Free phone calls!

Sipphone (full disclosure-my fund is an investor and I am on the board), developers of Gizmo Project, made a bold move yesterday offering users free calls to mobile and landlines in over 60 countries.  It is akin to the old MCI Friends and Family plan where customers could call other MCI customers for free.  This is viral marketing at its best.  Similarly, in order to take advantage of our offer, any Gizmo Project user can call any other registered Gizmo Project friend on any phone line in the 60 countries offered.  As Jim Courtney from Skype Journal says in his post:

The genius in this program is the attempt to drive market awareness virally by getting all your (PC- and headset-equipped) friends and family to sign up for GizmoProject and experiment with it. You then have the option of calling them at no charge; they can receive the call on either the GizmoProject softphone or their legacy PSTN phones.

There is lots of buzz in the blogosphere about this plan - some calling it great and others calling it a marketing gimmick.  Yes the free calls require both users to be registered to Gizmo Project but whether you call it a gimmick or not, I can already see some dramatic user signups in the last few days.  Michael Arrington from TechCrunch gets it when he says:

If calls continue moving towards free, then it’s going to be all about the value-added features. Video, better conferencing support, SMS - I can only imagine what sorts of features VOIP providers will be able to find substantial profit in. Perhaps these consumer VOIP services will have to make consumer VOIP a loss leader in exchange for building the strength of enterprise VOIP offerings. Ad supported free calls could be acceptable if the ads appear on the web interface. It’s hard to say what could take the place of burning through VOIP-out minutes, but interesting things will likely emerge.

As I have always thought, the price of phone calls has nowhere to do but down (and it has been dropping substantially over the last 5 years) and Gizmo Project is making a big move with its "free" offering.  As you might assume, the key to making our business model successful is the upsell of value added services and to continue to make sure we acquire new subscribers at the lowest cost possible.  From my perspective it all goes in the marketing bucket - would you rather spend money on silly television ads or pass on the low cost of telephony to your customers?   As Jason Droege, President of Sipphone told Om Malik,

“Wholesale PSTN rates are sooo cheap these days that it’s not much different than the cost of bandwidth back when I started Scour.net,” says Jason Droege, chief executive of SIPphone, the company behind Gizmo Project. “In the last 12 months I’ve seen wholesale PSTN costs drop dramatically and I expect this to continue. ”

While Mark Evans has a point that the problem with our service is that at least one user has to remain tethered to the computer to make calls, all I can say is to watch for an upcoming product announcement in the next month or so which will change all of that.  In the meantime, enjoy your free phone calls!

For other perspectives see Silicon Beat, Andy Abramson's VOIP Watch, and Engadget.

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This post was written by who has written 358 posts on BeyondVC.

3 Responses to “Free phone calls!”

  1. Andrew Fife Jul 23, 2006 at 1:59 am #

    The Vonage investor prospectus was right when it suggested they might never turn a profit.

  2. hmatura Dec 5, 2006 at 7:14 am #

    Interesting…Worth mentioning for those not so keen in new technologies that “10-10″ long distance services are also a very popular an easy alternative to enjoy cheap long distance calls. How it works? You simply dial the “10-10″ plan’s 7-digit access code, and then the area code and number you wish to call – and receive the discounted rates offered by the “10-10″ company. This is an easy way to take advantage of lower rates – without having to sign-up, internet or switching your long distance company. The Internet is a great resource for finding the rates and numbers of “10-10″ companies in your area.

    For example, you can now call Australia, Canada and most European countries for only 1¢ per minute by simply calling 1010228 before each call (e.g. 1010228 + 011 + country code + number you wish to call). http://www.1010228.com is one of the leading discount “10-10″ numbers in the US for interstate and international calls.

  3. DEBRA A SMITH PLAINFIELD, IL Oct 17, 2007 at 6:38 am #

    DEBRA A SMITH PLAINFIELD, IL 60544 (815) 254-1418 …

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