previously they had telegraphed a business model for deriving revenue from Gooogle Voice service. In an earlier blog post, they had indicated that Google Adwords that appear on mobile devices with full internet browsers can include "click to call" links. Further, the cost of a click to call is same as the cost of a click to visit a website. This is a big disruptive move because till now click to call service providers have charged a disproportionately high fee compared to normal CPC rates. They need to expand this service to other devices as well.

But usual click to call use case scenario has experienced pushback because they ask the user to enter a call back number. This has been a turn off because users are reluctant to share that information with advertisers. Google Voice avoids this problem. If the user has signed into her Gooogle Voice account while browsing, the click to call action can direct Google Voice to reach the subscriber using Google Voice call routing logic; so there is no need for the user to enter the call back number. Furthermore, Google Voice provides a shield of privacy for user's phone numbers. Also a user can selectively block a particular advertiser using standard Google Voice tools.

Going back to revenue potential of Google Voice. Assuming an average rate of $0.80 per clicks, Google Voice will break even if an average user makes 5 calls per month. I think this is a reasonably low figure for them to meet. So the revenue potential is very high.

This is an interesting development that other advertisement outlets like Bing, AT&T Buzz, Superpages, Yelp and many others will be well adviced to consider. And they do not have to develop the service all by themselves. There are many platform companies that can deploy a similar service readily for them: Ribbit, uReach, TringMe ...

Posted by aswath at June 22, 2010 07:07 PM
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