A couple weeks ago, I was speaking with Howard Thaw of Iotum. Howard works with Alec Saunders and both have sung praises about a Montreal-based mobile services company that has been saving them money on their considerable cell phone bills. On Friday, Alec wrote about how he has found ways to save considerable amounts of money when travelling to VON last week, spending only $4.16.
Mobivox seems to be attracting some attention lately, with new funding and a new COO. A couple weeks ago, Mobivox closed $11M in funding from IDG Ventures, Brightspark and Skypoint. Last week, Mobivox announced a new COO, Nitzan Shaer, formerly of IDG Ventures and former head of Skype’s mobile products group.
I have been trying out Mobivox for the past couple weeks and I think it is an interesting application.
How does Mobivox work? When you sign-up, you build an address book. The system can help by importing your Outlook, Gmail or Skype contacts. Then, you place a local call to the Mobivox access number nearest you – there are access numbers in major cities in 36 countries already. You speak to an automated attendant and just say the name of the person you want to reach.
If that person is a Mobivox or Skype user, the call is free. Well, for the cost of an outbound local call. Of course, there are lots of mobile calling plans out there that would allow customers to make their Mobivox access number one of their unlimited free destinations, such as Rogers My 5 or TELUS’ My Faves .
If the person you are trying to reach isn’t a Mobivox user, the call goes through at rates we have come to expect from VoIP. If you live in a place where there isn’t an access line, there is a call-back option – just send a text message and the system calls you.
Now, I have never been crazy about investing in arbitrage – at some point, the cellular companies will decide that they don’t really need 97% margins on their long distance calling rates and make North America part of their local calling. Say good bye to long distance arbitrage.
On the surface, Mobivox is just a sophisticated prepaid card / call-back company for mobile phones. Only worse for investors – a lot of the calling is for free. I seem to remember from the demand curves in my first year Economics course that it is easy to attract customers when the price is zero.
So how does Mobivox move onto the radar screens for venture capital? How does the business plan to make money?
Look at the marketing approach. Part social networking. Part viral. Look at the intelligent interface with voice recognition that drives enhanced features. Instant conference calling. Instant group calling. Transfer calls in progress from your mobile phone to a fixed line. Convenience features that will still be valuable to end users even when the savings aren’t as important.
All of these capabilities could be offered by the carriers, if they wanted to. That is a big “if”, because it puts LD revenues at risk, with an uncertainty that the elasticity will drive sufficient increases in total airtime to make up for the potential revenue shortfall.
That day will come. In the meantime, Mobivox is building out a global following. There are lots of places on the planet to arbitrage mobile long distance, even if carriers in any one country try to cut down the opportunity.
That is precisely what Hutchison appears to be doing with a recent announcement from 3UK, its upstart operating unit in the UK. In a deal done directly with Skype, 3UK is offering free calling and free messaging between Skype branded customers. An interesting acquisition strategy – but how do they make money?